Merck Settled Fraud Allegations for $31 Million
This case got very little coverage in October, 2014. A very short story by Reuters included these essentials,
A subsidiary of Merck & Co has agreed to pay U.S. states $31 million to settle claims that it overcharged their Medicaid programs for an antidepressant it had sold at a discount to pharmacy companies, attorney generals from three states said on Wednesday.
The officials from Idaho, New York and Florida said Organon USA Inc offered the drug, Remeron, to nursing home pharmacies at a discount to encourage its use over competitors. At the same time, the company reported the full cost of the drug when seeking reimbursements from state Medicaid programs, the states claimed.
New Jersey-based Organon, which did not admit any wrongdoing, also was accused of improperly promoting use of the drug by children and teens.
The agreement, which includes Washington, D.C., and every state besides Arizona, settled whistleblower lawsuits filed in 2007 in federal courts in Massachusetts and Texas.
That was the main content of the article.
Kickbacks to Promote Use of a Dangerous Drug
However, on the PharmaLot blog, Ed Silverman added important nuance,
Organon also allegedly offered kickbacks to nursing home pharmacies to encourage use of the Remeron antidepressant. The drug maker also allegedly promoted the medicine for uses not approved by the FDA. The marketing included targeting children and teenagers, according to a statement from New York Attorney General Eric Schneiderman.
So this was not merely financial fraud, but involved kickbacks to encourage excess use of a medicine for patients for whom it may have an enhanced risk of severe adverse effects. In particular, Remeron (mirtazapine) may lead to higher risks of suicide attempts, including successful ones, by adolescents (look here for its official label). So this case was not only about a company allegedly over-charging the government, but promoting a medicine that might be dangerous for vulnerable patients taking it.
Merck's Track Record
Merck in some ways is the poster child for health care companies once renowned, but now troubled. Merck's own voluminous Values and Standards document starts with this famous quote by founder George W Merck,
We try never to forget that medicine is for the people. It is not for the profits. The profits follow ,and if we have remembered that, they have never failed to appear.
Yet Merck was one of the first big multinational pharmaceutical companies to be tripped up by a big scandal in the 21st century. As we wrote here,
In summary, Vioxx (rofecoxib, Merck) a Cox-2 inhibitor non-steroidal anti-inflammatory drug used for pain, and touted for its ostensibly low risk of gastrointestinal side-effects, was withdrawn from the market in 2004 because of its cardiac risks. The Vioxx case is flush with examples of how the company used deception to market a very profitable drug without regard to its risks to patients.
A longer summary of the Vioxx scandal is in the Appendix below.
Furthermore, Merck also seems to have a chronic problem with honest discussion of another of its products, Zetia (look here). Merck was also fined by the French government for a "smear campaign" against generic competitors (look here) and this month got a very poor rating for its global corporate transparency from Transparency International (look here).
So this relatively small case reminds us that when a very large health care company is accused of misbehavior, including deceptive behavior that could have led to patient harms, not only are no individuals who might have authorized, directed or implemented the bad behavior held accountable, but the case is likely resolved in a seeming vacuum, totally uninformed about the company's previous record of similar problems.
Sheffield Pharmaceuticals CEO Pleaded Guilty of Felony for Discharge of Wastewater Without Permit
An interesting contrast is the case of one Mr Thomas Faria, as described by the New London (CT) Day in July, 2014,
Thomas H. Faria, who resigned in March as president and chief executive officer of Sheffield Pharmaceuticals, pleaded guilty in U.S. District Court Tuesday to a felony violation of the Clean Water Act for knowingly discharging untreated industrial wastewater to the New London sewage treatment plant from 1986 to 2011.
His penalty does not yet seem to be public, but could go considerably beyond loss of his job,
Faria pleaded guilty to one count of knowingly violating, or causing to be violated, the Clean Water Act, an offense that carries a maximum penalty of three years of imprisonment and a fine of not less than $5,000 but not more than $50,000 per day of the violation.
Yet the harms produced by the company's actions are not so clear,
The environmental impact of the violation over a 25-year-period is unknown, though Special Assistant U.S. Attorney Peter Kenyon from the Environmental Protection Agency said the EPA is unaware of any fish kills or direct harm suffered by humans.
'The possibility of impact from this type of discharge certainly exists,' Kenyon said during a conference call Tuesday.
So in this case, the offense was environmental, and had nothing directly to do with the over the counter drugs manufactured by the company, or their effects on patients. The impact of the offense on the environment was unclear. Nonetheless, the CEO of this small, privately held company lost his job, had a felony on his record, and is liable for large fines or up to three years in jail, pending sentencing.
Jury Found Takeda and Eli Lilly Concealed Cancer Risks of Actos, Company Subject to Punitive Damages of $36.8 Million
The basics of the case were reported by Medscape in April, 2014, and were also covered by Reuters and Bloomberg,
Drugmakers Takeda Pharmaceutical Co. and Eli Lilly and Co. promised to appeal an award of $9 billion in punitive damages — one of the largest in US history — after a federal jury found they had concealed the cancer risks for their type 2 diabetes drug pioglitazone (Actos).
In addition, the jury ordered the payment of $1.475 million in compensatory damages.
Pioglitazone is associated with an increased risk for bladder cancer among persons with type 2 diabetes, according to a 2012 study in BMJ, as reported by Medscape Medical News. The US Food and Drug Administration in 2011 updated the pioglitazone label to warn against starting the drug in patients with active bladder cancer and to use caution if starting it in patients with a prior history of bladder cancer,...
In addition, the judge ruled that the company destroyed relevant documents to prevent their use in court proceedings,
attorney Mark Lanier said Takeda officials intentionally destroyed documents about the drug.
US District Judge Rebecca Doherty agreed and penalized the company, telling jurors they could infer that the files may have supported Allen's claims that the company wrongfully concealed the medication's health risks. 'The breadth of Takeda leadership whose files have been lost, deleted or destroyed is, in and of itself, disturbing,' Doherty wrote in a January ruling.
In late October, 2014, the judge reduced the award for punitive damages, per Reuters,
In her ruling, Doherty said the original $9 billion damages award was 'excessive' and violated the companies' constitutional rights to due process.
She ordered Takeda to pay $27.6 million and Eli Lilly to pay $9.2 million for a total of $36.8 million. Doherty said that, while far smaller than the jury's original award, the reduced punitive damages were still 'large enough to accomplish the jury's clear aim: to send a message to the defendants that their wrongdoing must stop...'>
I should note that apparently the judge found the amount excessive given the size of the compensatory award to the single plaintiff. However, the judge reiterated her concerns about the companies' deceptive conduct,
The companies also had sought a new trial, arguing that the court had made prejudicial rulings on evidence and jury instructions that tainted the trial's outcome.
Doherty rejected that request Monday, writing that the evidence during the trial showed that the companies 'disregarded, denied, obfuscated and concealed' for more than a decade that Actos could increase patients' risk for bladder cancer.
Note that in this civil case, a jury found the companies' deceptive conduct reprehensible, and a judge agreed that they "disregarded, denied, obfuscated and concealed" the truth. No government prosecutors seemed to care to get involved with this particular case. Because it was a civil case in which the companies were defendants, I am not sure whether any penalties affecting individuals were a possible outcome. The results seem to suggest, at least in my humble opinion, that both ordinary people, like those sitting on juries, and judges may take greater exception to deceptive conduct that could harm patients than may government law enforcers and regulators.
Teva Pharmaceutical Industries Made $27.6 Million Settlement of Charges that it Induced Physicians' Excessive Prescriptions
This was well summarized by ProPublica in March, 2014,
Teva Pharmaceutical Industries Ltd. has agreed to pay more than $27.6 million to settle state and federal allegations that it induced Chicago psychiatrist Michael Reinstein to overprescribe clozapine, a powerful antipsychotic drug.
Reinstein has twice figured into ProPublica investigations.
Four years ago, ProPublica and the Chicago Tribune spotlighted Reinstein's prescribing pattern, finding that in 2007 he had prescribed more clozapine to patients in Medicaid's Illinois program than all of the doctors in the Medicaid programs of Texas, Florida and North Carolina combined. At least three of Reinstein's patients died of clozapine intoxication. At that time, Reinstein defended his prescription record, arguing that clozapine is effective and underprescribed.
Then, last spring, ProPublica reported that Reinstein prescribed even more of the drug in Medicare's prescription drug program for seniors and the disabled. ProPublica cited Reinstein in an investigation about how Medicare fails to monitor problem prescribers,...
Illinois Attorney General Lisa Madigan and the U.S. Justice Department claimed that IVAX, a Teva Pharmaceuticals subsidiary, paid Reinstein to overprescribe clozapine to Medicare and Medicaid patients. Yesterday Teva agreed to pay almost $15.5 million to the federal government and more than $12.1 million to Illinois to settle those allegations out of court.
Note that the government case seemed to be about how the government had to pay too much, not about harms to patients, despite the patient deaths described above. Furthermore, the prosecutors, as they usually now do, allowed the case to be settled without any findings of wrongdoing,
Teva spokeswoman Denise Bradley told Reuters that the settlement does not mean that the company has admitted any liability.
It is interesting that the government is apparently pursuing a case against the physician as an individual, but not any cases against corporate managers who might have authorized, directed, or implemented the "inducements" to that physician,
In November 2012, federal prosecutors also filed suit against Reinstein, alleging that IVAX hadpaid him $50,000 a year to work as a consultant, paid his nurse to promote the drug and funded a study at an affiliated research institute. After the payments, Reinstein began overprescribing clozapine. The company also allegedly paid for trips and entertainment for Reinstein and his friends.
Otherwise, this case is typical of many US government and state prosecutors have pursued against big health care corporations. There was a monetary settlement that might appear big to the public, but was tiny given the size of the company. (According to Yahoo Finance, Teva's annual revenue is about $20 billion.) The settlement did not involve any admission of wrongful behavior. No one in the company who may have been involved with the wrongdoing that was not admitted suffered any negative consequences. But, as is not usual, the government is pursuing a case against one individual, the physician who allegedly was paid as a "consultant," by maybe actually just to prescribe the company's product.
These cases add to the march of legal settlements about which we have often written. These settlements and other legal cases suggest how frequently big health care organizations are involved in practices that may be unethical, illegal, and/or harmful to the patients they proclaim to serve. Yet almost never do cases that involve US state and particularly federal law enforcement ever impose monetary penalties that are more than costs of doing business for the companies involved. Almost never do they impose any negative consequences on any individuals within the companies who might have authorized, directed or implemented unethical, illegal, or harmful behavior.
However, as we saw before, when the government asserts its law enforcement power against small organizations, small companies, or individuals, people may lose their livelihoods or go to jail.
The leniency of the government towards big health care corporations is very similar to the leniency shown towards big financial corporations. A recent review of the book "Too Big to Jail" in the Washington Monthly noted that Mr Eric Holder, the current US Attorney General has urged leniency for big, and hence economically powerful corporations,
a memo written by Holder in 1999, during his stint as deputy U.S. attorney general. The document, 'Bringing Criminal Charges Against Corporations,' urged prosecutors to take into account 'collateral consequences' when pursuing cases against companies, lest they topple and take the economy down with them. Holder also raised the possibility of deferring prosecution against corporations in an effort to spur greater cooperation and reforms—a policy, unsurprisingly, later supported by the Bush administration.
The attorney general angered many last year when he reiterated those concerns at a congressional hearing, admitting 'that the size of some of these institutions becomes so large that it does become difficult for us to prosecute' because of the potential nasty economic effects of a major company failure.
Furthermore, the book provided some essentially epidemiological evidence that the government in fact has been more lenient towards bigger corporations, at least in the finance sphere,
There’s some compelling evidence that the largest, most established companies are more likely to win leniency with a delayed or canceled prosecution: 58 percent of the companies awarded such deals are public firms listed on a U.S. stock exchange, while publicly traded firms make up just 6 percent of those against whom the Department of Justice obtained convictions.
Yet there seems to be no evidence that this policy produces social good. In particular, there seems to be no evidence that corporations treated leniently behave any better.
Finally, there is a question of essential fairness, and equal treatment under the laws. It appears that executives of large finance, and likely health care corporations have virtual impunity. Yet little people in health care, or finance, who do something wrong may go to jail.
True health care reform would establish a level playing field. True health care reform would deter unethical behavior, especially when it harms patients. True health care reform would make leaders of health care organizations accountable for putting patients' and the peoples' health first.
Appendix- Vioxx Case
There is evidence is that the company knew about the cardiac risks of Vioxx since 2000, but suppressed the clinical research evidence until 2003.(1) In particular, in 2005, the editors of the New England Journal of Medicine raised concerns that an article published in that journal in 2000 about the results of the VIGOR study of rofecoxib sponsored by Merck failed to report data that would have suggested that the drug caused excess cardiovascular risks.(2) In 2007, the company paid more than $4.9 billion to settle patient lawsuits alleging harm due to Vioxx.(3) Also in 2008, the company made a $58 million settlement of claims its advertising of Vioxx deceptively minimized its risks.(4) In 2008, it became clear that at least one apparently clinical trial of Vioxx, the ADVANTAGE trial, was merely a "seeding trial,' that is, a marketing exercise.(5)
On Health Care Renewal, we starting writing about Vioxx in 2005, including,
- here about ghost-writing of a Vioxx research publication;
- here, and here about allegations that Merck executives tried to intimidate Vioxx critics;
- here about how advocates of an extreme laissez faire approach to regulation of health care corporations used illogical arguments about the Vioxx case;
- here about the ADVANTAGE "seeding trial," that is, a study really meant to recruit supposed physician-researchers as prescribers; and
- here about how one once prominent Vioxx researcher pleaded guilty to fraud in connection with his research on other drugs.
- here about how in settling a shareholder lawsuit Merck vowed to improve its scientific and academic integrity, and refrain from manipulating and suppressing clinical research.
In 2010, we summarized the Vioxx case thus, " the Vioxx case provides a good lesson about some of the tactics used to deceptively and unethically promote health care products (pharmaceuticals in this case)."
In case there are any doubts about the harms patients suffered as a result of using Vioxx as a pain reliever, in 2004, a cumulative meta-analysis of published trials of Vioxx known by then estimated the risk of myocardial infarction (heart attack) due to Vioxx compared with placebo or other non-steroidal anti-inflammatory drugs was 2.3 times the baseline rate.(6) That analysis suggested that there was data by 2000 that Vioxx increased the risk of bad cardiovascular events. A cumulative meta-analysis from 2009 suggested that the risk of death due to Vioxx was 1.7 times the baseline rate.(7) That analysis suggested there was data by 2001 that Vioxx increased the risk of bad cardiovascular events. Graham and colleagues' nested case-control study of Vioxx use in a large managed care organization lead them to estimate that "88 000 - 140 000 excess cases of serious coronary heart disease probably occurred in the USA over the market-life of rofecoxib."(8).
1. Topol EJ. Failing the public health - rofecoxib, Merck and the FDA. N Engl J Med 2004; 351: 1707-1709. Link here.
2. Curfman GD, Morrisey S, Drazen JM et al. Expression of concern reaffirmed. N Engl J Med 2006; 354:1193. Link here.
3. Charatan F. Merck to pay $5bn in rofecoxib claims. Brit Med J 2007; 335: 1011. Link here.
4. Charatan F. Merck to pay $58m in settlements over rofecoxib advertising. Brit Med J 2008; 336: 1208-1209. Link here.
5. Hill KP, Ross JS, Egilman DS, Krumholz HM. The ADVANTAGE seeding trial: a review of internal documents. Ann Int Med 2008; 149: 251-258. Link here.
6. Juni P, Nartey L, Reichenbach S et al. Risk of cardiovascular events and rofecoxib: cumulative meta-analysis. Lancet 2004; 364: 2021-2029. Link here.
7. Ross JS, Madigan D, Hill KP et al. Pooled analysis of rofecoxib placebo-controlled clinical trial data: lessons for postmarket pharmaceutical safety surveillance. Arch Intern Med 2009; 169: 1976-1984. Link here.
8. Graham DM, Campen D, Hui R et al. Risk of acute myocardial infarction and sudden cardiac death in patients treated with cyclo-oxygenase 2 selective and non-selective non-steroidal anti-inflammatory drugs: nested case-control study. Lancet 2005; 365: 475-481. Link here.