Reference no: EM132121319

In May 2012, the DOJ announced it had reached a settlement totaling $1.5 billion with Abbott Laboratories for unlawful promotion of the drug Depakote. Abbott had promoted the drug to control agitation and aggression in elderly dementia patients, and also to treat schizophrenia, when the U.S. Food and Drug Administration (FDA) had approved its use only in the treatment of epileptic seizures, bipolar mania, and migraines. • In July 2012, the DOJ announced that GlaxoSmithKline (GSK) had agreed to pay $3 billion to resolve multiple cases regarding “unlawful promotion of certain prescription drugs, its failure to report certain safety data, and its civil liability for alleged false price reporting practices.” The settlement was touted as the largest health care fraud settlement in U.S. history at the time. Two specific examples of this “off-label” promotion were marketing Paxil as a treatment for pediatric depression and marketing Wellbutrin for weight loss, sexual dysfunction, substance addiction, and attention deficit hyperactivity disorder (ADHD). In neither case was FDA approval granted for these treatments. • In November 2013, the DOJ announced that global health care giant Johnson & Johnson (J&J) had agreed to pay more than $2.2 billion to settle civil and criminal liabilities in relation to off-label marketing and kickbacks. The settlement included $485 million in criminal fines and $1.72 billion in civil penalties with the federal government and states in relation to the prescription drugs Risperdal, Invega, and Natrecor. Each of these settlements lacked any admission of liability on the part of the drug companies, nor were there any specific commitments to improve internal processes to prevent these activities from occurring again (other than promising to remain compliant to existing legislation). While the Justice Department may be publicly committed to stamping out illegal marketing activities as part of a larger commitment to minimizing health care fraud, the questions remain as to whether these monetary settlements are large enough to be truly punitive, and whether or not they achieve any effective conduct modification on the part of the pharmaceutical companies themselves. For the FDA, approving a drug for a specific treatment includes prohibition of promotion for any other uses, even if those alternative use statements are true. In 2015, Amarin Pharma, a small drug manufacturer, challenged this position by claiming that limiting marketing promotions for Vascepa, its cardiovascular health drug, violated the company’s First Amendment rights to free speech. Judge Paul A. Engelmayer of the federal district court in Manhattan, sided with Amarin Pharma, arguing that the FDA’s allowance for physicians to prescribe medications for nonapproved uses (the FDA does not regulate physicians, the states do) represented sufficient incongruity to support the argument that the FDA approach to off-label marketing was restrictive. The judge’s decision granted a preliminary injunction that prevented the FDA from bringing any further action against Amarin Pharma, and the FDA was considering its options at the time this case was written. In September 2015, Pacira Pharmaceuticals filed a similar lawsuit against the FDA in the U.S. District Court for the Southern District of New York, seeking a similar injunction to protect its product, Exparel. It remains to be seen if other companies will follow suit.

1. Why would illegal marketing activities feature so frequently in the pharmaceutical industry? At what point would they be considered endemic?

2. Why would pharmaceutical companies choose to continue such practices even when it is made clear that they are illegal?

3. What should the respective boards of directors be doing here? How should they be held accountable?

4. Critics argue that fines are too affordable. In other words, a $1 billion fine for activities that generate several billions of dollars in illegal sales simply becomes a cost of doing business. Should fines be more punitive? How much would be enough?

5. Is the payment of a monetary fine sufficient restitution for these offenses? Why or why not?

6. If the FDA elects to change its position on off-label marketing, would this be a good thing for consumers? Why or why not?