Life Science Compliance Update

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April 19, 2016

Public Citizen Study Shows Significant Reduction in Pharmaceutical Settlements 2014 - 2015

Public Citizen updated that report, and issued a new report, which included settlements for all years, starting in 1991, through 2015. This new report found that there was a nearly eighty percent drop in settlements between companies and state governments in 2014-2015 from 2012-2013. Federal financial penalties also dropped in that same time period: in 2012 to 2013, $8.7 billion was collected, compared to $2.4 billion in financial penalties in 2014 to 2015.

As some of our readers may recall, in late 2012, Public Citizen published a study of all major financial settlements and court judgments between pharmaceutical manufacturers and the federal and state governments from 1991 through July 18, 2012. At the time of that report's publication, over $30 billion was paid by the pharmaceutical industry to settle allegations of numerous violations, including alleged off-label marketing and defrauding of Medicare and Medicaid.

The 2016 study also indicated that over the course of the twenty-five years that were examined, the companies that had the most expensive learning lessons were GlaxoSmithKline ($7.9 billion in financial penalties) and Pfizer ($3.9 billion in penalties). Pfizer had the most settlements over that time period, followed by Merck in second place, and tied for third place were GSK, Novartis, and Bristol-Myers Squibb.

While the report does mention that eighty-eight percent of the settlements referenced were civil, not criminal, it fails to mention - or even entertain the idea that - civil settlements often do not resolve the issue of guilt and payment of a civil settlement is not the same as admitting guilt to the alleged wrongdoing.

Of the settlements found in the report, the most common violation by companies was overcharging of government health insurance programs. The violation that resulted in the largest financial penalties was the unlawful promotion of drugs.

Analysis

Public Citizen is claiming that the aforementioned decrease in amount of money pharmaceutical companies have paid to settle charges for violating federal healthcare laws means there needs to be an increase in enforcement efforts.

However, our interpretation is that the decrease in settlements is actually due to an increase in awareness of corporate compliance. As we have seen, and have documented in our sister publication, corporate compliance has received a renewed focus by many companies, including large compliance departments at many United States corporations. PhRMA agrees with that assessment, stating, "the report makes scant mention of the tens of millions of dollars companies spend annually to develop and maintain state-of-the-art legal compliance programs."

PhRMA continued their statement, "among its many methodological flaws, the report aggregates all settlements involving the pharmaceutical industry, with little regard as to whether the companies actually broke the law. Civil settlements rarely resolve the question of guilt. Yet the report glosses over its own finding that 88 percent of the settlements reported were civil, not criminal."

Another reason for the decline in settlements may be that the courts are becoming more demanding when it comes to whistleblowers being able to successfully prove a False Claims Act case, or possibly that the Department of Justice (DOJ) and the Food and Drug Administration (FDA) are starting to back off off-label marketing claims as free speech defenses have begun to collect successful momentum.

PhRMA continues to advocate for conversations on how to direct healthcare enforcement to "promote ethical corporate conduct, patient safety, innovation, and security of the public [treasury]," believing (as do we) that such conversations are "important and necessary." However, effective conversations on those topics are more difficult to have when reports are published with conclusions based on faulty reasoning, like the reasoning shown in this report.

Our interpretation of this study, and the decrease in settlements, is that compliance officers are worth their weight in gold. Each pharmaceutical company and device company should have at least one compliance officer who is kept abreast of all actions taken by the company, to help continue this downward trend of settlements.

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