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Pharmaceutical Regulation in the United States: A Confluence of Influences1 By Reuben A . Guttman2 2012 Gr ant & Eisenhofer P.A .
• Pharmaceutical Regulation in the United States: A Confluence of Influences1 an incomplete picture. It is the totality of limited as to dose or how the dose may be these influences, and their interplay with administered.9 each other, that either impact or have the harmaceuticals, like other consumer potential to impact manufacturer conduct.
Once the FDA approves an indication, the products distributed in the United manufacturer provides the FDA with a States, are subject to regulation and package insert for approval. The package scrutiny from multiple sources. Legislative insert will set forth the indication and will oversight and statutory pronouncement, Legislation, Regulation, also list side effects, warnings, and dosing
regulatory mandate and oversight, information. In theory, the package insert judicial review, and non-governmental is a dynamic document, meaning that it organization (NGO) and media oversight subject to change based on experiences from directly and/or indirectly impact the The Food, Drug and Cosmetics Act
the actual use of the drug. Manufacturers conduct of pharmaceutical manufacturers. and the regulations
are required to report "adverse" events to In addition, stakeholders including the FDA and based – in part – on adverse pharmaceutical company shareholders, events, the package insert is updated with employees of pharmaceutical companies, In the United States, legislative additional warnings. The most serious and those entities that ultimately bear the intervention in the sales of drugs dates warning mandated by the FDA is the "Black costs of paying for drugs —known as third- back to 1938 with the initial passage of Box" warning which is a warning enclosed party payors— also influence the conduct the Food, Drug & Cosmetics Act (FDCA).5 by a black box. A Black Box warning means of drug manufacturers.
Like many laws promulgated by the that medical studies indicate that the drug Congress of the United States, the FDCA carries a significant risk of serious or even For example, the securities markets that created an "expert" agency known as the life-threatening effects.
price stock rely, in part, on representations Food and Drug Administration (FDA) that drug companies make about the which is empowered to create specific, and The FDA regulates both prescription integrity of their products. Public somewhat technical regulations, governing and over the counter drugs. Prescription misrepresentations to regulatory bodies the sales of food and drugs. Expert drugs can only be acquired from a and/or consumers also play out indirectly agencies, such as the FDA, are established pharmacy after the pharmacy is handed as misrepresentations to shareholders by Congress because of the legislature's a prescription written by a doctor. In the resulting in additional liability for inability to practically micromanage United States, doctors must be licensed to companies and those individuals who run thousands of products. Aside from its write a prescription and each prescription them. Accordingly, shareholders – the regulation of food and medical devices, the must cite the doctor's license number. owners of the pharmaceutical companies FDA regulates more than 11,000 drugs.6 Significantly, the FDA regulates the – have an interest in ensuring not only the conduct of manufacturers; it does not integrity of products sold to consumers, The FDA is both a regulatory and an regulate doctors. While doctors are made but the integrity of public statements about adjudicatory agency. It makes regulations aware of a drug's indication, they are not their products.
that further the mission of the FDCA and required to write prescriptions for purposes it makes decisions, i.e., adjudications, about and uses within the boundaries of the Through their retirement plans, the specific application of its regulations.7 indication. The use of a drug for purposes pharmaceutical company employees invest that fall outside the indication is known as in their employer and, to some degree, A manufacturer seeking to market a drug an "off-label use." Doctors are free to write stand in the same shoes as shareholders must apply for an "indication," which is prescriptions for off-label uses. In contrast, except that they have rights of redress a term used to define the parameters for with the exception of purely scientific, under United States Pension laws.
which the drug is approved for use. Before medical information provided by qualified recalls result in diminished stock value and marketing and selling a prescription drug, medical professionals, sales and marketing lost savings for employees who invest in a manufacturer must demonstrate to the presentations, promotions, or marketing their companies.
FDA that the product is safe and effective for its intended use.8 The FDA does not by drug companies to physicians for uses other than that approved by the FDA is Third-party payors, including labor union give blanket approvals for the use of a considered off-label marketing and is health and welfare funds, State Medicaid drug. Rather, the agency approves a drug proscribed by law.10 and employee health and welfare funds, for specific uses which may mean the and the federal Medicare system, have also treatment of a disease or just symptoms When marketing a drug, the FDCA had an immense impact with regard to the attributable to the disease. The indication also requires that the manufacturer be conduct of the pharmaceutical industry.
may be limited in that the drug may only be truthful about its product. Pharmaceutical used in combination with other specifically promotion and marketing materials and To say that any one of these influences is identified drugs or at a specific stage of presentations lacking in fair balance or that the real source of regulation would paint the disease. The indication may also be are otherwise false and misleading violate Reuben A. Guttman2 the FDCA11 and regulations promulgated side payments from the pharmaceutical the United States. In these letters, I by the FDA pursuant to the statute. Such industry while he was studying the safety asked questions about the conflict of violations exist where promotional and and efficacy of certain drugs.
interest disclosure forms signed by marketing materials and presentations for some of their faculty. Universities the FDA approved drug: Senator Grassley's investigation lead to typically require doctors to report Professor Nemeroff's suspension from a their related outside income, but I am • Minimize, understate, or misrepresent portion of his tasks by Emory University concerned that these requirements the risks, contra-indications, and and generated a wave of media inquiry are disregarded sometimes.
complications associated with that and oversight, placing additional focus on whether studies conducted under I have also been taking a keen • Overstate or misrepresent the risks, the auspices of universities are tainted interest in the almost $24 billion contra-indications, and complications by conflicts of interests resulting from annually appropriated to the associated with any competing drugs; payments to university professors by the National Institutes of Health (NIH) • Reference "off-label" uses of the drug - pharmaceutical industry.12 to fund grants at various institutions i.e., those uses which are not indicated such as yours. As you know, by the FDA - or expressly or implicitly Senator Grassley's intervention with regard institutions are required to manage promote unapproved uses and dosing to Nemeroff and Emory publicly began a grantee's conflicts of interest.1 But regimens for which the drug is not with a September 16, 2008 letter to Emory I am learning that this task is made University President James Wagner. The difficult because physicians do not • Make comparative claims about letter is instructive in that it outlines the consistently report all the payments the drug which have not been Senate oversight process as it applied to received from drug companies.
demonstrated by substantial evidence, Nemeroff and Emory's conduct.
such as comparisons with competing To bring some greater transparency drugs and/or drug indications of to this issue, Senator Kohl and I patient usage, warnings and safety introduced the Physician Payments claims including side effects, The United States Senate Committee Sunshine Act (Act). This Act will physician preference, or on Finance (Committee) has require pharmaceutical companies • Are otherwise false, misleading or jurisdiction over the Medicare to report publicly any payments that lacking in fair balance in the presentation and Medicaid programs and, they make to doctors, within certain of information about the drug being accordingly, a responsibility to the marketed or any competing drug. more than 80 million Americans who receive health care coverage The purpose of this letter is to assess under these programs. As Ranking the implementation of financial Congressional Oversight
Member of the Committee, I have disclosure policies at Emory a duty to protect the health of University (Emory/the University). Medicare and Medicaid beneficiaries he American system is replete with In response to my letter of October and safeguard taxpayer dollars checks and balances. While the United 25, 2007, Emory provided me with appropriated for these programs. States Congress promulgated the FDCA, the financial disclosure reports The actions taken by key experts which in turn established the FDA, that Dr. Charles Nemeroff filed often have profound impact upon Congress continues to engage in oversight with Emory during the period of the decisions made by taxpayer of the agency and situations that might January 2000 through June 2007. funded programs like Medicare and call for a change in the law or merely the Dr. Nemeroff is the Reunette W. Medicaid and the way that patients exposure of a problem.
Harris Professor and Chairman of are treated and funds expended.
the Department of Psychiatry and Oversight can take the form of formal Behavioral Sciences at Emory and Moreover, and as has been detailed hearings that are open to the public or is one of the most widely published in several studies and news less formal inquiries made by members experts in the field of psychiatry.
reports, funding by pharmaceutical of Congress to government agencies or companies may influence scientific private sector entities. In October 2008, for My staff investigators carefully studies, continuing medical example, Charles Grassley, a United States reviewed each of Dr. Nemeroff's education, and the prescribing Senator from the State of Iowa, initiated disclosure forms and detailed the patterns of doctors. Because I am an investigation over conflicts of interest payments disclosed. I then asked concerned that there has been involving studies conducted by Charles that Emory confirm the accuracy of little transparency on this matter, Nemeroff, a Professor of Medicine at the information my staff compiled. I have sent letters to almost two Emory University in Atlanta who allegedly In March 2008, Emory clarified dozen research universities across earned more than $2.5 million dollars in previous statements and provided • Pharmaceutical Regulation in the United States: A Confluence of Influences1 a chart of Dr. Nemeroff's outside while conducting research on the safety The Tort System
income. This chart contained several and efficacy of various drugs pursuant to a reports of, among other things, Dr. government grant that Emory had received, Nemeroff's outside consulting that it was clear Dr. Nemeroff was separately Notwithstanding that the FDA is supposed to be an expert agency, the my staff did not find in his disclosure receiving money from the pharmaceutical task of regulating 11,000 drugs, thousands forms filed with Emory.
industry. A third letter written by Senator of devices, and food, is so vast that some Grassley to the Inspector General of the mistakes are inevitable in oversight In addition, I contacted executives U.S. Department of Health & Human and compliance enforcement. There are at several major pharmaceutical and Services, dated February 24, 2009, brought multiple examples of where drugs given device companies (the Companies) this matter to that agency's attention, for an indication by the FDA have later been and asked them to list the payments the purposes of prompting an investigation found to be defective. These drugs have that they made to Dr. Nemeroff by the Inspector General's office.
either been voluntarily withdrawal from during the years 2000 through 2007. the market, withdrawn at the behest of These companies voluntarily and The Grassley inquiries with regard to the FDA or, in some cases, maintained on cooperatively reported additional Nemeroff were significant because the the market but with additional warnings payments that Dr. Nemeroff does not legitimacy of trials or studies conducted by including the most serious warning, the appear to have disclosed to Emory. universities – with government grants – is FDA mandated "Black Box Warning." For example, Dr. Nemeroff disclosed of critical importance to the integrity of the receiving $7,500 in 2005 from Pfizer. FDA's regulatory system, as these works For example, after multiple adverse events But Pfizer reported to me that it paid are often the basis of decision making by involving the drug, Trasylol, which was Dr. Nemeroff $138,000 in speaker the FDA in regulating prescription drugs. used in coronary bypass surgery, the honoraria (at least 40 speaking These studies and/or trials are used by the drug was withdrawn from the market engagements) and consulting fees pharmaceutical industry when applying to by its manufacturer, Bayer AG, in 2007.14 that same year. Based upon the the FDA for a new drug indication or an Similarly, the drug Bextra was approved by information provided to me from the FDA in 2001 for several uses including both Emory and the Companies, those related to the treatment of rheumatoid it also appears that Dr. Nemeroff The Grassley letters are not unique. arthritis. Bextra was withdrawn from the failed to disclose the vast majority of The United States Congress, through market in 2005. Though not implicating the over $900,000 that he received in its oversight committees, continuously a withdrawal from the market, possible speaking fees and expenses related monitors the conduct of the FDA and the evidence of diabetes related to the use of the to talks he has given on behalf of pharmaceutical industry. Oversight is not drugs Zyprexia, Risperdal, and Seroquel – always done for purely public interest all atypical antipsychotics – lead to Black reasons. For example, oversight of the Box warnings being imposed by the FDA Because Dr. Nemeroff's disclosures FDA may be inspired by a party that is on each of those drugs.
to Emory differ dramatically out of power in the Executive Branch, from those that I received from of which the FDA is a part. Or, oversight In each of the above cases, Trasylol, the Companies, I am attaching a may be conducted at the behest of one Bextra, Zyprexia, Risperdal, and Seroquel, chart that best represents a few pharmaceutical company which has the manufactures have been faced with of the disclosures made to me by secured the aid of a member of Congress common law "tort" actions brought by the Companies. Specifically, the to question the conduct of a competitor or individuals who allegedly have been attached chart contains columns the FDA's treatment of a competitor or, for harmed by the drugs. These common law showing some of the payments that matter, its own product. Still, there are actions have been able to proceed because disclosed by Dr. Nemeroff in March members of Congress who secure a lot of in promulgating the FDCA, a federal law, 2008 contrasted with the amounts media attention for their efforts to expose the United States Congress did not pre- reported to me by the Companies. wrongdoing in the pharmaceutical industry empt the right of private citizens to bring However, I understand that some and this media attention can help maintain these types of actions under state law. The discrepancies may exist because a member's popularity for the purposes question of whether the FDCA preempts Emory is uncertain if the disclosures of re-election. As to which members of these types of actions was addressed by the were made during a calendar year or Congress tend to get involved in oversight, United States Supreme Court in Wyeth v. academic year.13 one reasonable observation is that members Levine.15 tend not to favor investigating companies On October 2, 2008, Senator Grassley wrote that provide jobs to citizens in their district. Wyeth is a large pharmaceutical company16 a second letter to Emory President Wagner that manufactures the anti-nausea drug, providing supplemental information Phenergan. The cause of action arose after a related to his committee's investigation patient, Diana Levine, was administered the and informing President Wagner that drug intravenously though the "IV Push" Reuben A. Guttman2 method – one method of administration17 – not conflict with FDA labeling requirements Second, to the extent that companies are which risks that the Phenergan may enter for Phenergan because [Wyeth] could have required to pay out large sums of money an artery, causing gangrene and the loss warned against the IV-push administration to victims, the price of their stock may of a limb. The drug is highly corrosive and without prior FDA approval, and because drop leading to additional pressure in causes irreversible gangrene if it enters a federal labeling requirements create a the form of shareholder securities and patient's artery. floor, not a ceiling, for state regulation."21 derivative25 litigation against the company The importance of the pre-emption issue and members of the company's board of Diana Levine had a career as a guitar player coupled with the FDA's position that its directors. Pfizer and Merck pharmaceuticals until the administration of Phenergan regulation pre-empted Levine cause(s) which had to pay out large sums of money through the IV Push method lead to the of action resulted in the United States to victims of their Cox-2 inhibitor drugs, drug entering her artery causing Gangrene Supreme Court agreeing to hear the case. Vioxx and Bextra, were both targeted by and the loss of her arm. Levine filed a shareholder securities lawsuits. In these lawsuit in a Vermont State Court against Finding against Wyeth and the FDA's cases, the shareholders alleged that the Wyeth asserting common law negligence position,22 the United States Supreme companies withheld information from the and strict liability theories. As explained by Court affirmed the decision of the Vermont securities markets and that their billion the Court: "Although Phenergan's labeling Supreme Court, which upheld the jury dollar products caused serious side effects. warned of the danger of Gangrene and verdict. Of particular interest is a quote Had shareholders been made fully aware amputation following inadvertent intra- from the Court's opinion (Stevens, J.), of the problems with these drugs, they arterial injection, Levine alleged that the which explained that the position taken by arguably would not have invested in their labeling was defective because it failed to the agency in the Levine case was contrary manufacturers.
instruct clinicians to use the IV-drip method to the intent of the FDCA and longstanding of intravenous administration instead of positions taken by the FDA,23 as follows: Perhaps most important is the role of the the higher risk IV-push method."18 Levine tort litigation in providing a transparent framed her legal claims in accustomed tort In keeping with Congress' decision record for lawmakers, regulators at the FDA law terms, as follows: "More broadly, she not to pre-empt common-law and the medical professional.26 In American alleged that Phenergan is not reasonably tort suits, it appears that the civil procedure, these suits, which begin safe for intravenous administration because FDA traditionally regarded state with a formal complaint outlining the of the foreseeable risks of gangrene and loss law as a complementary form of Defendant's wrongdoing and the damage it of limb are great in relation to the drug's drug regulation. The FDA has caused, are met with a written answer by the therapeutic benefits."19 At trial, Wyeth limited resources to monitor the Defendant. Once the court determines as a argued, among other things, that it had 11,000 drugs on the market, and legal matter that the facts as alleged state a submitted its label to the FDA for approval, manufacturers have superior access "cause of action,"27 the "discovery" process the agency approved the label and, hence, to information about their drugs, moves forward where the parties exchange Wyeth could not be held liable. A jury especially in the post-marketing documents, and witnesses are called to returned a verdict of $7.4 million, which phase as new risk emerge. State tort testify in depositions. In the Spring of 2009, the trial judge partially reduced to account suits uncover unknown drug hazard discovery in litigation against the drug for Levine's earlier out of court settlements and provide incentives for drug manufacturer, Astra Zeneca, involving side with a health care center and a clinician.
manufacturers to disclose safety risk effects from its drug, Seroquel, surfaced promptly. They also serve a distinct a document known simply as "Study After the jury returned its verdict, Wyeth compensatory function that may 15" which exposed questions about the petitioned the trial judge to reject the motivate injured persons to come Seroquel's safety and efficacy. Although verdict because Levine's cause of action forward with information. Failure Astra Zenaca had actually provided this was "pre-empted" by FDA regulation to warn actions, in particular, lend study to the FDA, the agency, failing to act of pharmaceuticals. Wyeth claimed that force to the FDCA's premise that on it or take notice of its significance, was the FDA, a federal agency implementing manufacturers, not the FDA, bear unable to release it to the public because it a federal law, was solely responsible for primary responsibility for their was a document provided by the company regulating Wyeth's labeling and thus any drug labeling at all times. Thus, the to the FDA in confidence. One of the intervention by the courts of the State FDA long maintained that state law problems inherent in the FDA process is of Vermont would interfere with that offers an additional, and important, the agency's inability to properly scrutinize authority.20 Finding no conflict between layer of consumer protection that each and every document that is submitted FDA regulation and Levine's common law complements FDA regulation.24 in furtherance of a new drug indication claims, the trial court let the verdict stand.
(NDI) or an expanded indication. In To restate the Court's position in a protecting the sanctity of these documents In an appeal to the Vermont Supreme slightly different way, the significance of as trade secrets, more often than not Court, that Court affirmed the trial court common law actions are multi-fold. First, important documents concerning drugs do judgment opining that the jury verdict "did as noted, they bring relief to the victims. not see the light of day and are not subject to public scrutiny.
• Pharmaceutical Regulation in the United States: A Confluence of Influences1 In the United States, there is no true too, discovery in recent litigation has drugs and publishes a list of what it independent broker for honest information revealed that the industry has attempted deems to be the best and worst drugs.30 about pharmaceutical products. Billions of to influence these programs by funding Playing off the judicial process, Public dollars are spent on television and print them and selecting doctors who will give a Citizen has been instrumental in helping advertising which have two goals: (1) message favorable to their product. When to establish the right of citizens to access making people aware that they may have a drug company is sponsoring a CME non-confidential documents that are an illness, and (2) promoting a product that program, speakers are sometimes chosen produced in the context of "discovery" can address the illness. In many cases, the -- with input from sales representatives -- in court proceedings. In Public Citizen v. advertising is targeted to symptoms which based on their ability to influence product Liggett Group, Inc., 858 F.2d 775, 787 (1st are a normal part of the human existence sales.
Cir 1988), Public Citizen furthered the right and are not life threatening. Products of third parties to intervene in litigation dealing with urine flow, restless legs, sleep Curiously, perhaps the most honest to secure non-confidential documents disorders, and depression are marketed source of product information comes from produced in the litigation. Relying on directly to consumers with the intent that companies that – as part of their marketing this case, the United States District Court the consumer will "ask their doctor" to practices – disclose information about in U.S. ex rel. Franklin v. Parke Davis, 210 write a prescription.28 The obvious strategy their competitors' products in an effort to F.R.D. 257 (D. Mass 2002), allowed the New is to create a ground swell that pressures undermine their competitor's products' York Times and Boston Globe to intervene doctors to write prescriptions. While the reputation for safety and efficacy. It is, in the litigation – involving claims about advertisements are required to disclose the for example, common for pharmaceutical the unlawful marketing of the drug, side effects of the drugs, the side effects are representatives to distribute documents Neurontin – to secure documents produced often recited while the TV picture portrays comparing their products to the products in discovery. Quoting the Liggett case, the a happy healthy person playing with his of their competitors. These documents Court in Franklin opined that "[p]arties to kids, hand in hand with his wife, or in some highlight safety and efficacy issues litigation ‘have a general first amendment other happy mode.
with competing drugs. Unfortunately, freedom with regard to information gained because these documents are prepared through discovery and … absent a valid Companies also deploy sales representatives from publically available information, court order to the contrary, they are entitled who visit doctors and hospitals with competitors are unable to access to disseminate the information as they see pitches explaining why their products – in information "buried" within the FDA files fit."31 comparison to competitors' products – are which actually may shed light on the safety the proper choices. The representatives and efficacy of a competitor's product. As a representative of its members, who are select doctors to visit based on prescription consumers, Public Citizen has also played writing data that their company purchases. an active role in the FDA process. That role Through armies of representatives who The Role of NGOs
has ranged from filing "petitions" with the give pitches outside the FDA indication, the FDA seeking the agency's agreement to industry has made a pattern and practice of Non-governmental organizations withdraw a drug from the market to filing unlawfully marketing drugs for off-label (NGOs) have a played a role lawsuits against the FDA to compel it to in exposing flaws in pharmaceutical do so. For example, in June 2008, Public products and providing expert advice to Citizen sued the FDA in federal court for In addition to information from sales lawmakers, FDA officials, and healthcare failing to act on its petition to withdraw representatives, doctors also can read providers. Where warranted, these groups the painkillers Darvon, Darvocet and all about the safety and efficacy of drugs in have actually brought litigation against drugs containing propoxyphene from the journals, including the New England Journal companies and/or the FDA either to seek market. In doing so, Public Citizen was of Medicine, which historically has been redress or compel agency action. The relying upon a decision made by United one of the most respected publications. United States Supreme Court has long held Kingdom (U.K.) regulatory authorities in Unfortunately, there is now evidence that public interest groups representing withdrawing these drugs from the market. that studies reported in these types of members that might face injury or harm The U.K. began a phased withdrawal of publications have been subject to undue have "standing" to seek redress in court.29 Darvocet from the British market in 2005, industry influence either because they The ability of these groups to actually file following the recommendation of the U.K. have been funded by the industry or lawsuits against the FDA is yet another Committee on Safety of Medicines (CSM). because doctors conducting the studies check on the system. In the United States, In its report, the CSM stated that it could have – but did not disclose -- their financial there are multiple NGO's that have had an not "identify any patient group in whom relationship to the industry. the risk-benefit [ratio] may be positive." The withdrawal was completed at the end Doctors can also learn about drugs through The NGO Public Citizen, which was of 2007.
educational seminars and continuing founded by Ralph Nader, for example, medical education programs (CME). Here, constantly reviews information about Similarly, the Center of Science in the Public Reuben A. Guttman2 Interest (CSPI), another NGO, which has of health care.
Third-Party Payors
focused on exposing false and misleading Can Take Legal Action
advertising, initiated litigation in California • Union-Employer health care plans
Superior (State) Court against Bayer AG for which are the result of agreements As third-party payors have become more allegedly falsely claiming that the selenium negotiated between labor unions and conscious about controlling their costs, the in Men's One A Day multivitamins might employers have been established kickbacks schemes have been the subject of reduce the risk of prostate cancer. The suit to subsidize the cost of health care. litigation. This has particularly manifested was filed after CSPI contacted Bayer, asking These plans which, at least as to non- itself in litigation against pharmacy benefit that the company change its label. In filing governmental employees, are regulated managers. The apparent goal of a Pharmacy its suit, CSPI was relying on state – not by the Employee Retirement Income Benefits Manager (PBM) is to deliver cost federal – law to seek redress.
Security Act (ERISA),33 are funded efficiencies to health and welfare plans by monetary contributions from the and employers through group purchasing employer and sometimes by partial power.34 In the early 1990s, PBMs were contributions from employees. The plans "unheard of,"35 but by 2001 they were The Stakeholders
either purchase insurance coverage administering pharmacy benefits under from a private insurance carrier or "self contracts to health and welfare plans insure" but use an insurance carrier or encompassing more than 120 million some other intermediary to disperse participants.36 Ted Afield described the role payments to health care providers. of the PBM in a 2001 article published in the he United States does not have a Columbia Law School Business Law Review, as "universal" health care system where • Government employee health care follows:
every citizen is guaranteed health care. plans also exist for state and federal
There are a myriad of systems which employees. In addition, plans also exist PBM's serve numerous functions, provide health care coverage but these to cover members of the military and including the establishment and systems do not come close to providing administration of a retail pharmacy health care coverage for every citizen.32 network; computerized claims These systems are commonly known in The third-party payors have established processing and drug utilization the United States as third-party payors or systems for the reimbursement or payment review; and the establishment of TPP's. The following are the basic TPP's: of prescription drugs. Insurers, and union- employer plans and employer plans in some formularies, which essentially are lists of Food and Drug • The Medicaid system. Medicaid is cases -working through pharmacy benefit Administration (FDA) approved administered by states but is funded with managers (PBMs) – establish formularies drugs that are available through state and federal government dollars. It which favor(ed) the use of generics or one the PBM. The consolidation of these is a program designed to provide health competitor over another. A favored drug functions enables PBM's to play a care coverage for those with limited might be reimbursed at a rate of 100% while significant role in cost containment. income. Medicaid does not pay money to another competitor – but not favored drug For example, a PBM can negotiate the individual; rather it pays money to the – might be reimbursed at a rate of 50%.
rebates and other discounts from provider including a doctor, hospital or drug suppliers on behalf of its Understanding how the formularies work, the drug companies have strived to customers by offering the suppliers' • The Medicare system was established make sure that their drugs get favorable
drugs a place on its formulary.37 by the Federal government and is funded formulary treatment. In some cases, the This role presents a number of complex with federal dollars. It provides health manufacturers have paid kickbacks to problems. First, while the PBM's role care coverage to the elderly. It covers only the PBM's to ensure that their drugs are is purportedly designed to deliver cost those who paid money into the Medicare included in the formularies. Where the efficiencies, PBMs have become gatekeepers system for at least ten years and – absent drugs cannot be listed on the formularies, for the entry of drugs into specific markets some disability – is only available when the manufacturers have made coupons and thus a potential impediment to the the individual reaches the age of 65. As available on the internet. These coupons unfettered choice of consumers. This may in the case of Medicaid, Medicare does subsidize the cost of the drug that is not make a difference where drugs designed not pay money to the individual; rather borne by the plan. The coupon systems to deliver the same benefit, e.g., lower it pays money to provider including a – which are now prevalent in the United cholesterol, may pose different risks to doctor, hospital or pharmacy.
States – essentially have been designed by the pharmaceutical industry to undermine the patient. For example, Lipitor, Baycol, • Private insurance carriers which are the formularies at great cost to third-party and Crestor are all cholesterol lowering
funded by premiums paid by individuals payors.
drugs but each comes with different or their employers also subsidize the cost risks. Not only are the risks different but they may vary depending on the unique • Pharmaceutical Regulation in the United States: A Confluence of Influences1 health history and characteristics of the competition. The Federal Trade patient. These three drugs are clearly not Commission and the attorney interchangeable absent generals of informed decision- multiple states have Table 1. FCA Drug Settlements Following Government Intervention Criminal Fine
making by the plan participant. historically pursued Allegations
Settlement
Settlement
Crestor is currently on the formulary of at industry for violations of consumer Settlement
least one large PBM, it is also on the "do not of Profits
and antitrust laws.42 Off-label marketing of use" list of the Washington, D.C., public Geodon, Bextra, Zyvox and September interest group, Public Citizen, which has While federal antitrust laws Lyrica; kickbacks to concerns about its impact on renal function. generally restrict the ability of those Baycol, which at one time was a competitor Off-label marketing of antipsychotic drug Zyprexa 2009 of Lipitor, was the subject of a recall in 2001.
who can bring suit to consumers Off-label marketing of who were direct purchasers, Gabitril, Actiq and Provigil September Even where the risks of the drug are litigation by health and welfare between 2001 and 2006 Illegal kickbacks to equivalent, pharmaceuticals funds under state designed doctors, pharmacies and address the same illness or prophylactic that allow for "indirect purchaser" wholesale customers; price September purpose may have different delivery inflation on drugs including litigation has proven to be a viable devices which govern how and where Serzone; off-label marketing of Abilify (i.e., in what part of the body) the drug avenue for recovery. A number between 2002 and 2005 Off-label marketing of anti- long the drug will stay in the body. A drug Tennessee have statutes that protect Therapeutics cancer drug Trisenox between 2001 and 2005 with a coating that allows small intestine will generally stay in the who have been victimized by Off-label marketing of body longer than a drug with a coating Actimmune between August 2002 and January $36.9 million on cooperation federal; $6.7 that allows for the drug to dissolve in the 38 Acting in concert and/or with the Off-label marketing of In sum, choosing the right drug is an aid of PBMs, or other middlemen, Off-label marketing and important decision the drug and one has been a hotbed kickbacks for AIDS drug be based on the therapeutic needs for anticompetitive activity of an individual patient. To the extent that a up costs for consumers including Off-label marketing of PBM curtails the ability of a patient health and welfare funds.to make Neurontin between 1994 the choice, its conduct negatively impacts One scheme has involved efforts itself out as an independent Medicare uses the AWP as set by its parent company Merck, and to inflate the "average wholesale efforts by companies to impede market Second, and to compound the problem, the pharmacy benefits management (ii) to divert rebates from drug the industry through a "Red Book" to entry by generic competitors once PBM's choice of what price" ("A to list on its formulary WP") of drugs so as to provide company ("PBM") that could manufacturers to itself, both at is undoubtedly influenced physicians rebate establish a reimbursement rate. In In a patent has expired. These efforts, control the quickly rising costs of the expense of the plans. Plaintiffs it may get from the manufacturer. In many kickback where they are Re Pharmaceutical Industry Average prescription drugs by aggregating contend that Medco did not disclose unlawful, have involved cases, these rebates are not immediately drugs covered by Medicare Part B.
Wholesale power Price of employee Litigation,43 the the nature of its plan management combinations of activities including known to health plan trustees. Nor are they alleged that thereby the industry practices of the extent to which regulatory actions which have the readily apparent to plan participants who While Medicare does not negotiating favorable purchasing generally reported inflated wholesale prices (in the fect of failed to generic benefits, are directed to use the drugs listed in the cover the cost of prescription drugs the Red drug Book) manufacturers. which had the impact or incurred execution because of such of agreements with PBM's formulary.
that a patient administers to In reliance on Medco's himself, of setting Medicare reimbursement practices.
PBMs that impede generic entry into it does cover approximately cost containment, Plan sponsors Third, the potential for conflict is increased 450 rates higher than the proper cost. In the the marketplace. Through agreements entrusted Medco with discretionary On the initial appeal, the settlement was where the PBM is owned by or tied to a drug drugs, including ones that case of Abbott Pharmaceutical's drug, with PBMs, companies can provide the authority over certain aspects rejected, but was approved after remand. manufacturer. In 2004, the United States are administered by a doctor, and Acyclovir, Abbott reported an AWP PBM with a hefty rebate in exchange of the management of their On December 8, 2005, the United States District Court for the Southern District of certain self-administered the actual AWP Court of Appeals for the Second Circuit in , for exclusivity or near exclusivity on New York approved a $42.5 million dollar drugs. Through the Medicare for the primary purpose of cost Part according to the Plaintiffs, Central States Southeast and Southwest Area should the PBM's formulary.
program, pharmacy the federal benefit containment. Plaintiffs claim that government have been $349.05. This Health and Welfare Fund v. Merck-Medco manager Medco Health Solutions.40 In its reimburses health care providers, Medco "systematically misused such provided a windfall to "providers" Managed Care , 433 F.3d 181 (2d Cir. 2005), Overall, antitrust actions over recent Memorandum Opinion approving the as physicians, for up to 80 incentivized to and vacated and remanded drug. years have involved the settlement settlement, the Court summarized the class of the allowable costs of certain Unfortunately, formularies after determining that the record did not funds to pay a of drugs including Procardia XL, members' claims as follows: drug-switching programs, among demonstrate that the Plaintiffs had met prescription drugs that they administer co-pay of almost 60 percent of the AWP Coumadin, Buspar, Taxol, Tiazac, the United States Constitution Article Plaintiffs claim that Medco held other purposes (i) to increase the directly to patients. The remaining 20 as opposed to the proper 20 percent.
Adalat and Lorazepam to name a few.
market share in specific drugs of III standing requirements. On remand, percent is paid for by the Medicare Part B beneficiary or her/his health and Other schemes which have increased Historically, the third-party payors welfare fund, if it covers the drug.
costs to consumers have included have relied on the FDA and the Reuben A. Guttman2 Plaintiffs submitted information to the cover approximately 450 outpatient drugs, Historically, the third-party payors District Court pertaining to their injuries including ones that are administered by have relied on the FDA and the medical and the District Court entered a finding a doctor, and certain self-administered community to insure that drugs were safe that, in fact, the Plaintiffs were injured as a outpatient drugs. Through the Medicare and that they were used in an appropriate result of the Defendant's conduct. In 2007, Part B program, the federal government way. A wave of problematic drugs on appeal after the remand, the Second reimburses health care providers, such including the Cox-2 inhibitors Vioxx, Circuit approved the settlement after it as physicians, for up to 80 percent of the Bextra and Celebrex have caused private found sufficient evidence that one of the allowable costs of certain prescription third-party payors, including insurance Plaintiffs was "involved in a contractual drugs that they administer directly to carriers, to rethink this reliance. In the relationship with Medco so as to give her patients. The remaining 20 percent is paid United States third-party payors have for by the Medicare Part B beneficiary or initiated class action litigation over drugs her/his health and welfare fund, if it covers from the cholesterol drug, Vytorin,44 to Third-party payors have also effectively the drug.
anti-psychotics including Seroquel and used the antitrust laws to target industry practices that foreclose competition and Medicare uses the AWP as set by the maintain high prices for prescription industry through a "Red Book" to Federal and State Third-Party Payors:
drugs. Federal and State antitrust and establish a reimbursement rate. In In Re The False Claims Act
consumer protection laws bar schemes Pharmaceutical Industry Average Wholesale to monopolize, fix prices, or otherwise Price Litigation,43 the Plaintiffs alleged that impede fair competition. The Federal the industry reported inflated wholesale One of the more unique challenges to Trade Commission and the attorney prices (in the Red Book) which had the industry marketing practices has come generals of multiple states have historically impact of setting Medicare reimbursement under Federal and State False Claims Acts.45 pursued the drug industry for violations of rates higher than the proper cost. In the First passed by Congress during the consumer and antitrust laws.42 case of Abbott Pharmaceutical's drug, Administration of President Abraham Acyclovir, Abbott reported an AWP of Lincoln, the False Claims Act has provided While federal antitrust laws generally $1,047.38 when the actual AWP, according private citizens with the means to step into restrict the ability of those who can to the Plaintiffs, should have been $349.05. the shoes of the United States Government bring suit to consumers who were direct This "spread" provided a windfall to and seek redress against contractors that purchasers, litigation by health and welfare "providers" who were incentivized to give have defrauded the government. In 1986, funds under state antirust laws that allow the drug. Unfortunately, it caused funds the law was amended to provide private for "indirect purchaser" litigation has to pay a co-pay of almost 60 percent of the citizens the right to prosecute cases proven to be a viable avenue for recovery. AWP as opposed to the proper 20 percent.
against wrongdoers – in the name of the A number of states including Illinois government – even where the government, and Tennessee have statutes that protect Other schemes which have increased through the United States Department of the rights of "indirect purchasers" who costs to consumers have included efforts Justice, has declined to step into the case have been victimized by anticompetitive by companies to impede market entry (i.e., "intervene") itself.
by generic competitors once a patent has expired. These efforts, sometimes unlawful, The federal False Claims Act, which applies Acting in concert and/or with the aid have involved combinations of activities to the recovery of federal dollars, provides of PBMs, or other middlemen, the including sham regulatory actions which that: drug industry has been a hotbed for have the effect of delaying generic drug anticompetitive activity, driving up costs approval or the execution of agreements for consumers including health and welfare with PBMs that impede generic entry into Any person who – the marketplace. Through agreements with PBMs, companies can provide the (A) knowingly presents, or causes One scheme has involved efforts to inflate PBM with a hefty rebate in exchange for to be presented, a false or fraudulent the "average wholesale price" ("AWP") exclusivity or near exclusivity on the PBM's claim for payment or approval; of drugs so as to provide prescribing formulary.
physicians an unlawful kickback where (B) knowingly makes, uses, or they are administering drugs covered by Overall, antitrust actions over recent years causes to be made or used, a false Medicare Part B.
have involved a wide range of drugs record or statement material to a including Procardia XL, Coumadin, Buspar, false or fraudulent claim. .is liable While Medicare does not generally Taxol, Tiazac, Adalat and Lorazepam to to the United States Government for cover the cost of prescription drugs that name a few.
a civil penalty of not less than $5,000 a patient administers to himself, it does and not more than $10,000. .plus 3 times the amount of damages which • Pharmaceutical Regulation in the United States: A Confluence of Influences1 the Government sustains because of Among his allegations, Franklin claimed most successful representatives. He had the act of that person. that Parke-Davis' medical liaisons – of earned numerous regional and national which he was one – were instructed to sales awards and had risen to the position The term "claim" is generally defined make exaggerated or false representations of senior sales consultant. Notwithstanding broadly to include any request or demand concerning the safety and efficacy of the his success at Pfizer, Demott had serious for money or property when a portion of company's drugs and to off-label market concerns about the way in which he was that money or property has come from the the drugs for uses and in dosages that were being asked to market the company's outside the indication, i.e., off-label.
While there are certain limitations on Franklin further alleged that because After failing to get his concerns addressed who has standing to bring a suit, in kickbacks, employed to encourage usage of by Pfizer, in the fall of 2005, Demott filed general a suit cannot be based on "public a product paid for by the Medicare system, a complaint in the United States District information," as that term is defined in the are illegal,48 Parke-Davis had violated the Court in Boston, Massachusetts. As is statute, and it cannot be brought based on FCA. Franklin's theory was premised on required by the FCA, his cause of action "allegations or transactions which are the the argument that kickbacks alone were was filed under seal meaning that it subject of a civil suit or an administrative a predicate to an FCA violation. Franklin was kept secret from Pfizer but given to civil money penalty proceeding in which alleged that Parke-Davis disguised its government prosecutors. The FCA seal the Government is already a party."47 kickbacks in the form of payments to allows the government –through the doctors for sham consulting arrangements, Department of Justice and state attorneys Courts have held that a manufacturer's off- participation in "speakers bureaus," general – to conduct an investigation before label marketing of drugs and/or kickbacks or as arrangements to conduct studies. the company knows that it is the suspect of used to induce the writing of prescriptions Sustaining Franklin's causes of action wrongdoing.
causes doctors to write prescriptions that are (asserted on behalf of the Government) the reimbursed by the Medicaid and Medicare court explained that in some cases "the FCA Prior to filing his case, Demott had systems (state and federal dollars) thereby can be used to create liability where failure disclosed his concerns to the United States "causing" false claims to be filed. to abide by rule or regulation amounts to a Department of Justice and the Inspector material misrepresentation made to obtain General for the United States Department of In U.S. ex rel. Franklin v. Parke-Davis, a Government benefit."49 In this case, Health and Human Services (HHS) which 147 F. Supp.2d 49 (D. Mass. 2001), a Parke-Davis was alleged to have engaged oversees the Medicare program. He also whistleblower, David Franklin, filed suit in a wrongful pattern of conduct which made disclosures to various state attorney under False Claims Act against his former caused the prescriptions to be written – generals. His disclosure provided an outline employer, Parke-Davis. Franklin had direct based on false information – which in turn of the facts, a listing of potential witnesses, knowledge of the company's marketing were reimbursed by government health and binders of documents supporting practices of the drug Neurontin, and care plans.
his claims. This disclosure--along with he alleged that the company's off-label disclosures made by other whistleblowers marketing and kickbacks paid to doctors – Subsequent to the Franklin case, the federal – was sufficient to prompt the government to induce prescription writing -- resulted in and state governments have intervened and to begin a four-year investigation. Through the filing of false claims for payment and settled in a number of cases filed by private his initial complaint and an amended filing, approval. Specifically, Franklin accused whistleblowers, as shown in Table 1.
Demott made the following claims with Parke-Davis of illegal marketing practices, regard to the following Pfizer products including the off-label promotion of its The largest of these settlements involved which were laid out in paragraphs 10-16 of anticonvulsant medication, Neurontin. the September 2009, $2.3 billion dollar his Amended Complaint and Jury Demand: The drug had only been approved for settlement entered into by the United States use in patients with epilepsy, but in 2001 Government and various state governments over 80% of its $1.8 billion in sales were with Pfizer, Inc. That settlement was the 10. Pfizer waged an illegal "off-label" for indications unapproved by the FDA. result of litigation under the False Claims marketing campaign to promote In 2004, Pfizer – which had by that time Act initiated by six lead whistleblowers and the prescription drug Bextra for purchased Parke-Davis – acknowledged at least 10 other whistleblowers who had non-FDA approved uses. The FDA that Parke-Davis had aggressively marketed filed cases that post dated the filings of the approved Bextra for treatment of Neurontin by illicit means for unrelated initial six.
rheumatoid arthritis, osteoarthritis, conditions including bipolar disorder, pain, and primary dysmenorrhea (a migraine headaches, and drug and alcohol Glenn Demott, a onetime Pfizer sales type of menstrual pain). Rather withdrawal, and consented to $430 million representative, was one of those than awaiting FDA approval for in damages to resolve the litigation.
whistleblowers. As a Pfizer employee, the drug's alternate uses, Pfizer Demott had been one of the company's chose to promote such off-label Reuben A. Guttman2 uses of Bextra as providing acute, the safety warning sections of and medical institutions by offering dental, podiatric, pre-operative and the package insert and caused large quantities of drug samples postoperative pain relief, despite physicians to expand their use of (what Pfizer now calls "starters") in Pfizer's awareness of the FDA's Celebrex to patients who would not exchange for large or standing orders prohibition on off-label marketing. otherwise have received the drug from the physicians and medical because of the patient's risk factors.
institutions for those or other scheme also involved promotion of drugs. This became an accepted unproven claims of superior speed practice that later resulted in Pfizer- of onset, superior efficacy and 13. Pfizer sales representatives trained District Managers and sales superior gastrointestinal safety. To marketed Lyrica for off-label uses, representatives exchanging large do so, Pfizer misrepresented and including for pain, in advance of its numbers of Pfizer-supplied Depo- falsified data from research studies, approval by the FDA and thereafter. Provera (an injectable contraceptive) made false certifications of physician Pfizer's agents falsified physician samples (up to 100) in return Medical and Drug Information requests for medical information for the physicians and medical requests, and used unreliable, concerning Pfizer's prescription institutions placing larger Depo- misleading and irrelevant data drug Lyrica before that drug had Provera orders. To accomplish this, to promote its claims of superior been approved for any uses by the Pfizer sales representatives first efficacy and cardiovascular and FDA. When the Relator reported promised physicians free sample gastrointestinal safety and urge this conduct to Pfizer's Compliance doses of DepoProvera, an injectable higher dosing than the FDA Department, Pfizer took no action contraceptive, in exchange for the against the sales representatives, physicians purchasing Estring in violation of the terms of its (FDA approved for treating various Corporate Integrity Agreement.
post-menopausal conditions). This 11. Pfizer actively promoted bartering continued thereafter, Celebrex, its COX-2 inhibitor, "off- without Estring, which illegally label" to increase its sales of that 14. Pfizer routinely paid improper manipulated Medicaid "best drug. Celecoxib is a non-steroidal kickbacks to physicians in order to price" and "average manufacturer anti-inflammatory COX-2 inhibitor induce those physicians to prescribe price" reimbursement and rebate manufactured and marketed by calculations. The deals drastically Pfizer under the brand name drug Relpax and engaged in other decreased the average wholesale "Celebrex." The FDA approved unlawful marketing practices price per dose paid and reimbursed Celebrex on December 31, 1998 for the to increase Relpax sales. These the physicians at an artificially treatment of pain and inflammation kickback schemes violated 42 U.S.C. higher rate. This practice also associated with adult rheumatoid § 1320a-7b(b) (the "‘Medicare Fraud improperly influenced physicians' arthritis and osteoarthritis. The FDA & Abuse/Anti-Kickback Statute") decisions about whether to prescribe expanded Celebrex's approved uses and caused false or fraudulent claims Depo-Provera, so that patients after the initial approval, but never for Pfizer's drugs to be filed by receiving those drugs could not generally expanded it for all types physicians and medical institutions be certain that their treatment was of pain or inflammation. Additional for reimbursement from Federal and guided solely by their physicians' later approvals were for Familial State government-funded health independent medical assessment of Adenomatous Polyposis (FAP); programs. Pfizer misrepresented their diagnoses.
for management and treatment the results of scientific studies to of primary dysmenorrhea (a type promote Relpax over competitors' of menstrual pain); for juvenile migraine medication and illegally 16. Pfizer marketed its atypical rheumatoid arthritis; for ankylosing used information from the studies antipsychotic drug, Geodon spondylitis; and for acute pain to promote Relpax, including (ziprasidone hydrochloride), in adults arising from dental or promoting dosages that were higher initially indicated for the treatment orthopedic surgery.
than the FDA had approved.
of schizophrenia, to a high-volume Medicaid clinic called Townstreet 12. Pfizer promoted Celebrex as Medical Clinic, located in Columbus, having superior efficacy, superior 15. For years, Pharmacia, Ohio. Pfizer aggressively promoted gastrointestinal safety, and superior Pfizer's predecessor, trained and Geodon to this practice, which served cardiovascular and cardio-renal encouraged its district managers a large Medicaid patient population, safety. These false claims of and sales representatives to "‘do despite the fact that Pfizer was aware Celebrex's properties diminished deals" and "‘barter" with physicians of a dangerous side effect caused • Pharmaceutical Regulation in the United States: A Confluence of Influences1 by the drug. In particular, Geodon settlement laid out the claims that the (6) for which the United States and could create serious, potentially government could have asserted had it state Medicaid programs provided fatal heartbeat irregularities. Pfizer pursued the case through trial: coverage for Geodon; (b) offered engaged in a pattern of reckless and paid illegal remuneration to marketing of Geodon, while (1) Bextra: During the period health care professionals to induce knowing that Geodon was being February 1, 2002, through April 30, them to promote and prescribe used off-label for conditions other 2005, Pfizer: (a) illegally promoted Geodon, in violation of the Federal than its approved uses. In addition the sale and use of Bextra for a variety Anti-Kickback Statute, 42 U.S.C. to this aggressive marketing for of conditions (including acute pain § 1320a-7b(b); and (c) made and/ non-indicated purposes, Pfizer paid and various types of surgical pain) or disseminated unsubstantiated kickbacks to the Townstreet Clinic and at dosages other than those and/or false representations or through the payment of grants for which its use was approved by statements about the safety and and "preceptorships." Defendant the Food and Drug Administration efficacy of Geodon. As a result of the continued to aggressively market ("FDA") (i.e., "off label" uses), in foregoing conduct, Pfizer knowingly to the Townstreet Clinic physicians violation of the FDCA, 21 U.S.C. caused false or fraudulent claims for even after the prescriptions were § 331, et seq., and which were not Geodon to be submitted to, or caused known to be inappropriate and medically-accepted indications as purchases by, Medicaid, Medicare defined by 42 U.S.C. § 1396r-8(k) and the other Federal Health Care (6) for which the United States and The gravamen of Demott's claims on state Medicaid programs provided behalf of the government were that Pfizer's coverage for Bextra; (b) offered (3) Zyvox: During the period January unlawful marketing practices caused and paid illegal remuneration to 1, 2001, through February 28, 2008, government third-party payors to spend health care professionals to induce Pfizer: (a) illegally promoted the sale money that they otherwise would not have them to promote and prescribe and use of Zyvox for a variety of off- spent. After an investigation involving Bextra, in violation of the Federal label conditions (including infections countless documents and witness Anti-Kickback Statute, 42 U.S.C. caused by methicillin-resistant interviews the Government announced in § 1320a-7b(b); and (c) made and/ Staphylococcus aureus ("MRSA") July 2009 that it had reached a settlement or disseminated unsubstantiated generally, rather than only those with Pfizer. For their efforts in prompting and/or false representations or types of MRSA infections for which the Government investigation that lead statements about the safety and Zyvox was FDA-approved), in to the recovery, each of the Relators was efficacy of Bextra. As a result of the violation of the FDCA, 21 U.S.C. provided a share (i.e., a "bounty") of the foregoing conduct, Pfizer knowingly § 331, et sec., and which were not caused false or fraudulent claims for medically accepted indications as Bextra to be submitted to, or caused defined by 42 U.S.C. § 1396r-8(k) In addition to the civil prosecution of Pfizer purchases by, Medicaid and the (6) for which the United States and for monetary damages under the FCA, the other Federal Health Care Programs.
state Medicaid programs provided Government also prosecuted the company coverage for Zyvox; (b) made and/ for criminal wrongdoing. As a result, a (2) Geodon: During the period or disseminated unsubstantiated Pfizer subsidiary agreed to plead guilty to from January 1, 2001, through and/or false representations or criminal conduct. December 31, 2007, Pfizer: (a) statements about the safety and illegally promoted the sale and use efficacy of Zyvox (including that The civil and criminal prosecutions of Geodon for a variety of off-label Zyvox was superior to vancomycin, resulted in three important documents: (1) conditions (including depression, its primary competitor drug for a settlement agreement of the False Claims bipolar maintenance, mood disorder, these indications); and (c) offered Act violations, (2) a criminal plea, and (3) anxiety, aggression, dementia, and paid illegal remuneration to a Corporate Integrity Agreement (CII) with health care professionals to induce the Department of Health and Human disorder, obsessive compulsive them to promote and prescribe Services which governed the company's disorder, autism and posttraumatic Zyvox, in violation of the Federal conduct going forward. stress disorder), and for patients Anti-Kickback Statute, 42 U.S.C. (including pediatric and adolescent § 1320-7b(b). As a result of the All told, the FCA settlement agreement patients) and dosages that were off- foregoing conduct, Pfizer knowingly covered wrongful conduct in the marketing label, in violation of the FDCA, 21 caused false or fraudulent claims for of the drugs Bextra, Geodon, Zyvox, Lyrica, U.S.C. § 331, et seq., and which were Zyvox to be submitted to, or caused Aricept, Celebrex, Lipitor, Norvasc, Relpax, not medically-accepted indications purchases by, Medicaid, Medicare Viagra, Zithromax, Zoloft and Zyrtex. The as defined by 42 U.S.C. § 1396r-8(k) and the other Federal Health Care Reuben A. Guttman2 (4) Lyrica: During the period that the company disclose payments made It is now clear that Pfizer and September 1, 2005, through October to doctors, and a requirement that doctors its senior management knew that 31, 2008, Pfizer: (a) illegally promoted be informed of the settlement. The criminal from its initial approval, Celebrex the sale and use of Lyrica for a variety plea, taken by a Pfizer subsidiary, involved should have been the subject of the of off-label conditions (including criminal conduct in the marketing of Bextra "black box" FDA warning it now chronic pain, neuropathic pain, carries regarding the substantial risk perioperative pain, and migraine), of cardiovascular harm that can be in violation of the FDCA, 21 U.S.C. caused by using the drug. Had this § 331, et seq., and which were not "black-box" warning been included medically-accepted indications as on Celebrex's label, it never would defined by 42 U.S.C. § 1396r-8(k) Some of the underlying facts that gave have been more than what it is (6) for which the United States and rise to the FCA action against Pfizer now -- a niche painkiller used by a state Medicaid programs provided have also given rise to an action brought by segment of special-need patients. coverage for Lyrica; (b) made and/ shareholders of Pfizer under U.S. securities Further, the Defendants knew or or disseminated unsubstantiated laws. In a case brought in the United States were reckless in not knowing that and/or false representations or District Court for the Southern District Bextra, because of its extraordinary statements about the safety and of New York, institutional investors in dangers to users, never even should efficacy of Lyrica, including claims Pfizer – including the Teachers Retirement have been approved for use by that it was superior to Neurontin System of Louisiana – have alleged that and its generic equivalent, misrepresentations regarding the safety and gabapentin; and (c) offered and efficacy of Bextra and Celebrex fraudulently 4. The Defendants failed to paid illegal remuneration to health impacted the price of Pfizer stock. When disseminate to the public results care professionals to induce them the market learned of problems related from a study ending in 1999, that to promote and prescribe Lyrica, to these drugs, the stock price dropped, found patients taking Celebrex in violation of the Federal Anti- causing injury to a class shareholders that to treat mild Alzheimer's disease Kickback Statute, 42 U.S.C. § 1320- purchased the stock while the company had a statistically significant 7b(b). As a result of the foregoing was making the misrepresentations or increase in heart attacks and other conduct, Pfizer knowingly caused fraudulent omissions. While the Plaintiffs cardiovascular side effects (the false or fraudulent claims for have filed a 142-page complaint against "1999 Study"). The Defendants Lyrica to be submitted to, or caused Pfizer, the claims are summarized in failed to publicly disclose that purchases by, Medicaid, Medicare paragraphs 2-9, as follows: the 1999 Study showed Celebrex and the other Federal Health Care For more than five years, Pfizer increased by nearly four times the misrepresented Celebrex as a risk- risk of cardiovascular problems free painkiller, safer than aspirin, compared with a placebo. Dr. Lon S. (5) Kickbacks: From January 2001, ibuprofen and other drugs, which Schneider, a professor of psychiatry, through December 2004, Pfizer could be taken by almost anyone for neurology, and gerontology at the paid illegal remuneration for a number of types of chronic pain. University of Southern California speaker programs, mentorships, Pfizer also misrepresented Bextra as Keck School of Medicine in Los preceptorships, journal clubs, and a safe painkiller for a wide variety Angeles, who was part of the safety gifts (including entertainment, of applications. Unbeknownst to monitoring board for Celebrex, said, cash, travel and meals) to health investors, however, from at least regarding the 1999 Study: "It should
care professionals to induce them as early as 1999, Pfizer had in its have been fully published in 2000,
to promote and prescribe the drugs possession data regarding serious and perhaps if it had been some
Aricept, Celebrex, Lipitor, Norvasc, cardiovascular risks of Celebrex attention might have been drawn to
Relpax, Viagra, Zithromax,Zoloft, and/or Bextra that contradicted or potential safety issues." (Emphasis
and Zyrtec, in violation of the rendered false statements made by added). Similarly, Dr. Kenneth Federal Anti-Kickback Statute, 42 the Defendants throughout the Class Brandt, a professor of medicine U.S.C. § 1320a-7b(b). As a result of Period about the alleged safety of at Indiana University School of the foregoing conduct, Pfizer caused those drugs. Once the truth – which Medicine, who was part of a panel false claims to be submitted to was known by Pfizer for years – that reviewed Celebrex safety in Medicaid and TRICARE.
was revealed, sales of Celebrex 2001, said that, had the panel known fell dramatically and Bextra was about the study, the group would The CII, yet a separate document, outlined removed from the market. As a have recommended that both Vioxx how the company would monitor its result, Pfizer's stock price declined and Celebrex be taken with greater conduct going forward, the requirement caution. That panel decided in • Pharmaceutical Regulation in the United States: A Confluence of Influences1 2001 that Vioxx, but not Celebrex, 7. From the initial approval of On February 28, 2008, the court granted should carry a warning about its Celebrex by the FDA in 1999, and the the Defendants' motion to dismiss. Pfizer's cardiovascular risks. That difference subsequent FDA approval of Bextra knowledge that evidence of torcetrapib's is one of the main reasons Celebrex in 2001, through April 2005, Pfizer's efficacy was inconclusive and did not had greater sales than Vioxx.
website contained no warning support an inference that its optimistic about the cardiovascular dangers statements were materially misleading, 5. Moreover, it is clear that the associated with the use of Celebrex the judge ruled. While the Pfizer securities information about the safety of and Bextra that it knew existed. litigation did not reach a jury, by allowing Celebrex that was hidden from those Today, Bextra is no longer on the the case to go through the discovery phase outside of Pfizer, was well-known market and Pfizer's Celebrex website of the judicial process opened Pfizer's inside the company. According to states: "Important Information:
conduct to public scrutiny and oversight. one of the inventors of Celebrex CELEBREX may increase the chance
and Bextra, members of senior of a heart attack or stroke that can
management were well aware of the lead to death." (Emphasis added).
clinical studies that were conducted on Celebrex and Bextra. Statements 8. Sales of Celebrex were $2.6 by former employees of Pharmacia billion in 2000 and $3.1 billion in Corporation ("Pharmacia") 2001. After the introduction of In the United States, regulation of the pharmaceutical industry is subject (now Pfizer) who worked on the Bextra, the joint sales of Celebrex to formal and informal control. Laws, development of Celebrex, confirm and Bextra totaled $3.5 billion in regulations, and oversight by Congress that all of the negative effects and 2002, approximately $3.4 billion in and stakeholders has been the means by problems were reported to top 2003, and $4.5 billion in 2004. The which the industry has been tested as to joint sales of Celebrex and Bextra the safety and efficacy of its products. constituted between 6% and 11% of The system is imperfect and involves 6. It was not until December Pfizer's total sales from 2002 to 2004.
a fluid interrelationship of all of the 17, 2004, when the National competing pressures, including the desire Cancer Institute announced the Beginning with Pfizer's first for breakthrough drugs and scientific premature cessation of a trial of announcement in October 2004, innovation balanced against the health and Celebrex because of a dramatic regarding Bextra, Pfizer's sales of safety of consumers. It is a system that has increase in cardiovascular death the drugs began to decline. The brought a diverse array of stakeholders and stroke among the participants effect of the black box warning label of the trial that the truth began on Celebrex and the withdrawal of to emerge concerning Celebrex's Bextra from the market caused a safety. Thereafter, on January 31, material decline in Pfizer's revenues 2005, Pfizer acknowledged that the and earnings. Revenues from previously undisclosed 1999 Study, Celebrex fell from $2.294 billion for conducted prior to Celebrex being the first nine months of 2004 to $1.258 1 Originally published in the Public Interest Law approved by the FDA, found that billion for the same period in 2005, Journal, Peking University, Beijing, People's elderly patients taking the drug a decline of 45%. Bextra's revenues Republic of China. The Peking University Public Interest Law program is a program in cooperation were far more likely to suffer heart for the first three quarters declined with the China Law Center, Yale Law School.
problems than patients taking a by more than $925 million from 2004 placebo. Not only was the study to 2005. Combined, Celebrex's and 2 Reuben A. Guttman is a Partner with the New concealed from the investing public Bextra's revenues for the first nine York based law firm of Grant & Eisenhofer. Mr. for five years, but Pfizer withheld months of 2005 fell by over $2 billion Guttman practices in the firm's Washington, D.C. office. Mr. Guttman heads the firm's False it from the FDA during the FDA's compared to the first nine months of Claims Act practice which involves complex 2000-01 review of the efficacy and 2004, a decline of 63%. As a result, pharmaceutical industry fraud and was counsel safety of Celebrex. Similarly, only Pfizer's common stock price fell for one of the six prime "relators" in litigation in October 2004, following the very dramatically. From October 18, 2004 resulting in the United States Government's public controversy over Vioxx, to October 26, 2005, Pfizer's stock recovery of $2.3 billion from Pfizer, Inc. He is a member of the national faculty of the Emory did Pfizer disclose information experienced a series of drops, falling University Kessler-Edison Trial Advocacy regarding a study of Bextra that from $29.00 per share on October 18, Program and he has been a faculty member of the showed serious cardiovascular 2004 to $21.06 per share on October National Institute for Trial Advocacy. The author problems associated with the use of 26, 2005 (a decline of $7.94 per share credits Bradley Hillis, an attorney with Grant & Eisenhofer, for his review of and contributions to or 27.4%), representing a loss in market capitalization of $58.5 billion.
Reuben A. Guttman2 3 There is a financial benefit from FDA approval 9 Once the monopoly period granted by the as the "supreme law of the land." Wyeth, 129 of a drug and, as an economic calculation, the drug's patent has expired, other manufacturers S.Ct. at 1195.
value of the "stamp of approval," expressed in may produce a "generic" version of the drug. A a company's stock price, exceeds the procedural simplified application is allowed for the generic 20 Wyeth, 129 S.Ct. at 1194.
costs, according to some commentators. Ariel version of drug, given the rigorous testing of the Katz, Pharmaceutical Lemons: Innovation original version. The Drug Price Competition 21 The Solicitor General of the United States and Regulation in the Drug Industry, 14 Mich. and Patent Term Restoration Act of 1984 (the represented the position of the FDA before the Telecomm. & Tech. L. Rev. 1 (2007)("Although "Hatch-Waxman Act") established a new United States Supreme Court.
intuitively appealing, the argument that drug process for generic drugs to enter the market, the regulation negatively affects the incentives to Abbreviated New Drug Application ("ANDA"). 22 Wyeth, 129 S.Ct. at 1201.
innovate does not fully capture the role that Congress intended the Act to "make available regulation plays in this industry. [T]he regulatory more low-cost generic drugs by establishing framework is not solely a burden imposed on the a generic drug approval procedure for pioneer Id., at 1202.
industry; it also provides a valuable service to the drugs first approved after 1962." Adam R. Young, industry. Specifically, drug regulation provides Generic Pharmaceutical Regulation in the United Securities actions are brought by shareholders certification of drug quality.") States With Comparison to Europe: Innovation against a company and its directors and derivative and Competition, 8 Wash. U. Global Stud. L. Rev. actions are brought by shareholders in the name of the company against those – including officers 4 Employee Retirement Income Security Act 165, 169, n.30 (2009).
("ERISA") § 404(c); 29 U.S.C. § 1104(c) (1974).
and directors – who have injured the company.
10 See, 21 U.S.C. § 331(a)-(b), § 352(a),(f).
25 Justice Louis D. Brandeis wrote: "Sunshine 5Food, Drug & Cosmetics Act ("FDCA"), 21 U.S.C. § 301 et seq. (1938). The FDCA's is said to be the best of disinfectants." Brandeis, 11 See, 21 U.S.C. § 301.
precursor law, the Pure Food and Drug Act of L.D., Other People's Money and How the Bankers June 30, 1906, P.L. 59-384, 34 Stat. 768, was part Use It, Melvin I. Urofsky, ed. (orig. 1914, reprint 12 The issue of whether conflicts of interest have of President Theodore Roosevelt's progressive Bedford/St. Martin's: 1995), at 92.
tainted studies used to secure FDA approval platform, and was inspired by Upton Sinclair's of drugs is indeed serious. Dr. Marcia Angell, vivid descriptions of Chicago's meatpacking a former editor of one of the more prominent Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009).
factories in his 1906 novel, The Jungle. The Pure medical publications in the United States, noted Food and Drug Act of 1906 also required that so- in her article, "Drug Companies & Doctors: A The phrase "ask your doctor" or a similar called "patent medicines," which had previously Story of Corruption," N.Y. Review of Books 56:1 phrase appears in almost all direct to consumer been sold with secret ingredients or misleading (Jan. 15, 2009), that "[i]t is simply no longer television advertisements. Compare, Mintzes, labels, be accurately labeled with contents and possible to believe much of clinical research that B., Morgan, S. & Wright, J.M., "Twelve Years' dosage. While the 1906 law required disclosure is published, or to rely on the judgment of trusted Experience with Direct-to-Consumer Advertising of ingredients, it had a limited ability to regulate physicians or authoritative medical guidelines. I of Prescription Drugs in Canada: A Cautionary safety. The limits of the 1906 were tested before take no pleasure in this conclusion which I have Tale," PLoS ONE. 2009; 4(5): e5699 (In Canada, the U.S. Supreme Court in United States v. Forty reached slowly and reluctantly over my two researchers have found that: "The suggestion to Barrels and Twenty Kegs of Coca-Cola, 241 U.S. decades as an Editor of the New England Journal ‘ask your doctor' is no guarantee that the [TV] 265 (1916), in which the government sought to of Medicine." viewer is protected, as doctors often prescribe reduce the amount of caffeine in the popular soda medicines that patients request although they pop. The Supreme Court ruled the law did not might not have otherwise chosen to do so.").
13 See Letter from Sen. Charles E. Grassley to grant the government the power to regulate the James A. Wagner, Ph.D., Emory University, amount of caffeine, so long as the ingredient September 16, 2008.
See, Sierra Club v. Morton, 405 U.S. was disclosed on the label. The company later 727 (1972); compare Fair Housing Council settled with the government and curbed the of Suburban Philadelphia v. Montgomery 14 Gardiner Harris, "Heart Surgery Drug Pulled amount of caffeine. The Pure Food and Drug Act From Market," N.Y. Times, November 6, 2007.
Newspapers, 141 F.3d 71, 78 (3d Cir.1998), of 1906 was largely replaced by the much more where no standing was found as no member of the comprehensive Food, Drug, and Cosmetic Act plaintiff group had sustained injury in fact. The of 1938, passed under Teddy Roosevelt's cousin, Wyeth v. Levine, 555 U.S. _, 129 S.Ct. 1187 concept of constitutional standing is particular to President Franklin D. Roosevelt.
federal courts, i.e., courts created by Article III of the U.S. Constitution. Standing requirements in 16 Subsequently, on October 15, 2009, Wyeth was 6 Wyeth v. Levine , 555 U.S. _, 129 S.Ct. 1187, state court may differ from state to state.
1202 (2009).
acquired by Pfizer, Inc.
29 The group publishes its findings at its 17 An arguably safer method of administration is 7 In contrast, there are some agencies established by Congress that only make decisions through to introduce the drug through a saline solution in a adjudications. For example, the National Labor hanging drip bag, according to medical testimony 31 U.S. ex rel. Franklin v. Parke Davis, 210 Relations Board (NLRB), which regulates the at trial. Wyeth v. Levine, supra, Respondent's F.R.D.257, 260 (D. Mass 2002), citing Public relationship between workers engaging in union Brief in Opposition, at 4.
Citizen v. Liggett Group, Inc., 858 F.2d 775, 780 activity, i.e., protected-concerted conduct, and (1st Cir. 1988). their employers, establishes its rules of the Wyeth, 129 S.Ct. at 1191.
workplace by holding hearings concerning 32 China has similar gaps in its system as the specific labor disputes and publishing decisions 19 Id.
government pays some portion of the cost of about how the National Labor Relations Act treating illness but not all costs. In contrast, (NLRA), promulgated by Congress, should be 20 Wyeth's argument was based on the doctrine countries including Great Britain and Israel have applied. See, e.g., 29 U.S.C § 155, et seq. of pre-emption, which arises from the Supremacy been able to implement universal coverage for all Clause of the United States Constitution, 8 See, 21 U.S.C. § 331(d), § 355(a).
Article VI, Clause 2. That clause establishes the Constitution, Federal Statutes, and U.S. Treaties 33 ERISA § 404(c); 29 U.S.C. § 1104(c) (1974).
Dist. LEXIS 28606, 2004 WL 1243873 (S.D.N.Y. Schering Plough over the company's failure to May 24, 2004)(No. CLB, 03-MDL-1508).
fully disclose information about the safety and 34 See, Afield, W.E., Note: The New Drug Buyer: efficacy of its drug, Vytorin. The TPP's alleged The Changing Definition of the Consumer for 41 Central States Southeast and Southwest that had full information been made available Antitrust Enforcement in the Pharmaceutical Area Health and Welfare Fund v. Merck-Medco to the medical community, fewer prescriptions Industry, 2001 Colum. Bus. L. Rev. 203.
Managed Care, 504 F.3d 229, 243 (2d Cir. 2007).
would have been written. Schering-Plough Corp., Quarterly Report for Third Quarter ending 35 Id., at 210.
42 See, e.g., the February 5, 2002 press release September 30, 2009 (filed Oct. 29, 2009), SEC from Tennessee Attorney General Paul G. Form 10-Q, at 22.
36 Id.
Summers announcing the state's participation in the settlement of a price fixing case involving 45 The Federal False Claims Act can be found at the drug Lorazepam (Mylan Pharmaceuticals); 31 U.S.C § 3729, et seq. There are 23 States and the April 27, 2001 press release from Texas the District of Columbia that have promulgated 38 An "enteric coating" is put on a pill to so that Attorney General John Cornyn regarding his their own False Claims Acts which allow citizens it does not dissolve until it reaches the small state's participation in an antitrust settlement to bring suit to recover dollars that have been intestine. These coatings work because they do against Mylan over ingredients to Lorazepam; defrauded from the states. One of the most not dissolve in the acidic juices of the stomach. the website of California Attorney General Bill comprehensive websites which explains these Enteric coatings are also used where the drug Lockyer which documents antitrust actions laws is www.whistleblowerlaws.com.
would irritate the stomach if it was dissolved in and/or settlements involving contact lenses (Johnson & Johnson), the anti-cancer drug Taxol 46 See, 31 U.S.C. § 3729(a)(2)(A). (Bristol-Myers Squibb), and the heart medication 39 In a recent television news interview, for Cardizem (Aventis and Andrx Corporation).
47 See, 31 U.S.C. § 3730(e)(3).
example, one PBM official indicated that Lipitor had been removed from his firm's "formulary" in 43 M.D.L. No. 1456, No. 01-cv-12257-PBS (D. 48 U.S. ex rel Franklin v. Parke-Davis, 147 F.
favor of several generic brands and Crestor.
Supp.2d 39, 52 (D. Mass. 2001).
40 See, In Re: Medco Health Solutions, Inc. 44 On August 5, 2009, third-party payors Pharmacy Benefit Manager Litigation, 2004 U.S. reached a $40 million settlement with Merck-

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