Big Pharma Getting Legal Heat for Marketing Tactics

The pharmaceutical industry has had a lot of success in recent years. Its profit margin is about 16%, seventh highest of the 215 industries tracked by Morningstar, an investment research company. In 2003, the drug industry succeeded in getting Congress to pass and President Bush to sign the Medicare Expansion Act that, by some estimates, increased drug industry profits by $139 billion. And last year the Pharmaceutical Researchers and Manufacturers Association (PhRMA) made a deal with President Obama to cut costs for some drugs in exchange for a commitment not to allow the health care reform bill to allow importation of drugs from other countries or to fix prices. As a result, the pharmaceutical industry will get assured reimbursement for drugs for millions of additional Americans.

With these successes, one would think that the pharmaceutical industry would be satisfied with using its clout to set the rules for its own benefits. Instead, however, a recent series of news reports shows that pharmaceutical companies are regularly attracting the attention of legal authorities in their aggressive marketing of drugs. Consider the following:

Why do drug companies break the law?

First, according to legal and academic observers, they don’t appear to respect or fear the law. According to federal prosecutor Michael Loucks, then the head of the health-care fraud unit of the U.S. Attorney’s Office in Boston, when lawyers for Pfizer Inc., the world’s largest drug company, promised him in January 2004 that the company wouldn’t break the law again, they knew the company was involved in other illegal promotions. “At the very same time Pfizer was in our office negotiating and resolving the allegations of criminal conduct in 2004,” said Loucks, “Pfizer was itself in its other operations violating those very same laws. They’ve repeatedly marketed drugs for things they knew they couldn’t demonstrate efficacy for. That’s clearly criminal.” According to Jerry Avorn, a professor at Harvard Medical School in Boston and author of Powerful Medicines: The Benefits, Risks, and Costs of Prescription Drugs, “Marketing departments of many drug companies don’t respect any boundaries of professionalism or the law. The Pfizer and Lilly cases involved the illegal promotion of drugs that have been shown to cause substantial harm and death to patients.”

Another reason for widespread lawlessness is that the fines represent a small portion of drug industry profits. As large as the penalties are for drug companies caught breaking the off-label law, the fines are tiny compared with the firms’ annual revenues. According to Bloomberg News, the total of $2.75 billion in fines that Pfizer has paid in off-label penalties since 2004 is a little more than 1 percent of the company’s revenue of $245 billion from 2004 to 2008.

Finally, companies break the law because they think they can get away with it. The Food and Drug Administration has been chronically understaffed, dependent on the drug industry for the fees that support its operations and using experts in the pay of the very industries they are regulating. According to Dr. Marcia Angell, a former editor of the New England Journal of Medicine, “There is growing evidence that the Center for Drug Evaluation and Research, the part of the [Food and Drug] agency that regulates prescription drugs, has become the servant of the industry it regulates.” Whether the new tougher stance of the current FDA will be able to reverse these trends remains to be seen.

In sum, the drug industry resorts to lawless activities because they face relentless pressure to maximize profits and cut costs, because they often see the law as an obstacle to profits rather than a legitimate moral framework that should govern their behavior and because the regulatory agency charged with monitoring the drug industry has often lacked the resources and sometimes the will to provide aggressive oversight. Protecting public health against dangerous and illegal promotion of prescription drugs will require changing these three dynamics.

Photo Credits:

  1. via Flickr