Saturday, October 02, 2010

$5 billion in fines! "The cost of doing business!"

In the last 2 years alone, 6 of the top 10 pharmaceutical companies have been fined for fraud in the US with a further 3 undergoing investigations. The total paid out has been $5bn in fines. (Of the top 10, only Roche remains untouched by the US government).
The US government is now considering a few different approaches such as sanctions and personal accountability of executives if these fines are not going to work. For example:

Requiring a subsidiary, and all its assets, to be sold off to a third party

Confiscation of the company’s patents, but allowed the company to keep the drug but having it compete as a generic (which would be an enormous financial blow)

A stricter liability rule to hold executives to account (“regime change”) where any executives found guilty would be banned from working and would have to be sacked as part of any negotiated settlement.

Pursuing doctors receiving kickbacks from industry

What about jail time for such executives? Lewis Morris, chief lawyer at the US Department of Health and Human Services, explains to Newman: “the criminal burden of proof is hard to meet. In white collar crime responsibility for illegal acts is usually spread across many individuals at all levels in the organization: there is rarely one person who has made a critical decision on which the prosecutors can hang their case.”

It is of course too early, as of writing, to know what shape the measures will eventually take, and whether they will be effective or not. However, it requires a strong government and set of systems in place to do something like this. This is something the US would have to its advantage. For many other countries, poor or emerging, corruption attempts like this is more likely succeed, unfortunately (often accompanied by any found-out companies claiming this is how they must do business in foreign countries to stave off competition!).

1 comment:

Anonymous said...

The fines and settlements paid by big pharma historically do not deter wrongdoing. Most settlements go with a deferred or non prosecution agreement. Corporate Integrity agreements that often go with such settlements as void of efficacy as the settlements themselves.