Thursday, June 14, 2012

Companies have no soul to damn nor body to kick

Are billion-dollar settlements ‘the cost of doing business' in pharma?

In a society that keeps score, the U.S. record for the largest financial penalty paid by a pharmaceutical company for illegal marketing of drugs is the $2.3 billion mark set by Pfizer and its subsidiaries in 2009.

The Pfizer record might not hold for long.

GlaxoSmithKline said last year in a regulatory filing that it reached a deal with the Justice Department to pay $3 billion over allegations about the marketing of several drugs, including Avandia. But the Justice Department has not commented, so the deal is not done.

Meanwhile, Johnson & Johnson and the government are closing in on a settlement that might top $2 billion over illegal marketing of several drugs. Bloomberg News has reported that $2.2 billion was the figure. Company and government officials have declined comment.

At the time of the Pfizer settlement, the federal judge in the case expressed frustration with the outcome, though he said he recognized the significance of the record fine and the limited resources of prosecutors.

"This is a case in which no human being, apparently, is going to be held responsible for substantial criminal activity by a corporation," U.S. District Judge Douglas P. Woodlock said in court while declaring the agreement official on Oct. 16, 2009. "I have invoked before, and some other judges of this court have invoked before, the observation of the 19th century British judge that, ‘The problem with sentencing a corporation is that it has no soul to damn nor body to kick.' That is ordinarily not within the sentencing guidelines, that is, kicking or damning, but in the sentencing guidelines is a recognition of real criminal culpability; and there is no, apparently, human being who did anything wrong here or at least the government is prepared to pursue."

Rarely do health-care executives go to jail for misdeeds. One of the few exceptions was in the case brought against medical device maker Synthes Inc., of West Chester. Besides the criminal and civil charges against the company, four executives were sent to prison in 2011.

J&J is scheduled to close on its $19.7 billion purchase of Synthes on Thursday. If J&J's settlement with the government comes anytime soon, it would not be the first coincidence of a court fine of a few billion dollars being overshadowed by an acquisition costing many times more. A few hours before Woodlock spoke in court in 2009, Pfizer announced it had spent $68 billion to acquire Wyeth Pharmaceuticals.

"It has, I think," Woodlock said of the $2.3 billion Pfizer penalty, "become something of the cost of doing business, a very high cost of doing business, for some of these corporations to shed their skin like certain animals and leave the skin behind and move on to the future without ultimately giving the public what it is entitled to, which is the satisfaction of knowing that there has been full evaluation of the criminal responsibility of the individuals who occupied that skin."

Part of the Pfizer case stemmed from work done by the U.S. Attorney's Office in Philadelphia, as does the ongoing J&J investigation. Both cases involved antipsychotic drugs produced by the companies, Geodon for Pfizer and Risperdal for J&J.

Philadelphia attorney Stephen Sheller represented one of the whistle-blowers in the Pfizer case and has individual clients suing J&J over their experiences with Risperdal. Sheller said part of the problem is that doctors are allowed to prescribe antipsychotic drugs for conditions not approved by the FDA for a wide variety of vague and unclear mental health conditions. Drug companies encourage this, legally, and sometimes otherwise, knowing that public or private insurers are often paying the bills.

"There is no objective test to tell if someone is crazy," Sheller said. "Letting the doctors write off-label is costing taxpayers so much money, but it's not just the financial cost. The adverse medical events hurt people and are costing billions. We're trying to stop it at the spigot with the drug companies."

Contact David Sell at 215-854-4506 or or @PhillyPharma on Twitter. Read his PhillyPharma blog on

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