November 15, 2011

What's $3 Billion Anyway?

GlaxoSmithKline (GSK), the fifth largest drug company in the world, just settled with the Department of Justice for a cool $3 billion. It implicitly acknowledged guilt for a multitude of sins, principally but by no means exclusively for doing everything within its not inconsiderable power to sell its diabetes drug, Avandia (rosiglitazone, still on the market but available only through a “restricted access program”), despite clear evidence that the drug posed significant cardiovascular risks. GSK tried to suppress doctors who raised concerns about Avandia. It funded biased “medical education” programs to “teach” physicians about the merits of Avandia. It manipulated research findings to portray the drug in a positive light.

The GSK deal tops the previous record, the $2.3 billion settlement made by the number one drug manufacturer, Pfizer, in 2009 for illegally promoting its pain-killer, Bextra (valdecoxib, now withdrawn from the market), for non-FDA-approved indications. But the day the settlement was announced, GSK’s stock price remained unchanged. Clearly, the company had already budgeted for its anticipated “fine.” If anything, investors breathed a sigh of relief—the legal case was history and, all things considered, the outcome wasn’t as bad as it might have been.

The charges against GSK are virtually identical to those in the earlier Justice Department case against Pfizer. And they’re very similar to the case against Merck for its handling of the anti-inflammatory drug Vioxx (rofecoxib, now withdrawn from the market), as well as to the $1.4 billion case against Eli Lilly for illegal marketing of the antipsychotic drug Zyprexa (olanzapine) and the $1.3 billion case against Abbott Labs for unacceptable promotion of the anti-seizure drug Depakote (valproic acid). GSK was found to have promoted the drugs Paxil (paroxetine) and Wellbutrin (bupropion) for off-label indications: while physicians are allowed to prescribe a drug for any plausible indication once it has been approved, pharmaceutical companies are prohibited from marketing drugs for non-FDA-approved conditions.

The pattern of abuse found at GSK is evidently endemic and persistent—it has endured in many of the major drug companies over a period of years. What does this say about the regulations that are supposed to protect consumers? At the same time that some politicians are advocating rolling back regulations, claiming they stymy progress, critics of the drug industry argue that the federal government needs to devote more resources, not fewer, to enforcing existing regulations. Other critics, such as Kevin Dufferson of the BU Health Law Program, suggest that the current regulations are inadequate deterrents. He describes the $3 billion payment as merely “a speed bump,” saying the company will merely regard it as “the cost of doing business.” Compared to GSK’s 2010 revenues of $36.2 billion, the settlement with the Department of Justice is arguably small potatoes. Drug companies know exactly how much the DOJ and the FDA devote to investigating and prosecuting drug fraud cases; their cost-benefit analysis persuades them to continue to violate the regulations with impunity. Only when their CEO’s are prosecuted and sent to jail, some critics claim, will the situation change.

On balance, regulation seems essential to protect the health and safety of the consumer. Without regulations, drug companies would likely distort and mislead in promoting all their drugs, not merely the blockbuster drugs where they have the most to gain. Better enforcement and greater executive accountability may well improve drug company behavior. But given that the policing alone is unlikely to guarantee integrity, it is also essential that drug companies fundamentally alter their organizational culture. Only with deep-seated cultural change will deliberate falsification of data become unthinkable. Only when a new ethos prevails will it become impossible to mistake propaganda for science. The CEO of GSK claims that just such a process is underway: a press release asserts that the company has hired more “compliance staff” and it has strengthened its training programs on ethical conduct. Most importantly, it has changed its incentive compensation program for sales reps so as to reward them based on customer evaluation and selling “competency” rather than on meeting sales targets. Whether a profit-driven company can truly reform its culture without changing its fundamental mission remains to be seen.

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