Wed, Jul 11, 2012 page9

• Pharma tops league of misbehavior

  GlaxoSmithKline’s US$3 billion fine for mis-selling drugs in the US is the biggest ever handed down, but analysts say it is a drop in the ocean compared with the profits made from medicines

  • By Terry Macalister / The Observer
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  GlaxoSmithKline (GSK), Britain’s biggest pharmaceutical group, has been selling anti-depressant drugs in the US for unapproved uses on children, concealing critical evidence from US regulator, the Food and Drug Administration (FDA), relating to a diabetes product, and offering lavish entertainment to doctors willing to promote its medicines.

  The problem came to light because of whistleblowers inside the company and adds to a string of other settlements with pharmaceutical firms that lead critics to claim problems are endemic in the sector.

  Last month, Abbott Laboratories was forced to pay US$1.6 billion over its marketing of the anti-psychotic treatment Depakote, while the total cost of industry fines is over US$20 billion covering the past two decades.

  

  Illustration: Mountain People

  However, the GSK case has shaken even the most hardened of industry observers, as prosecutors found the company had been allotting over half a million US dollars a year to its district sales representatives to offer doctors regular golf lessons, fishing trips, and basketball tickets while promoting the use of antidepressant drug Paxil in children.

  The GSK sales campaign also involved helping to publish an article in a medical journal that misreported evidence from a clinical trial.

  Meanwhile the company was also being accused of marketing the drug Wellbutrin for sexual dysfunction and weight loss, when it had only received official consent from the FDA to treat depression. Some of its drugs reps were reportedly describing Wellbutrin as “the happy, horny, skinny pill.”

  In the case of a third treatment, Avandia, the company did not report to the FDA studies it had carried out that showed there were safety concerns concerning heart risks. Critics had been calling for the drug to be banned four years ago, yet it was only in 2010 that restrictions were finally slapped on its use.

  GSK has agreed to pay a US$3 billion fine to settle criminal and civil charges with federal and state governments stemming from illegal activity over 10 years. This is the biggest-ever fine of its kind but there seem no plans at this stage to pursue executives or other individuals in positions of power at the time. Through some of the period covered by the fine, the firm was run by the highly-paid Frenchman Jean-Pierre Garnier, whose entitlement to a ￡22 million (US$34.1 million) “golden parachute” payoff, if he left the company, enraged shareholders and caused a historic investor revolt.

  In response to last week’s announcement by regulators, the pharmaceuticals company said it had changed the way its sales staff is paid by eliminating individual sales targets.

  Sir Andrew Witty, GSK’s chief executive, said the settlement brought a resolution to “difficult, long-standing matters for GSK,” adding: “I want to express our regret and reiterate that we have learned from the mistakes we made.”

  Critics point out that other executives directly named as having been told of concerns continue in top jobs, albeit in different companies.

  Whistleblower Greg Thorpe first alerted the company to the entertainment offered to doctors and the culture that allegedly put profits above ethics in 2001. He raised his concerns with David Stout, who was then head of the US business, and Bob Ingram, GSK’s chief operating officer. When he was forced out of the company, he took his case to the regulators, which spent almost 10 years investigating the issues.

  Stout became a non-executive director of another London-listed pharmaceutical company, Shire, and Ingram is chairman of the biotechnology firm Elan.

  GSK’s corporate responsibility report runs to more than 100 pages, and details its pledges to improve access to healthcare in the developing world, and cut its carbon footprint.

  Witty insists: “We firmly believe that operating in a responsible and ethical way is essential for the success of our business.”

  However, after last week’s case, there can be little doubt that Big Pharma is top of the table for misbehavior ahead of the arms industry, which has hogged the limelight for the past 100 years.

  Some point to a long-running pattern of behavior reaching back much farther than the most recent revelations. Eliot Spitzer, who as New York’s attorney general sued GSK over similar allegations eight years ago, told the New York Times that companies like GSK seem incorrigible.

  “What we are learning is that money [ie, fines] do not deter corporate malfeasance. The only thing that will work, in my view, is chief executive officers and officials being forced to resign and individual culpability being enforced,” Spitzer said.

  Sidney Wolfe, a doctor and director of consumer organization Public Citizen’s health research group, goes further: “Until more meaningful penalties and the prospect of jail time for company heads who are responsible for such activity become commonplace, companies will continue defrauding the government and putting patients’ lives in danger.”

  Despite the large fine, US$3 billion is far less than the profits made from the drugs. Avandia has made US$10.4 billion in sales, Paxil took US$11.6 billion, and Wellbutrin sales were US$5.9 billion during the years covered by the settlement, according to IMS Health, which provides information for the pharmaceutical sector.

  The fact that the profits available from bestselling drugs dwarf the fines handed out if anything goes wrong means the kinds of misdemeanors picked up in the settlement are bound to happen, says Wolfe. His conclusion is that, for Big Pharma, “crime pays.”

  All of GSK’s problems have come to light in the US, where corporate abuse is taken very seriously. Britain is different, and the FDA’s equivalent, the Medicines and Healthcare products Regulatory Agency (MHRA), appears to engage in lighter-touch regulation.

  The MHRA has never successfully prosecuted a company since it was established nearly 10 years ago. It did investigate GSK over alleged inappropriate use of a drug in 2008 but abandoned the case. Since then, the total amount of fines imposed on individuals engaged in counterfeiting is ￡73,300. Confiscation orders under proceeds of crime legislation have totaled ￡18.9 million and the MHRA says it has issued 467 warnings and 151 cautions.
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