Drug Marketing Remains an Issue

January 30, 2010

Novartis AG’s agreement to settle criminal allegations involving marketing of an epilepsy drug is the latest in a string of cases showing that improper marketing practices are still a problem years after the U.S. government started cracking down on them.  Pfizer Inc. and Eli Lilly & Co. paid big fines and pleaded guilty to illegal marketing of their drugs over the past year, while AstraZeneca PLC in September reached a preliminary deal to pay $520 million to settle a federal investigation into its marketing. It declined to say whether it would admit wrongdoing in the final settlement.

Drug Marketing Remains an Issue

This month, the Justice Department charged Johnson & Johnson with paying “tens of millions of dollars in kickbacks” to a nursing-home pharmacy company to boost sales of J&J drugs. J&J said its conduct was “lawful and appropriate.”

Novartis this week said its U.S. subsidiary struck an agreement with the U.S. Attorney’s Office in Pennsylvania to settle a criminal investigation of the company’s marketing of the epilepsy drug Trileptal. Novartis agreed to plead guilty to violating the U.S. Food, Drug and Cosmetic Act, and to pay a $185 million fine. Novartis had already disclosed that the U.S. Attorney’s Office was investigating allegations that Novartis promoted the drug off-label, and scrutinizing “payments made to health-care providers in connection with this medicine.” The settlement agreement is “contingent on court approval,” Novartis said.

It added that it is still negotiating with the investigators “to resolve civil claims relating to Trileptal,” and said it has set aside $397 million in provisions in connection with the Trileptal investigations. The same investigators are also probing “potential off-label marketing” and payments to health-care providers involving five other Novartis drugs, the company said: Diovan, Exforge, Sandostatin, Tekturna and Zelnorm. A Novartis spokeswoman declined to comment further. A spokeswoman for the U.S. Attorney’s Office in Pennsylvania said she couldn’t comment on any investigations.

The U.S. government has been pursuing alleged wrongdoing in drug marketing for well over a decade, attempting to punish the worst offenders in an industry that racks up sales of more than $300 billion a year in the U.S.

But the recent stream of high-profile cases shows that sales tactics are still an area of concern.

“Combating health care fraud is a top priority of the Department of Justice,” said Tony West, Assistant Attorney General of the Justice Department’s Civil Division. “When it comes to marketing drugs that so many of us rely on, the government expects pharmaceutical companies to be honest in the claims they make about the drugs they sell.”

Improper marketing often occurs when drug companies are promoting therapies that are similar to others on the market, says Patrick Burns, director of communications at Taxpayers Against Fraud, a watchdog group in Washington, D.C. “In that kind of marketplace, the business isn’t about the drug. It’s about the kickback and it’s about market expansion through illegal promotion,” he said.

One of the most common illegal tactics companies use is “off-label” marketing, when sales reps encourage doctors to prescribe drugs for uses for which they aren’t approved by the Food and Drug Administration. Doctors themselves are allowed to prescribe drugs any way they see fit, but the law says companies can’t promote them for unapproved uses.

The government has also accused companies of making payments to doctors to get them to prescribe certain drugs, both on and off-label. These payments can take several forms that are often legitimate, including consulting fees and research grants. Corporate whistleblowers often draw the government’s attention to alleged wrongdoing, sparking federal investigations.

The industry’s main trade group in the U.S.-the Pharmaceutical Research and Manufacturers of America, or PhRMA-says it is important for drug companies to be able to compensate doctors for legitimate advice and research that supports drug development and medical practice. The group’s code of conduct says companies “should continue to ensure” that these payments “are neither inducements nor rewards for prescribing or recommending a particular medicine or course of treatment.” A PhRMA spokeswoman said she couldn’t comment on specific investigations facing certain companies. Some drug companies have taken steps to make their relationships with doctors more transparent. GlaxoSmithKline PLC, for example, recently began capping its annual payments to U.S. doctors at $150,000 and publishing the figures.

Glaxo had previously disclosed that federal investigators were probing its marketing of nine drugs between 1997 and 2004, including scrutinizing its financial relationships with health-care providers.

In a recent interview, David Brennan, chief executive of AstraZeneca, said government fines have made drug companies “more sensitive than we’ve ever been” about preventing illegal promotion of drugs.

But Shelley Slade, a former Justice Department lawyer who now represents corporate whistleblowers through the firm Vogel, Slade & Goldstein LLP, in Washington, D.C., said large criminal monetary penalties and civil settlements don’t appear to deter companies sufficiently. “It’s not going to stop until the government puts some of these executives in jail,” she said.

“Many of these companies view the fines as a small fraction of what they have gained through illegal schemes, and just a cost of doing business.”