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Report on fraud a bitter pill for Pfizer, GlaxoSmithKline

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Drug giants Pfizer Inc. and GlaxoSmithKline have helped catapult pharmaceutical firms ahead of defense contractors when it comes to defrauding the federal government, according to a new report by the consumer group Public Citizen.

The New York-based Pfizer, along with Glaxo, Eli Lilly & Co. and Schering-Plough, accounted for more than half of the $19.8 billion in fines imposed against pharmaceutical companies under the federal False Claims Act in the past two decades, the report said. Three-quarters of all these penalties have occurred in just the past five years, it added, indicating that companies are increasing their violations and that the government is enforcing state and federal laws more aggressively.

"Recent billion-dollar settlements with two of the largest pharmaceutical companies in the world, Eli Lilly and Pfizer, provide evidence of the enormous scale of this wrongdoing," an executive summary of the report said.

Pfizer, which has research-and-development facilities in Groton and New London, paid $2.3 billion in fines last year for illegal marketing of the pain medication Bextra and other drugs. The penalties included a $1.2 billion criminal fine, said to be the largest in U.S. history.

The False Claims Act settlements usually occur after whistleblowers file suit and the federal and state governments join in, often claiming that illegal activities led to inflated health care costs for such programs as Medicaid, the report said. In the case of Bextra, state and federal governments added their names to a whistleblower suit filed by former Pfizer drug representative John Kopchinski, who wound up with more than $50 million for uncovering the illegal-marketing scheme.

The report noted that pharmaceutical firms vaulted ahead of defense contractors by a wide margin starting in 2007 in terms of total financial settlements related to fraud. So far this year, drug companies have paid nearly $1 billion in penalties, compared with only $261 million for defense firms.

"The pharmaceutical industry now tops not only the defense industry, but all other industries in the total amount of fraud payments for actions against the federal government under the False Claims Act," according to the report.

Early last year, Lilly paid a $515 million criminal fine for illegal off-label promotion of the anti-psychotic drug Zyprexa and a total of $1.4 billion in penalties.

Glaxo's $3.4 billion settlement - the largest ever - occurred in 2006, when it settled a case charging the company with nonpayment of taxes over a 17-year period.

The report said off-label promotion of drugs was the No. 1 reason for pharmaceutical-company penalties in recent years. In the past five years, off-label penalties have increased six-fold over the previous 15 years, the report said.

"Former pharmaceutical company employees and other 'whistleblowers' have been instrumental in bringing to light the most egregious violations," according to the report.

The fines include Pfizer's Bextra case as well as its 2004 payment of $430 million for the illegal promotion of its blockbuster pain drug Neurontin. The report said that at one time 94 percent of Neurontin's revenues were derived from off-label uses.

Pfizer's total penalties of $2.94 billion during the past two decades accounts for nearly 15 percent of all fines levied against pharmaceutical firms. Only Glaxo, with $4.5 billion in penalties, has paid more.

The report noted that major pharmaceutical firms may have pushed off-label uses of existing drugs because of a sharp decrease in the number of blockbuster medications coming to market over the past few years. "Thus, companies are likely under pressure to maximize sales of their existing products by any means, including by illegally promoting off-label use," the report said.

Fines not enough

The report said the increasing fraud found among pharmaceutical companies indicates current penalties may not be a big enough deterrent to stop illegal practices.

It cited an Oct. 13 speech by Eric Blumberg, deputy chief for litigation for the U.S. Food and Drug Administration, in which he spoke out in favor of targeting pharmaceutical executives for criminal prosecution. "Unless the government shows more resolve to criminally charge individuals at all levels in the company, we cannot expect to make progress in deterring off-label promotion," Blumberg said.

The Public Citizen report, issued Thursday by the organization's Health Research Group, agreed that a more robust response is required from the government to stop health-care fraud.

"Both increased financial penalties and appropriate criminal prosecution of company leadership may provide a more effective deterrent to unlawful behavior by the pharmaceutical industry," the report concluded.


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