King Pharmaceuticals Settles and One Columnist Writes that Such Settlements are Not the Answer

Here we go again.  The latest settlement in the parade was made by the Alpharma subsidiary of King Pharmaceuticals, as reported by Reuters:

Alpharma Inc, a unit of King Pharmaceuticals (KG.N), has agreed to pay $42.5 million to resolve allegations that it gave kickbacks to doctors to prescribe the pain drug Kadian and misrepresented its safety and effectiveness, the Justice Department said on Tuesday.

Kadian, which is based on morphine [that is, a long-acting preparation of morphine], is used to treat chronic moderate to severe pain.

We have ranted frequently about how settlements like this, which simply impose costs on large organizations that can easily be regarded as costs of doing business, but impose no penalties on the people who authorized, directed, or implemented bad behavior, do nothing to deter future bad behavior. Now at least we have company (see recent example of rant here). Last week, a commentary by An Woolner on Bloomberg, included:

Examples abound that these companies keep breaking rules and violating laws to make and market their products, no matter how many times they are caught, fined and forced to promise to go straight.

Yet,

The biggest fine ever imposed in U.S. history, $2.3 billion against recidivist Pfizer, represented a mere 14 percent of the revenue stream from selling the drugs at issue over seven years. [see our post here.]

So immune to criminal sanctions was the New York-based company that it launched its off-label Bextra campaign at the same time the company was pleading guilty to doing precisely the same thing with other drugs. The anti-inflammatory medication was later yanked from the market because of increased risk of heart attacks and stroke.

So,

What’s to be done?

The government can essentially kill a company by pushing for the parent firm to be barred from government work, which would include Medicaid and Medicare.

Teaching a Lesson

That would teach the company a lesson. But it would also hurt the millions of people who depend, in Pfizer’s case, on products from Accupril to treat congestive heart failure to Zyvox when you have certain pneumonias or infections.

And then there are those thousands of company employees who do good, honest work and who would suddenly find themselves in already massive unemployment lines.

Instead,

The challenge is to find a way to make it not worthwhile to break the rules.

Executives Behind Bars

Throwing a few company executives in jail might do the trick. On occasion, sales managers and physicians have been prosecuted.

As for top managers at pharmaceuticals, six have been convicted or pleaded guilty, mostly for misbranding or promoting off-label uses, according to the Justice Department.

Winning felony convictions is tough to pull off because you have to prove they had specific intent to commit fraud. As with any white-collar crime, that is tricky.

But there is a way around that obstacle, and the FDA announced this month that it would go that route to focus on pharmaceutical executives, the Wall Street Journal reported.

The Food and Drug Act allows misdemeanor convictions without proof of intent to do wrong.

That is an awesome power and it can be easily abused. The timing of the FDA announcement suggests that it’s a response to critics in Congress and a brutal Government Accountability Office report that the division operates without scrutiny or, well, accountability.

And yet, used for the right cases, the misdemeanor prosecution of an executive or two who set up incentives for the sales force to push drugs illegally and withhold information about devices from regulators just might do the trick.

Nothing else has yet.

To which I say, amen.