Pharma fines “just cost of doing business”

pharma finesKEY TAKEAWAY: From 1991 through 2015, a total of 373 settlements were reached between the federal and state governments and pharmaceutical manufacturers, for a total of $35.7 billion. Of these, 140 were federal settlements, for $31.9 billion, and 233 were state settlements, for $3.8 billion.

Financial penalties declined sharply since 2013. Just $2.4 billion in federal financial penalties were recovered in the most recent two-year period (2014-2015), less than one-third of the $8.7 billion in federal penalties in 2012-2013 and the lowest two- year total since 2004-2005.

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In contrast, the number of these federal settlements decreased only slightly, from 22 to 19, from 2012-2013 to 2014-2015. Thus, the average size of federal settlements declined from $395 million per settlement — $8.7 billion for the 22 settlements — in 2012-2013 to $126 million per settlement — $2.4 billion for 19 settlements — in 2014-2015, less than one-third of the average amount in the earlier interval.

  • There were just 20 state settlements in the final two years of the study period (2014-2015), a nearly 80% drop from the 95 settlements in 2012-2013 and the lowest two-year total since 2006-2007. State financial penalties totaled just $424 million during these two most recent years — compared with $1.2 billion in 2012- 2013 — a lower total than in any two-year period since 2007-2008.
  •   From 1991 through 2015, overcharging of government health insurance programs, mainly drug pricing fraud against state Medicaid programs, was the most common violation, while the unlawful promotion of drugs was the single violation that resulted in the largest financial penalties.
  • The decline in total financial penalties in 2014 and 2015 was primarily due to a decrease in the size of federal settlements involving unlawful promotion, with federal financial penalties that could be attributed to unlawful promotion declining by 90% from nearly $2.8 billion in 2012-2013 to $263 million in 2014-2015. The combined total for these latter two years was lower than that for any single year since 2006. As was the case with overall federal financial penalties, this reflects a sharp decrease in the amount of the average penalty paid for unlawful promotion, since the number of federal unlawful promotion violations had declined only slightly, from 11 to eight.

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  • From 1991 through 2015, GlaxoSmithKline and Pfizer reached the most settlements (31 each) and paid the most in financial penalties — $7.9 billion and $3.9 billion, respectively —to the federal and state governments. Johnson & Johnson, Merck, Abbott, Eli Lilly, Teva, Schering-Plough, Novartis, and AstraZeneca also paid more than $1 billion in financial penalties. Thirty-one companies entered into repeat settlements with the federal government from 1991 through 2015, with Pfizer (11), Merck (nine), GlaxoSmithKline, Novartis, and Bristol-Myers Squibb (eight each) finalizing the most federal settlements.

    Much larger penalties and successful prosecutions of company executives that oversee systemic fraud, including jail sentences if appropriate, are necessary to deter future unlawful behavior. Otherwise, these illegal but profitable activities will continue to be part of companies’ business model.