Are drug manufacturers too big to fail?

Off-label use is the practice of prescribing drugs for an FDA unapproved indication. In the medical community, off-label use is so common that the failure to do so may amount to medical malpractice, especially in areas such as treating HIV and cancer. Contrary to the legal protection which doctors receive for prescribing off-label use, drug manufacturers are forbidden to promote it. In 2004, Warner-Lambert, one of Pfizer’s subsidiaries, settled with the government for $430 million for its violation of FDA regulation by promoting off-label use of Neurotin. Pfizer vowed to reform. In 2009, Department of Justice fined Pfizer $2.3 billion for its off-label promotion of Bextra. And of course, once again, Pfizer “reformed”.

Off-Label Settlement of Bextra

The story began in 2001 when Pharmacia & Upjohn Company (P&U), a subsidiary of Pfizer, received approval from FDA for three indications of Bextra: osteoarthritis, adult rheumatoid arthritis, and primary dysmennorrhea. Due to safety concern, FDA rejected P&D’s request to approve Bextra for general acute pain. From 2002 through 2005, P&U promoted Bextra for these unapproved uses to physicians under false claims of safety. It used so-called advisory boards, consultant meetings, and paid vacation at lavish resorts, to promote Bextra to, as one local manager claimed, "anyone that use[d] a scalpel for a living."

On April 7, 2005, Pfizer withdrew Bextra from the U.S. market on recommendation by the FDA, citing an increased risk of heart attack and stroke and also the risk of a serious, sometimes fatal, skin reaction. The American Heart Association soon released a study indicating that patients using Bextra after heart surgery were 2.19 times more likely to suffer a stroke or heart attack than those taking placebos. In September 2009, P&U pled guilty to a felony violation of the Food, Drug & Cosmetic Act, for misbranding the drug, Bextra, with the intent to defraud or mislead. In the plea agreement, it agreed to pay a criminal fine of $1.195 billion, the largest criminal fine ever imposed in the United States for any matter. Additionally, Pfizer agreed to pay an additional one billion dollars to settle civil allegations that it induced physician with kickbacks to market four drugs, including Bextra.

Why manufacturers will forego FDA approval and risk civil and criminal sanctions?

There are several possible reasons: FDA approval process is expensive and it takes years of testing; in the case of Bextra, FDA declined to approve; and seeking FDA approval will expand the scope of generic competition once patent expires. Most importantly, manufacturers are motivated by profits. After realizing that there isn’t enough money for its approved use, manufacturers will promote off-label use to bring in more profit. Bextra is 20 times the price of ibuprofen, but with no medical evidence to show that it is more effective. Another incentive for manufacturers to promote off-label use is because everyone else does it. Eli Lilly pled guilty to criminal misbranding of Evista, Serono paid 704 milion to resolve charges relating to its marketing of Serostim, and the list goes on.

too big to fail?

One of the obstacles in stopping the promotion of off-label use is that doctors are continuingly allowed to prescribe it. The rationale focuses on a gap between patient care and FDA approval process. Proponents of off-label use argue that physicians should be encouraged to provide the best available treatments when the FDA approval process failed to keep up with the progress in medicine or when manufacturers do not bother apply for FDA approval due to lack of financial incentive in treating rare uses. Therefore FDA allows a certain level of communication between the manufacturers and the physicians to ensure quality care. The manufacturers often disguise off-label promotion as dissemination of information or education about their drugs. No politician is going to push for banning off-label use altogether because they do not want to deal with angry HIV and Cancer patients demanding to know where is their drug.

The government’s approach to deal with off-label promotion is to increase the probability of risk that a manufacture will get caught. Evidences of off-label use are conspicuous. Doctors know about it, and so does Pfizer’s competitors. The False Claim Act awards whistleblowers for suing those defrauding the government through Medicaid. But doctors have very little incentive to sue when they are the ones receiving the kickbacks and perks. Competitors are unlikely to bring whistleblower lawsuit as well because they are promoting off-label use as well. For example, two competitors, TAP and Astra Zeneca, exchanged nasty letters against each other regarding their unlawful off-label conducts, but none filed suits due to fear of retaliation.

In prosecuting off-label promotion, the government has a deadly trump card. Any company convicted of a major health care fraud is automatically excluded from Medicare and Medicaid. Convicting Pfizer would prevent the company from billing federal health programs for any of its products. It would be a corporate death sentence. However, the government is also afraid to use its leverage. "We have to ask whether by excluding the company [from Medicare and Medicaid], are we harming our patients," said Lewis Morris of the Department of Health and Human Services. Essentially, the government fears that Pfizer's collapse will disrupt the flow of Pfizer products to Medicare and Medicaid recipients and lead to job loss of Pfizer employees who were not involved in the fraud. End result is that the government made a deal with Pfizer. P&U took the blame and pled guilty. If we examine the relationship between P&U and Pfizer, it raises suspicion that Pfizer has purposely structured its business to insulate itself from liability. Pfizer Inc. owns Pharmacia Corp., which owns Pharmacia & Upjohn LLC, which owns Pharmacia & Upjohn Co. LLC, which in turn owns P&U. Instead of convicting the real culprit, the government went after its great-great-grandson.

There are so much profits involved in the business of off-label use, paying the fines will simply become a factor in the risk calculation. Pharmaceutical companies will continue to promote off-label use to steal from patients, and the government will aggressively pursue off-label actions to force settlement to get some of its money back. Then the cycle continues. Paying these fines will be simply treated as doing business with the government. All the cost will be ultimately passed to the taxpayers and the patients who listen to their doctors and buy expensive FDA non-approved drugs they don’t need. The government believes it has to protect the institutional creed because punishing Pfizer will lead to job loss and deprive patients of Pfizer drugs. But what about the patients and taxpayers that Pfizer are continuously defrauding from? Keeping Pfizer out of Medicare and Medicaid will deprive patients of Pfizer drugs because Pfizer hold patents on them, but patent right is not absolute. The court already invalidates patents based on certain illegal conducts. The day that the government starts to invalidate patent on the ground of illegal conducts such as off-label promotion is the day that Pfizer will seriously reconsider its risk calculation.