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Pfizer, Inc., founded in 1849 by Charles Pfizer and Charles Erhart,…
Pfizer, Inc., founded in 1849 by Charles Pfizer and Charles Erhart, is “the world’s largest research-based biopharmaceutical company, which discovers, develops, manufacturers, and markets prescription medicines for humans and animals.” The company, based in New York City, is ranked number 2 for 2010 in pharmaceutical sales in the world by Fortune 500 behind only Johnson & Johnson. Overall, the company is ranked #40 overall on the Fortune 500. Pfizer’s values state that it is committed to “upholding the highest ethical standards in everything from research and development to sales and marketing.”
Drug approval for the Pharmaceutical industry is strictly regulated by the Center for Drug Evaluation and Research (CDER), which is part of the US Food and Drug administration (FDA). The CDER “evaluates new drugs before they can be sold” and ensures that the drugs “work correctly and that their health benefits overweigh their known risks.” The entire pharmaceutical industry has been heavily scruinized in recent years for marketing practices, paying kick-backs to doctors, and questionable clinical trials. In fact, seven of the world’s top drug companies “have paid a total of $7 billion in fines and penalties since 2004. At the forefront of the controversy is Pfizer, which has been repeatedly charged with violations of US law in marketing its products.
Off-label marketing of Neurontin
In spite of Pfizer’s commitment to uphold high ethical standards in every area of the business, they have encountered controversy, lawsuits, and criminal charges repeatedly in recent years. In 2002, Pfizer’s subsidiary Pharmacia & Pujohn Company LLC pleaded guilty to illegally marketing the drug Genotropin for an approved or off-label uses. This instance was self-reported by Pfizer and resulted in a $34.7 million fine. The illegal marketing is alleged to have taken place before Pfizer’s acquisition of Pharmacia. This case didn’t receive much attention in the news media.
In 2000, Pfizer acquired Warner-Lambert including the Parke-Davis division which manufactured Neurontin. Prior to the acquisition the FDA has approved Neurontin to be used only as an adjunctive epileptic drug. The FDA’s approval specified that the only approved use of the drug was an add-on drug in the event the primary anti-epileptic medication was not effective. Although patents have filed claiming Neurontin could be used in the treatment of the other disorders including mania and bipolar disease, no New Drug Application (NDA) was ever filed with the FDA for approval for these additional uses. Near the time that the patent for Neurontin was to expire, Parke-Davis/Warner-lamber was facing substantial costs to conduct studies necessary to have the drug approved for other uses. The company knew that they alone would bear the brunt of the added cost while generic competitors would soon be able to reap the benefits of their investment.
Rather than spend the money for additional studies, the decision was made to focus on heavily marketing Neurontin through a publication strategy, which marketed the drug for off-label uses. Parke-Davis/Warner-Lambert took advantage of a small loophole in FDA regulations that allowed them to distribute articles written by independent third parties that described the off-label benefits of Neurontin. Since no such independent articles existed Parke-Davis hired writers to create the articles and specialists to become the ghost writers of the articles which would be published in medical journals. Additionally, Parke-Davis paid physicians to promote Neurontin for off-label uses by recommending its use and for ordering the prescriptions themselves. Parke-Davis used various methods to pay the doctors including hiring them as consultants and paying them to attend conferences about the off-label uses of Neurontin. Parke-Davis also paid physicians to conduct studies where they prescribe patients Neurontin in higher doses than approved by FDA all to prove that higher doses were safe and effective. The studies were never deemed of scientist value nor were the results presented to the FDA.
Soon after the acquisition of Warner-Lambert and its Parke-Davis division, a class-action suit was filed in US District Court against Pfizer alleging the off-label marketing of Neurontin for higher doses and uses other than those approved by the FDA. This suit was brought on as a whistleblower lawsuit filed by a former Parke-Davis employee. In 2004, Warner-Lambert pleaded guilty to two felony counts of marketing a drug for uses unapproved by the FDA. As a result of the agreement Pfizer paid $430 million in criminal fines and civil penalties and assured prosecutors that they would no longer promote drugs for unapproved uses. The criminal fines of $430 million paid due to the off-label marketing of Neurontin were minor in comparison to the revenues generated by the medication. In 2003 and 2004 the gross revenue from the sale of this drug exceed $2.7 billion each year. Pfizer lost exclusivity on the medication in 2005 but still generated greater than $400 million in sales each year through 2007 and $387 million in 2008. It was later discovered that “before the ink was dry on their plea” Pfizer sales representatives were already involved in off-label marketing with four other drugs: Bextra, Geodon, Zyvox, and Lyrica.
Off-label marketing of Bextra
Altough the troubles for Pfizer began in 2002 with lawsuits stemming from off-label marketing of Neurontin, the lawsuit that thrust them unwillingly into the spotlight involved Bextra and didn’t begin until 2006. The looming lawsuits were foreshadowed by similar lawsuits filed against their competitor, Merck & Co, which manufactured Vioxx. Vioxx is a non-steroidal anti-inflammatory drug (NSAID) that was withdrawn in 2004 due to safety concerns. The drug, meant for treating patients with osteoarthritis and rheumatoid arthritis, was withdrawn due to concerns of increased risk of heart attack and stroke. Merck was accused of marketing the drug for uses that were not approved by the Food and Drug Administration. David Graham, an FDA employee, stated that “Vioxx killed some 60,000 patients – as many people as died in the Vietnam War.”
Pfizer’s drug Bextra was the main competitor of Vioxx; However, Pfizer didn’t pull Bextra from the market until April of 2005 (seven months after the removal of Vioxx) and not until the FDA forced them to do so. In 2001 the FDA approved an NDA for Bextra for the treatment of osteo- and rheumatoid arthritis and Primary dysmenorrhea (extremely painful menstrual cramps), but denied it for treatment of the acute pain. It was deemed “not safe for patients at high risk of heart attacks and strokes.” In fact, clinical trials had proven that Bextra could cause heart damage. The drug was also found to have a connection “with a rare skin condition” called Stevens-Johnson syndrome. Despite this, Pfizer illegally marketed the drug for the treatment of all types of pain, which critics believed put the lives of many patients at risk. Once the FDA approves drugs, doctors are allowed to prescribe them for any use,. However, the actual maker of the drug cannot legally market them for anything other than approved uses.
Felony charges against Pfizer stems from a violation of the Food, Drug and Cosmetic Act for misbranding Bextra with the intent to defraud or mislead. Under this act, companies must specify the intended uses of a product to the FDA when it fills out its NDA. Once the FDA approves the drug the law prohibits the drug from being marketed or promoted for any use outside of those approved by the FDA. From 2002 through April 2005, Pfizer knowingly used both false and misleading claims to promote Bextra for unapproved uses and for dosages above approved level. First, the company’s marketing team created sales materials to promote Bextra for unapproved uses, such as surgical pain. “Market research was commissioned to test the sales materials” and Pfizer allowed the promotion of Bextra for the unapproved purposes to continue. Pfizer’s marketing team produced promotional material that illegally stated that one intended use of Bextra was for acute pain. The Pfizer sales team marketed Bextra to hospitals for the treatment of acute pain but didn’t explain the increased risk of heart damage. The doctors were told that the risks were the same as those of sugar pills.
Secondly, the sales representatives were encouraged and allowed to promote Bextra directly to physicians for unapproved uses and dosages. Furthermore, so-called advisory boards, consultant meetings, and other forums and remuneration, were used to promote Bextra to medical prescribers for unapproved uses and dosages and with false and misleading claims to safety and efficacy. One way this was done was by sending them on trips to lavish resorts for consultant meetings. Pfizer paid more than $5 million to physicians to entice them to come to seminars at resorts. Finally, Pfizer caused false claims to be submitted to government healthcare programs for uses that were not medically accepted and therefore not covered by the government programs such as Medicaid and Medicare.
The federal government’s investigation into Pfizer was initiated by a whistleblower lawsuits. The first of the whistleblower lawsuits was filed by one of Pfizer’s sales representatives John Kopchinski. He began questioning the marketing of Bextra and was fired, which is a violation of the anti-retaliation provision of the federal False Claims Act. Kopchinski filed a qui tam lawsuit in 2003, which sparked the interest of state and federal investigators. A qui tam lawsuit is a provision of the False Claims Act that allows the private citizen, the whistleblower, to file suit on behalf of the government against federal contractors committing fraud against the government. The individual filing suit, the Relator, stands to receive a portion of the settlement.
The largest penalty in U.S. history
In September 2009, after a federal investigation into their “fraudulent marketing of drugs” Pfizer was ordered to pay $2.3 billion to resolve criminal and civil allegations. At that time, this was the largest penalty paid by any corporation. Pharmacia & Upjohn, a subsidiary of Pfizer, pleaded guilty the felony violation for the off-label promotion of Bextra. Pfizer’s settlement was the largest combined federal and state healthcare fraud settlement not only in the history of the healthcare industry, but also in the history of corporate wrongdoing. The fine was “the largest ever imposed in the US for any matter” according to the Justice Department. The lawsuit included $1.3 billion in criminal charges involving Bextra and $1 billion in civil charges which stems from accounts from whistleblowers contending that the drugs Lyrica, Zyvox, Geodon, and nine others were marketed for purposes “other than those approved by the Food and Drug Administration.” According to the terms of the Pfizer civil settlement agreement, $102 million will be divided among six whistleblowers, Kupchinsky will receive $51.5 million. The fine was surpassed in 2011 when GlaxoSmithKline, another pharmaceutical company, agreed to a $3 billion fine for illegal activities.
Pfizer’s marketing actions also violated the Pharmaceutical Research and Manufacturers of America (PhRMA) “Code on Interaction with Healthcare Professionals” which Pfizer had pledged to follow but systematically violated. The code states that “in interacting with the medical community, we are committed to following the highest ethical standards as well as legal requirements.” In 2010 Pfizer Chairman and CEO Jeffrey Kindler was elected Board Chairman of PhRMA by its members.
A CNN special report revealed that the company that was actually charged and fined by the government was a subsidiary of Pfizer. Pharmacia & Upjohn Co., Inc. was created on March 27, 2007, the “same day Pfizer lawyers and prosecutors agreed that the company would plead guilty in kickback case against a company Pfizer has acquired a few years earlier.” A company that has been convicted of major healthcare fraud loses its Medicare and/or Medicare billing eligibility for all of its products. Prosecutors agreed that this could lead to the downfall of Pfizer and it turn create hardships for user of Pfizer drugs, a loss of employment for employees that were not involved in the fraud, and financial loss to investors. So, a deal was cut to file the criminal charges against Pharmacia & Upjohn Co., Inc. leaving Pfizer free to continue providing medication to Medicare and medicaid patients. Pharmacia & Upjohn Co., Inc. is merely a shell corporation that has never produced anything. The two years later the shell company pleaded guilty again to criminal charges in the Bextra case.
Pfizer entered into a five-year Corporate Integrity Agreement (CIA) after the settlement of the most recent lawsuit. To comply with this agreement Pfizer must allow all internal and external investigators to conduct audits to monitor the company’s marketing activities. The agreement requires Pfizer to become more accountable and transparent in all aspects of their business. To ensure adherence the Audit Committee of Pfizer’s board of directors must reevaluate the compliance program each year and sign off on the effectiveness of the program. Pfizer’s senior executives, including the CEO, also have to sign off on the effectiveness of the program. This move ensures that the executives and the board can no longer deny responsibility for the activities of the marketing department. Pfizer is required to notify doctors about the settlement and create processes and procedures that allow them to report inappropriate behavior by any of Pfizer’s employees. If Pfizer fails to comply with its obligations, it risks exclusion from federal healthcare programs and monetary penalties.
Although Pfizer pleaded guilty to criminal charges in many of the lawsuits, the company denied wrongdoing in most of the civil cases. The company never took full responsibility for its actions. In response to the settlement, Senior Vice-President Amy Schulman simply stated “We regret certain actions taken in the past, but are proud of the action we’ve taken to strengthen our internal controls and pioneer new procedures.”
Discussion questions
Based on what you have learned thus for for about Pfizer’s actions, what is the best explanation for their repeated fraudulent marketing of pharmaceuticals? Was it poor management? Was it disregard for the law? Was it simply a decision based on a cost-benefit analysis? Or was it something else? Explain.
How would you characterize the ethical culture of Pfizer? Does it seem like managers would expected to follow industry and federal guidelines? Why, or why not? How might the culture be changed to improve compliance?
To what extent do you believe that Pharmaceutical industry self-regulatory guidelines are a good way to ensure that companies engage in ethical marketing practices? Does it matter if there is no means of enforcing the industry standards? Why, or why not?
