[Ip-health] Why Aren't Big Pharma Execs Ever Punished?

Riaz K Tayob riaz.tayob at gmail.com
Thu Dec 9 21:47:31 PST 2010

David Callahan Senior Fellow, Demos and Editor, CheatingCulture.com
Posted: December 9, 2010 03:42 PM

Why Aren't Big Pharma Execs Ever Punished?

The routine is now maddeningly familiar: The U.S. Justice Department 
announces that some huge drug company has broken the law and defrauded 
government healthcare programs of tens of millions of dollars. 
Prosecutors use terms like "illegal kickbacks" and "conspiracy" to 
describe the schemes they have discovered. And large financial penalties 
are trumpeted as evidence that justice has been done.

But there is nearly always something missing in these cases: Criminal 
charges against the Big Pharma executives who orchestrated the frauds. 
Worse, the companies involved typically do not even admit any 
wrongdoing. Strangely, these serious crimes don't seem to involve any 
actual criminals.

The latest example is the settlement announced earlier this week by the 
Justice Department with three drug makers, including Abbott 
Laboratories. Collectively, the firms will pay $421 million as result of 
charges that they overbilled the U.S. government for medicines. Abbott 
will pay $126.5 million.

Abbott and the other firms were nabbed for a type of fraud that is 
widespread in the healthcare field, namely telling the government that 
drugs cost one price while charging healthcare providers a much lower 
price. This allows healthcare providers to get reimbursed by Medicare 
and Medicaid for much more than they actually spend on drugs, what's 
known as a "spread." Drug makers engage in this scheme to incentivize 
providers to use their drugs. Taxpayers get soaked because drug makers 
inflate the price of drugs beyond what is justified so they can offer a 
nice spread to providers yet still make a profit. These schemes are one 
reason why the costs of Medicare and Medicaid have been sky high, while 
Big Pharma makes record profits and doctors drive Mercedes. And it's not 
just the federal government that gets stuck with an inflated bill. 
States overpay, too, since states pick up part of the tab for Medicaid. 
In turn, high Medicaid costs can squeeze out spending on other 
priorities -- like education.

This is outrageous stuff, and government authorities have been hopping 
mad for years. The Justice Department has gone after nearly every major 
drug maker, often repeatedly, and state attorney generals have also 
joined the fight. In announcing the settlement earlier this week, the 
Justice Department played up just how tough the crackdown has been:

     Since January of 2009, the Justice Department's Civil Division and 
the U.S. Attorneys around the nation have recovered more than $9 billion 
in cases alleging false claims, fraud against the government, and 
violations of the Food, Drug and Cosmetic Act. Cases alleging fraud or 
false claims against government health care programs are the largest 
portion of these recoveries, and during this period the Justice 
Department has opened more health care fraud cases, secured larger fines 
and judgments, and recovered more dollars lost to health care fraud than 
in any other period: more than $5 billion. Criminal fines, forfeitures, 
restitution and disgorgement under the Food, Drug and Cosmetic Act have 
yielded another $3 billion, again a record number.

All that sure does sound serious. So it is bizarre that the specific 
individuals who perpetrate these criminal schemes are nearly never held 
responsible. Nor are their names even mentioned in most of the cases. 
(Top executives at Abbott Laboratories include: Miles D. White, Richard 
A. Gonzalez, and Donald V. Patton. The COO of Roxane Laboratories, one 
of the other firms named, is Robert Fromuth. The CEO of the third firm 
named, B. Braun Medical, is Caroll H. Neubauer. None have been accused 
of wrongdoing.) And despite clear evidence that crimes occurred, the 
companies are not forced to acknowledge criminal deeds. In fact, they 
typically deny any wrongdoing even as they fork over record sums to 
settle claims by the Justice Department. So it was that on the same day 
that DOJ announced its settlement with Abbott Laboratories, a company 
spokesperson said the following: "We continue to believe that we have 
complied with all laws and regulations and have entered into this 
agreement to eliminate the uncertainty associated with continued 

You can find similar statements by drug makers in nearly every large 
settlement involving the defrauding of U.S. government programs. And 
you'll hear the same language in settlements about the illegal marketing 
of drugs. For instance, last year Pfizer agreed to a record $2.3 billion 
penalty -- but still denied any illegal behavior. Basically, these cases 
amount to Big Pharma and the Justice Department agreeing to disagree as 
to whether any laws were actually broken. And instead of executives 
being punished, it is shareholders who pick up the tab for criminal 

Sidney Wolfe, a doctor and consumer advocate with Public Citizen, said 
about the Pfizer settlement at the time that it may seem large, "but 
it's not enough to ensure drug companies will curb their bad behavior." 
Wolfe said what drug makers were doing was "part of well-organized crime 
in this country" and the penalties wouldn't deter more such crime 
"because they represent just a fraction of drug company profits and no 
one has gone to jail."

The latest slap on the wrist for Big Pharma this week shows that nothing 
has changed.

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