[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
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
More information about the Ip-health