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How Not to Get Big Pharma to Change
Its Ways
Robert Reich
Chancellor's Professor of Public Policy, University of California at Berkeley; Author, 'Beyond Outrage'
Posted: 07/06/2012 8:23 am (FiDA blog bold.)
Earlier this week the Justice Department
announced a $3 billion settlement of
criminal and civil charges against pharma giant GlaxoSmithKline -- the
largest pharmaceutical settlement in history -- for improper marketing
prescription drugs in the late 1990s to the mid-2000s.
The charges are deadly serious. Among other
things, Glaxo was charged with promoting to kids under 18 an antidepressant
approved only for adults; pushing two other antidepressants for unapproved
purposes, including remedying sexual dysfunction; and, to further boost sales of prescription drugs, showering doctors with gifts, consulting
contracts, speaking fees, even tickets to sporting events.
$3 billion may sound like a lot of money, but
during these years Glaxo made $27.5 billion on these three antidepressants
alone, according to IMS Health, a data research firm -- so the penalty could almost be considered a cost of doing business.
Besides, to the extent the penalty affects
Glaxo's profits and its share price, the
wrong people will be feeling the financial pain. Most of today's Glaxo
shareholders bought into the company after the illegal profits were already
built into the prices they paid for their shares.
Not a
single executive has been charged -- even though some charges against the company
are criminal. Glaxo's current CEO came on board after all this
happened. Glaxo has agreed to reclaim the bonuses of any executives who engaged
in or supervised illegal behavior, but the
company hasn't officially admitted to any wrongdoing - and without legal
charges against any of executive it's impossible to know whether Glaxo will
follow through.
The Glaxo case is the latest and biggest in a series of Justice Department
prosecutions of Big Pharma for illegal marketing prescription drugs. In
May, Abbott Laboratories settled for $1.6 billion over its wrongful marketing
of an antipsychotic. And an agreement with Johnson & Johnson is said to be
imminent over its marketing of another antipsychotic, which could result in a
fine of as much as $2 billion.
The Department says the prosecutions are well
worth the effort. By one estimate it's recovered more than $15 for every $1
it's spent.
But what's the point if the fines are small
relative to the profits, if the wrong people are feeling the financial pinch, and
if no executive is held accountable?
The only way to get big companies like these to
change their behavior is to make the individuals responsible feel the heat.
An
even more basic issue is why the advertising and marketing of prescription
drugs is allowed at all, when consumers can't buy them and shouldn't be
influencing doctor's decisions anyway. Before 1997, the Food and Drug
Administration banned such advertising on TV and radio. That ban should be
resurrected.
Finally, there's no good reason why doctors
should be allowed to accept any perks at all from companies whose drugs they
write prescriptions for. It's an inherent
conflict of interest. Codes of ethics that are supposed to limit such gifts
obviously don't work. All perks should be banned, and doctors that accept them should be subject to potential loss of their
license to practice.
ROBERT B. REICH, Chancellor's Professor of Public
Policy at the University of California at Berkeley, was Secretary of Labor in
the Clinton administration. Time Magazine named him one of the ten most
effective cabinet secretaries of the last century. He has written thirteen
books, including the best sellers "Aftershock" and "The Work of
Nations." His latest is an e-book, "Beyond Outrage." He is also
a founding editor of the American Prospect magazine and chairman of Common
Cause.
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