A big fine and patent breaking highlight pharma's week

by Daniel R. Hoffman, Ph.D.

The perfect storm into which pharma has navigated itself means that the most constructive observations ought to point out potentially fruitful, new directions for the industry. That has been the main emphasis from this quarter in 2012, but sometimes the week brings news so astonishing that gentle encouragement must step aside. So it was with the news that Abbott Labs agreed to pay $1.6 billion in fines and admit its guilt for marketing its anti-seizure medication, Depakote, to nursing homes for unapproved uses.

The penalties levied on Abbott, depending on how they're calculated, were the second or third highest in pharma history, yet taking into account the audacity of violations and the vulnerability of affected patients, the company got off lightly. The matter was not limited to an over-ambitious sales district or a brand team that paid speakers to spin fables for physicians at dinner meetings. Instead the company organized and trained a special sales force to sell Depakote for treating aggression and agitation in elderly dementia patients confined to nursing homes. For six years, starting in 2001, Abbott also promoted Depakote as an adjunct to antipsychotic drugs for treating schizophrenia, despite the fact that their own studies failed to show any benefit from adding the second drug.

As flagrant and deliberate as these Depakote violations were, they were not Abbott's first foray into illegal behavior. In 2001 a joint venture of Abbott and Takeda paid an $875 million fine for conspiring with physicians to bill Medicare for samples of a prostate cancer medication that Abbott gave the doctors for free. Two years later, Abbott paid another $600 million fine because its nutritional products sales people helped hospital and long-term care facilities pull a similar scam on health insurers. Abbott sold the providers liquid meal products at discount prices and then corroborated reimbursement requests the institutions submitted to insurers for the full price.

In the case of the nutritionals scam, federal agents set up a sting operation to apprehend the criminals. The Justice Department learned of Abbott's more recent Depakote violations through a whistleblower suit filed by former sales reps that charged their employer with bribing physicians and pharmacists at eldercare facilities to use Depakote. In those and other circumstances, Abbott required its reps to falsify Depakote's safety and effectiveness. Now those whistleblowers will split a bounty of $84 million from the federal government and additional money from states.

So perhaps the constructive observation here goes to people with recent college and graduate degrees who are considering careers in the pharmaceutical industry. Unless pharma radically changes the way it does business, the industry provides fertile ground for launching a career as a whistleblower.

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The other interesting news involves two items related to Cipla, a pharma company based in Mumbai, India. First, the Indian government granted Cipla a compulsory license to market a low-price version of Bayer's drug Nexavar to treat kidney and gastro-intestinal cancers. "Compulsory license" is a diplomatic way of saying the government will break Bayer's patent and permit Cipla to sell Nexavar at a generic price.

In another announcement, Cipla also stated that it would start selling low cost generics of other branded cancer drugs in India and throughout the rest of Asia. The announcement specifically mentioned AstraZeneca's Iressa as one of the brands on its list.

The notion that the emerging BRIC (Brazil, Russia, India and China) nations can save pharma's bacon appears less plausible all the time. Managements touted rising prosperity among middle classes in those countries as the force that will tide pharma over its patent cliff.

For nearly a decade, pharmas have been teasing investors with the message that they needn't worry about the dearth of better outcomes from new drugs and the growing resistance of private and public payers to high drug prices. "Regardless of the question," one CEO told his vice-presidents, "the answer is China."

Privately the managements hoped the BRICs would provide a "bridge" across the patent cliff until pharmaceutical science could gear up to provide more blockbusters. Now those hopes appear less sanguine because most medication needs among emerging nations can be satisfied by low-cost generics. In cases where branded pharma companies based in the US and Europe think otherwise, governments in those countries do not seem reluctant to both dangle and use the sword of patent breaking. Pharma may have been constructing a bridge to nowhere.

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