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Business and Markets

Selling It, And Selling It Hard

There’s a long, detailed article up over at Bloomberg on the recent run of huge fines for off-label promotion of drugs. Pfizer, Lilly, Bristol-Meyers Squibb, and Schering-Plough all get mentioned in great detail.
And there’s a key point from the whole depressing thing: the reason that marketing departments do this kind of thing is that it makes money. Even after you pay a billion dollars in fines, you can still come out ahead, and you might not even have to pay the fines. It’s just being put down as a cost of doing business – it’s a speeding ticket, and it’s being weighed against the cost of driving under the legal limit.
But there’s no way that our industry will gain – or regain – respect as long as we operate this way. Have the people involved priced that out as well?

17 comments on “Selling It, And Selling It Hard”

  1. Lucifer says:

    Pharma should hire more MBAs/ lawyers, fire more scientists and debase itself further.
    After all.. only short term profits, stock prices and dividends matter.

  2. TW Andrews says:

    But there’s no way that our industry will gain – or regain – respect as long as we operate this way. Have the people involved priced that out as well?
    That’s a bit of a prisoner’s dilemma situation, though. No one company is going to benefit by halting this sort of thing, they just won’t make their quarterly/yearly numbers. Intervention needs to come from the outside, since the industry clearly isn’t going to save itself.
    I’d like to see the Feds go hammer-and-tongs after this sort of behavior, and not just punishing the companies involved, but also the individuals. Fines clearly aren’t doing the trick, and jail time seems a bit extreme, but if people involved could be permanently barred from certain sorts of jobs, I think that would probably dry up some of the willingness to go along.

  3. Vader says:

    I agree that the punishment for this should be severe enough to be an effective deterrent.
    But I can’t help making a comparison to the herbals industry, where, in effect, *all* claims are off-label. And there are virtually no sanctions, or at least no effective sanctions, for it.
    Of course, the unverifiability of claims for herbals is a major comparative advantage of scientific medicine. It is indeed a shame to throw that away.

  4. Hap says:

    I think the rise of herbal “drugs” is not just a consequence of their being able to promise the sun, stars, and moon without consequence, but also of the loss in trust people had for drug companies and of the cost of drugs (yes, the last two aren’t completely consistent, but that’s us – we want cheap things we can rely on). Behaving more like supplement makers isn’t going to help anyone.
    There is also the bonus of drug companies being run for short-term financials rather than long-term existence. If you’re not planning on being around in five years, and no one will hold you responsible for your acts in the meantime, there’s no reason not to make as much money as you can and get out. (Other than conscience, but we’ll assume that’s not a factor here.) The heavy sales push cashes unquantifiable respect for measureable financials, and since people manage what they can count and not what they can’t, well… They won’t be there to sell later drugs, and to realize that they have the trust previously accorded to insurance and used car salesmen, and are less trusted than snake oil salesmen. Probably also leading to gov’t control as well – a self-fulfilling prophecy.

  5. alig says:

    I thought it was interesting that the judge basically said Lilly was guilty of a felony, but pled them to a misdomeanor because it would save the jobs of all the innocent workers at Lilly. If the company is found guilty of a felony, they can no longer do business with the government, meaning no medicaid or medicare reimbursement. Same reason it was Pharmacia and Warner-Lambert that pled guilty to felonies and not Pfizer.

  6. David says:

    “But there’s no way that our industry will gain – or regain – respect as long as we operate this way. Have the people involved priced that out as well?”
    Its not just the outside, but people within the company as well. Its hard for employees in one department of a company do things on a another department that are despicable.

  7. startup says:

    Yet at the same time I read about doctors trying new therapies using known drugs in off-label fashion and they’re generally being hailed as heroes doing what [evil] pharma wouldn’t.

  8. Igor says:

    Your last line speaks about respect for the industry, but the 99.9% of the people outside of the industry don’t know it’s happening, and thus maintain their level of respect. It’s only when this type of thing hits 60 Minutes or the like that it truly has a global effect, I’m afraid, good or bad.
    It’s the same thing with Wal-Mart. People continue to go there, even though those in the industry know they ship many of their goods on the same trucks as hazardous waste, and at the same time. Minimal fines when caught; cost of doing business.

  9. lukas says:

    Agree with #7. At the end of the day, it is doctors, not Big Pharma, who sign prescriptions, and they should be held responsible primarily.

  10. Hap says:

    Drug companies are being dinged for making false and misleading claims about their products, claims they were told not to make. The doctors didn’t make those claims – they only fell for them. The drug companies made the claims, and so are being punished for them.
    Even if off-label sales were analogous to (illegal) drug sales, where both possession and sale are crimes, the seller and not the buyer would bear the brunt of prosecution – sales of illegal drugs get far greater penalties than possession, and possession gets large penalties only when the amounts presuppose an intent to sell. I’m not seeing the problem with the penalties here.

  11. JH says:

    I bet it would turn some heads if a CEO of one of these companies ended up with a prison sentence. After all, felonies by individuals more often than not result in jail time, and the CEO is/should be responsible for every single thing that happens with his/her company.

  12. Brad says:

    OK, if Pfizer is fined $2 billion dollars, can they write that off on their taxes. In other words, they pay a fine of $2 billion, so their income is reduced by $2 billion. Are taxes determined on the income, or the income minus the fine?

  13. startup says:

    #12. They fire 25,000 people and call it even.

  14. lukas says:

    Off-label sales are perfectly legal though, as are off-label use and off-label prescription. The only thing that is against the law is off-label promotion, be it truthful or deceptive. Given the huge volume of off-label sales and use, that situation borders on the schizophrenic.
    I agree that the pharma cos should be fined if they are found to advertise their drugs deceptively. But not all off-label promotion is deceptive.

  15. Hap says:

    I thought it was the FTC doing this – their interest is in sales and promotion. I don’t think they can determine off-label sales (as opposed to on-label ones), so off-label promotion is all they can go after.
    I would think that off-label promotion is mostly deceptive. Drug companies are held to a higher standard than supplement makers (a bad situation, IMO, because they should be held to the same high standards) – they’re expected to have data (with the appropriate power) to support their claims. They might not have dishonest intent in claiming a drug does something it hasn’t been approved for (they may have preliminary data to suggest that effect, or it may be a logical consequence of its action), but they don’t have the evidence that their claims require. Hence, they get dinged, even if their drug actually has the off-label effect, because they don’t really know until they have the data.

  16. lukas says:

    It is my understanding that in some cases they have the data, but the data is not good/extensive enough for the FDA.

  17. > Even after you pay a billion dollars
    > in fines, you can still come out ahead
    If that’s true, then the fines are too low at one billion. Make it ten billion, a hundred billion, or a trillion, whatever it takes to dwarf the perceived benefits of illegal behavior. Or start putting company execs in jail, but I tend to think for this kind of offense fines are a better solution, as long as they’re high enough to motivate compliance. But the fine needs to be significantly *more* than even an optimistic estimation of the potential benefits, because, as you say, not every offense is caught.

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