The Food and Drug Administration says it has nearly doubled the number of warnings to drugmakers for questionable promotion since President Obama took office. The agency sent 41 enforcement letters 2009, up from 21 in 2008, Thomas Abrams, head of the FDA's Division of Drug Marketing, Advertising, and Communication (DDMAC), tells Reuters. In January alone, the FDA sent nine letters.But even as the FDA tries to regulate direct-to-consumer advertising of prescription drugs -- a practice mostly unique to the U.S. -- promising action against violators, the issue of misleading marketing from advertising to reps promoting off-label uses remains rampant.
In late January, Novartis (NVS) said it will plead guilty and pay a $185 million fine for violating laws relating to potential off-label marketing and promotion of Trileptal, its epilepsy treatment. Novartis may have to stand trial potentially for off-label marketing claims related to five other drugs.
But Novartis isn't the only company to settle such a case recently. Eli Lilly & Co. (LLY) paid $1.4 billion for its marketing of antipsychotic drug Zyprexa. Pfizer (PFE) paid $2.3 billion, including a record $1.195 billion criminal fine, for its painkiller Bextra, which has been withdrawn from the market. AstraZeneca (AZN) in September reached a $520 million settlement on two federal investigations and two whistleblower suits over its blockbuster psychiatric drug Seroquel. Johnson & Johnson (JNJ) was recently charged with paying kickbacks to motivate nursing-home pharmacy firm Omnicare to increase sales of J&J drugs. And biotechnology giant Amgen (AMGN) was sued after an investigation discovered an alleged nationwide kickback scheme to boost drug sales. J&J and Amgen deny wrongdoing.
Not Much Pain Involved
The FDA's DDMAC division, assigned to review marketing material from TV commercials, websites, brochures and conference posters, doesn't have the authority to impose fines and other penalties. But its pressure has been taking effect on drugmakers, according to the Pharmaceutical Research and Manufacturers of America. Big drugmakers are "more sensitive than we've ever been" about preventing illegal promotion of drugs, AstraZeneca's CEO recently told The Wall Street Journal.
Is it enough? Some say it isn't. "Many of these companies view the fines as a small fraction of what they have gained through illegal schemes, and just a cost of doing business," said Shelley Slade of Vogel, Slade & Goldstein, in the Journal. Indeed, $520 million is small change on $17 billion in sales of Seroquel since 2004. Zyprexa incurred $1.4 billion in fines but brought in $4.69 billion in sales in 2008 alone. And critics called Pfizer's $2.3 billion fine a drop in the bucket.
Until the balance is tipped, and the fines offset earnings, shady practices may continue. A recent industry paper suggested that "While evidence-based medicine is a noble ideal, marketing-based medicine is the current reality." Sadly, that assessment seems to be true.
Bonds for Beginners
Learn about fixed income investments.View Course »