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Pharma overtakes arms industry to top the league of misbehaviour
GlaxoSmithKline's $3bn fine for mis-sel ing drugs in the US is the
biggest ever handed down, but analysts say it is a drop in the ocean
compared with the profits from medicines
The Observer, Sunday 8 July 2012
GSK's headquarters in Brentford, London. The firm has been handed a $3bn fine in the US for mis-sel ing the drug Paxil for unapproved use in children. Photograph: Fiona Hanson/PA Archive/Press Association Images
What's the current scandal?
GlaxoSmithKline, Britain's biggest pharmaceutical group, has been
sel ing anti-depressant drugs in the US for unapproved uses on
children, concealing critical evidence from US regulator the Food and
Drug Administration (FDA) relating to a diabetes product, and offering
lavish entertainment to doctors wil ing to promote its medicines.
The problems came to light because of whistleblowers inside the
company and adds to a string of other settlements with pharmaceutical
firms that lead critics to claim problems are endemic in the sector.
Last month, Abbott Laboratories was forced to pay $1.6bn over its marketing of the antipsychotic treatment Depakote, while the total cost of industry fines is over $20bn covering the last two decades.
But the GSK case has shaken even the most hardened of industry observers, as prosecutors found the company had been al otting over half a mil ion dol ars a year to its district sales representatives to offer doctors regular golf lessons, fishing trips, and basketbal tickets while promoting the use of antidepressant drug Paxil in children. The GSK sales campaign also involved helping to publish an article in a medical journal that misreported evidence from a clinical trial.
Meanwhile the company was also being accused of marketing the drug Wel butrin for sexual dysfunction and weight loss, when it had only received official consent from the FDA to treat depression. Some of its drugs reps were reportedly describing Wel butrin as "the happy, horny, skinny pil ".
In the case of a third treatment, Avandia, the company did not report to the FDA studies it had carried out that showed there were safety concerns about heart risks. Critics had been cal ing for the drug to be banned four years ago yet it was only in 2010 that restrictions were final y slapped on its use.
What's happened to the perpetrators?
GSK has agreed to pay a $3bn fine to settle criminal and civil charges
with federal and state governments stemming from il egal activity over
10 years. This is the biggest-ever fine of its kind but there seem no plans at this stage to pursue executives or other individuals in positions of power at the time. Through some of the period covered by the fine, the firm was run by the highly paid Frenchman Jean-Pierre Garnier, whose entitlement to a £22m "golden parachute" payoff if he left the company enraged shareholders and caused a historic investor revolt.
In response to last week's announcement by regulators, the pharmaceuticals company said it had changed the way its sales staff are paid by eliminating individual sales targets. Sir Andrew Witty, GSK's chief executive, said the settlement brought a resolution to "difficult, long-standing matters for GSK" adding: "I want to express our regret and reiterate that we have learned from the mistakes we made."
Critics point out that other executives directly named as having been told of concerns continue in top jobs, albeit in different companies.
Whistleblower Greg Thorpe first alerted the company to the entertainment offered to doctors and the culture that al egedly put profits above ethics in 2001. He raised his concerns with David Stout, who was then head of the US business, and Bob Ingram, GSK's chief operating officer. When he was forced out of the company, he took his case to the regulators, which spent almost 10 years investigating the issues.
Stout became a non-executive director of another London-listed pharmaceutical company, Shire, and Ingram is chairman of the biotechnology firm Elan.
What's the public image of the industry?
Rock bottom, despite drugs firms' best efforts. GSK's corporate
responsibility report runs to more than 100 pages, and details its
pledges to improve access to healthcare in the developing world, and
cut its carbon footprint. Witty insists: "We firmly believe that operating
in a responsible and ethical way is essential for the success of our
But after last week's case, there can be little doubt that Big Pharma is
top of the table for misbehaviour ahead of the arms industry, which has
hogged the limelight for the past 100 years.
Some point to a long-running pattern of behaviour reaching back much farther than the most recent revelations. Eliot Spitzer, who as New York's attorney general sued GSK over similar al egations eight years ago, told the New York Times
that companies like GSK seem incorrigible. "What we are learning is that money [ie fines] do not deter corporate malfeasance. The only thing that wil work in my view is chief executive officers and officials being forced to resign and individual culpability being enforced." Sidney Wolfe, a doctor and director of consumer organisation Public Citizen's health research group, goes further: "Until more meaningful
penalties and the prospect of jail time for company heads who are responsible for such activity become commonplace, companies wil continue defrauding the government and putting patients' lives in danger."
What's the reality?
Despite the large fine, $3bn is far less than the profits made from the
drugs. Avandia has made $10.4bn in sales, Paxil took $11.6bn, and
Wel butrin sales were $5.9bn during the years covered by the
settlement, according to IMS Health, which provides information for the
The fact that the profits available from bestsel ing drugs dwarf the fines handed out if anything goes wrong means the kinds of misdemeanours picked up in the settlement are bound to happen, says Wolfe. His conclusion is that, for Big Pharma, "crime pays".
What's the UK doing about it?
All of GSK's problems have come to light in the US, where corporate
abuse is taken very seriously. Britain is different, and the FDA's
equivalent, the Medicines and Healthcare products Regulatory Agency
(MHRA), appears to engage in lighter-touch regulation. The MHRA has
never successful y prosecuted a company since it was established
nearly 10 years ago. It did investigate GSK over al eged inappropriate
use of a drug in 2008 but abandoned the case. Since then, the total
amount of fines imposed on individuals engaged in counterfeiting is
£73,300. Confiscation orders under proceeds of crime legislation have
total ed £18.9m and the MHRA says it has issued 467 warnings and
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