Pfizer Reformed, Again

When a drug manufacturer applies to the Food and Drug Administration (“FDA”) for approval of a new drug, it must indicate the drug's specific usages on the application. If a doctor prescribes a drug for an usage which did not receive FDA approval, he engages in the practice of prescribing off-label use. Such practice is so prevalent in the medical community that the failure to prescribe the off-label use of certain drugs may expose a doctor to medical malpractice. Unlike doctors, who may act in good faith, drug manufacturers are often suspected of malicious motives when they promote any off label uses. Therefore, on the one hand, the law generally permits doctors to practice off-label use, but on the other land, forbids any promotion of off-label use by manufacturers. In 2004, the government fined Warner-Lambert (a Pfizer subsidiary) $430 million for promoting the off label use of Neurotin. In response, Pfizer pledged to reform. Yet, In 2009, the government fined Pfizer $2.3 billion for its off-label promotion of Bextra. And of course, according to Pfizer representative, Pfizer will “reform,” again.

Off-Label Settlement of Bextra

The story of Bextra began in 2001 when Pharmacia & UpJohn? Company (“P&U”), a Pfizer subsidiary, received approval from FDA for three indications of Bextra: osteoarthritis, adult rheumatoid arthritis, and primary dysmennorrhea. Due to safety concerns, the FDA did not approve Bextra for general acute pain. Displaying complete disregard for patients’ safety, P&U promoted Bextra for general acute pain to physicians claiming it was safe. From 2002 to 2005, Pfizer used so-called advisory boards, consultant meetings, and paid vacation at lavish resorts to promote Bextra to, as one local manager claimed, "anyone that use[d] a scalpel for a living."

In 2005, Pfizer withdrew Bextra from the market on recommendation by the FDA, citing an increased risk of heart attack, stroke, and a sometimes fatal skin reaction. In September 2009, P&U pled guilty to a felony violation of the Food, Drug & Cosmetic Act, for misbranding Bextra with the intent to defraud or mislead. In the plea agreement, it agreed to pay a criminal fine of $1.195 billion. Furthermore, Pfizer paid an additional $1 billion to settle civil allegations that it induced physicians using kickbacks to market Bextra and three other drugs.

Why manufacturers will forego FDA approval and risk civil and criminal sanctions?

Manufacturers forego FDA approval and risk civil and criminal sanctions for many reasons: FDA approval process is expensive and takes a long time; the FDA may decline to grant its approval at all; and FDA approval will expand the scope of generic competition once their patent expires. Most importantly, manufacturers are motivated by profits. After realizing that the approved uses of a drug fail to generate enough revenue, manufacturers promote off-label uses to grab more profit. Bextra is 20 times more expensive than ibuprofen, but not shown to be more effective. These massive profits explain why companies promote off label use even in the face of huge sanctions. Pfizer is not alone in promoting off label use. Eli Lilly pled guilty to criminal misbranding of Evista, Serono paid 704 milion to resolve charges relating to its marketing of Serostim, and the list goes on.

too big to fail?

Manufacturers always have the incentive to promote off-label use as long as doctors are allowed to prescribe it. Supporters of allowing doctors to prescribe off-label use argue that there exists a gap between patient care and FDA approval process. Doctors should be encouraged to provide the best available treatments when the FDA approval process fails to keep up with the progress in medicine or when lack of financial incentive in treating rare diseases causes manufacturers to forego FDA approval. No government is willing to risk banning off-label use altogether because it will lead to a public outcry, especially from HIV and Cancer patients. Therefore the government will keep allowing doctors to prescribe off-label use and FDA has to allow some communications between manufacturers and doctors to ensure quality care. The manufacturers often disguise off-label promotion as dissemination of information or education about their drugs.

The government’s approach to tackle off-label promotion is to increase the probability of catching a non-complying manufacturer. One strategy the government implements is to award whistleblowers a portion of the settlement under the False Claim Act. Evidences of off-label promotion are conspicuous. Doctors know about it, and so does Pfizer’s competitors. But doctors are unlikely to sue because of the power which Pfizer wields in the medical community. The kickbacks and perks also sealed their mouths. Competitors are unlikely to bring whistleblower lawsuit because they fear retaliation of their own off-label promotion.

In prosecuting off-label promotion, the government has a deadly trump card. Any company convicted of a major health care fraud is automatically excluded from Medicare and Medicaid. Convicting Pfizer would prevent the company from billing the government for any of its products. However, the government was afraid to hand out such corporate death sentence. It feared that Pfizer's collapse would disrupt the flow of medical products to Medicaid recipients and create mass layoffs of Pfizer employees. Therefore the government made a deal with Pfizer. Instead of convicting the real culprit, the government only excluded P&U, Pfizer’s great-great grandson (Pfizer Inc. owns Pharmacia Corp., which owns Pharmacia & Upjohn LLC, which owns Pharmacia & Upjohn Co. LLC, which in turn owns P&U.)

When manufacturers can hide behind shell companies, the settlement fine will simply become a part of the risk calculation of doing business with the government. Manufacturers will continue to defraud patients as long as they make a profit, and the government will continue to aggressively pursue off-label actions and get a portion of that profit back. All the costs are ultimately passed down to the innocent taxpayers and the patients who listen to their doctors and buy expensive non-FDA-approved drugs. The government believed that it must protect the institutional creed of “too big to fail”, because otherwise the consequence would be unimaginable. But what about the patients whom Pfizer put under dangerous health risk and the taxpayers whom Pfizer stole from by defrauding Medicare? Keeping Pfizer out of Medicare and Medicaid will take Pfizer drugs from the patients because Pfizer hold patents on them, but patent protection is not absolute. The courts already invalidate patents based on certain illegal conducts. The day that the government invalidates patents on the ground of illegal off-label promotion will be the day that Pfizer finally seriously reconsiders its risk calculation.