What Pharma is Reading These Days - Part 2


Pharma is a diverse industry with hundreds of occupations and its own social structure. For that reason, people who work there pay attention to different storylines in the news.

Last week, we mentioned that people in our convenience sample who are involved with neuro-psychiatric products have been following an emerging story about a pattern of systemic fraud underlying the dangerous overuse of antipsychotic drugs. At the same time, people in the executive suites, together with their legal talent and other attendants, sense a growing concern over the federal government's efforts to hold fiduciary officers responsible for serious and repeated violations.

In particular, the Department of Health and Human Services's inspector general's office has grown frustrated that pharmas persist with off-label marketing and other transgressive patterns, despite settlements that imposed billion dollar fines on each of several companies. In cases involving repeat or flagrant offenders, the inspector general wants to hold senior executives accountable as a deterrent. Under that plan, the feds would bar pharmas from selling products to government agencies such as Medicare, Medicaid and the VA if the top officers retain their positions at the recidivist companies. Barring sales to the government amounts to virtual capital punishment for a pharma.

At the moment, the authorities seek to make an example of Howard Solomon, CEO and chairman of Forest Laboratories. According to an insightful review in Bloomberg News, the inspector general wants to force Solomon out, under threat of barring Forest's sales to government, because the company under his watch promoted its antidepressant drugs for unapproved uses. Despite numerous warnings about the practice, Forest continued its off-label promotions.

Government watchdog agencies have concluded that pharma's fiduciary officers maintain their errant ways as if the billion dollar fines were merely a cost of doing business. Executives at companies that committed gross violations emerged unscathed from off-label marketing scandals and, in some cases, these top managers even received larger year-end bonuses while shareholders absorbed the fines. According to a source quoted by Bloomberg, "Some of these companies are making so much money from these sales that there's no amount of punishment that we can heap on the corporation, because it's not personal."

The pharma industry's formal response to establishing executive responsibility consists of an effort to make illegal behavior perfectly acceptable by changing the regulations. Over many decades, a central feature of prescription drug marketing has prohibited pharmas from promoting their products for anything other than uses formally approved by the FDA. Pharma's top managers feel they can squelch the inspector general's efforts to hold them personally responsible by doing away with the whole concept of off-label marketing. Under this sham constitutionalism for multi-millionaires, deceptions and unproven assertions peddled to physicians would be protected as free speech under the First Amendment.

An even larger segment of pharma employees maintain close tabs on yet another developing storyline. This one relates to an industry-wide effort to reduce expenses by obtaining more chemical raw materials from China and by conducting more clinical trials in India. Both trends, in the eyes of cautious observers, raise potential public safety hazards for American consumers.

According to a report by the U.S-China Economic and Security Review Commission in April of last year, China has become the world's largest supplier of active pharmaceutical ingredients. The Food and Drug Administration and the Consumer Product Safety Commission have identified numerous quality problems with materials imported from China. These include tainted cough syrup and the blood-thinning drug heparin, toothpaste that contained antifreeze, pet food with melamine, mushrooms contaminated with staphylococcus, and cadmium in children's jewelry.

The consumer commission found that there are fewer regulations for pharmaceutical exports from China than from other industrialized economies: "In particular, the regulations on'Pharmaceutical Processing for Export'... are brief and could be easily interpreted as putting an enormous burden on the destination country or region external to China with respect to quality standards and safety requirements."

On numerous occasions, the FDA publicly claimed it lacks resources to adequately inspect either  medications or active pharmaceutical ingredients that have been imported. Pharma's trade group, PhRMA, even cited this lack of inspection capability when it opposed reimportation of less expensive Canadian and British medications back into the U.S., where they originated.

Clinical development represents another important cost factor for pharma, alongside manufacturing and marketing. As noted as long ago as 2005 by Scott Carney in a story for Wired, "more and more drug companies are conducting clinical trials in developing countries where government oversight is more lax and research can be done for a fraction of the cost." Carney cited a report by a subsidiary of the Netherlands-based Rabo Bank that clinical trials conducted in India can reduce expenses by 60% below what it would cost to do them in the U.S. or Europe. More recently, the global consulting firm KMPG concluded that, "overall R&D costs [in India] are about one-eighth and clinical trial expenses around one-tenth of Western levels."

Two problems result from conducting a large percentage of clinical trials on the subcontinent. One, the extreme poverty of potential trial subjects may undermine the spirit of informed consent, an ethical cornerstone of all studies involving human subjects. Second, the oversight typically conducted in the U.S. and Europe by either the hospital, medical school or other institution running the trial, in concert with an independent review board, is often lacking or unknown in developing countries. So the reliability of data collected from trials in those places remains anyone's guess.

To recap, some of the stories followed most closely these days by people who work within pharma involve fraudulent over-promotion of their products, the feds going after their senior executives, and the potential dangers of conducting manufacturing and research overseas.

What does that say about the industry?

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