Novartis Settles..., But Wait, There's More

Back in January, 2010, we posted about Novartis' settlement of charges that it promoted its anti-seizure drug, Trileptal, (Oxcarbazepine) for off-label uses, agreeing to plead guilty to one charge of violating the US Food, Drug and Cosmetic Act.  This week, the full story of the settlement just came out, and yes, but wait, there's more.  Per the New York Times article by Duff Wilson, the story is not only about Trileptal:

The Swiss drug giant Novartis is paying $422.5 million to settle criminal and civil investigations into the marketing of the antiseizure medicine Trileptal and five other drugs, federal officials said on Thursday.

The other drugs were:

Diovan, a hypertension drug that is the company�s top-selling product, at $6 billion last year; Sandostatin, a drug to treat a growth hormone disorder that had worldwide sales of $1.2 billion last year; Exforge, a hypertension drug that sold $671 million; Tekturna, a blood pressure medicine that sold $290 million; and Zelnorm, a medicine for irritable bowel syndrome and constipation that was later withdrawn from the United States market.

And the issue was not solely off-label marketing:

Federal prosecutors accused Novartis of paying illegal kickbacks to health care professionals through speaker programs, advisory boards, entertainment, travel and meals. But aside from pleading guilty to one misdemeanor charge of mislabeling in an agreement that Novartis announced in February, the company denied wrongdoing.

While the allegations were much more broad than those originally announced, the penalties were the usual suspects:

The settlement includes a $170 million criminal fine and $15 million in criminal forfeiture by Novartis Pharmaceuticals, its United States subsidiary.

Also,

Novartis settled the investigation into the other drugs for $237.5 million.

However,

Prosecutors said top management at Novartis had approved illegal marketing from July 2000 to June 2004. No individual, however, was named or charged.

Back in June, we posted about how US law enforcement was supposedly going to start getting tougher with the people who authorized, directed or implemented wrong doing by health care organizations. Back then, federal officials said that executives would be held accountable, and forced to leave their jobs or even be disbarred from working in the industry.

However, here we are, four months later, and even a case that mushroomed from involving allegations of off-label promotion of one drug to off-label promotion of six drugs, allegations of kickbacks to physicians, and allegations that top management knew about what was going on results in no negative consequences to any individuals.

So it still seems that if misdeeds, such as promotion of drugs for off-label uses, and giving kickbacks to doctors disguised as honoraria for talks, consulting fees, and meals and travel payments, are done under the auspices of a large health care organization, no one is ultimately responsible for them.  The organization may have to pay what appears to be a big fine, but one that pales against the profits to be made from the misdeeds.

So, if an ordinary person commits fraud, he or she is likely to have to pay a big fine and go to jail.  If a physician commits fraud, he or she is likely to have to pay a big fine and go to jail, and incidentally to lose his or her medical license.  But if a corporate executive authorizes a fraudulant practice, he or she is likely not to pay any penalty (but may well have already collected a big bonus).

We have repeated endlessly that by limiting penalties to only modest increases in the costs of doing business for organizational malfeasance in health care, we just encourage more bad behavior.  But with each new example like this, I agree more that the fundamental problem has become corporatism, (or Corpocracy, as Robert A G Monks put it).  Government and corporate leaders find that they have more in common with each other than with the little people.  Or as Barry Ritholtz just blogged:

The new dynamic, however, has moved past the old Left Right paradigm. We now live in an era defined by increasing Corporate influence and authority over the individual. These two 'interest groups' � I can barely suppress snorting derisively over that phrase � have been on a headlong collision course for decades, which came to a head with the financial collapse and bailouts. Where there is massive concentrations of wealth and influence, there will be abuse of power. The Individual has been supplanted in the political process nearly entirely by corporate money, legislative influence, campaign contributions, even free speech rights.

This may not be a brilliant insight, but it is surely an overlooked one. It is now an Individual vs. Corporate debate � and the Humans are losing.

Furthermore,

There is some pushback already taking place against the concentration of corporate power: Mainstream corporate media has been increasingly replaced with user created content � YouTube and Blogs are increasingly important to news consumers (especially younger users). Independent voters are an increasingly larger share of the US electorate. And I suspect that much of the pushback against the Elizabeth Warren�s concept of a Financial Consumer Protection Agency plays directly into this Corporate vs. Individual fight.

But the battle lines between the two groups have barely been drawn. I expect this fight will define American politics over the next decade.

Keynes vs Hayek? Friedman vs Krugman? Those are the wrong intellectual debates. Its you vs. Tony Hayward, BP CEO, You vs. Lloyd Blankfein, Goldman Sachs CEO. And you are losing . . .