Drug Company Settlements On Decline As Enforcement Wanes: Public Citizen Report

The findings of a new report suggest that a recent drop in settlements and penalties paid by drug companies is a sign of inadequate enforcement activities that are designed to keep the pharmaceutical industry in check. 

The prominent consumer watchdog group Public Citizen recently issued a report “Twenty-Five Years of Pharmaceutical Industry Criminal and Civil Penalties,” (PDF) cataloging criminal activity related to drug companies from 1991 through 2015.

The report noted that there has been a sharp decline in the number of drug company settlements and financial penalties levied by federal and state agencies from 2012-2013 to 2014-2015. The number of criminal and civil settlements between drug companies and government agencies dropped from 117 in 2012-2013, to just 39 in 2014-2015; a decline of 67%. Financial penalties against drug companies by federal and state agencies similarly dropped 70% in the same time frame, from $9.8 billion to $2.9 billion.

The findings raise questions about whether there is sufficient oversight in place to enforce regulations, indicating that there is no evidence that drug companies suddenly stopped violating the law.

“We don’t yet know why there were fewer and smaller settlements in the 2014 to 2015 period,” Dr. Sammy Almashat, lead author of the report and a researcher with the Public Citizen Health Research Group, said in a press release. “But we do know that, in addition to the rarity of executive accountability, previous penalties never have been large enough to deter the most common types of pharmaceutical fraud. So it would be surprising if the industry suddenly decided, of its own accord, to comply with laws it had routinely violated for decades.”

The most common cause of criminal and civil penalties and settlements was illegal drug promotion, typically in the form of off-label promotions where drug manufacturers try to sell their medications for indications not approved by the FDA. While doctors can prescribe a drug for any reason they see fit, it is illegal for drug manufacturers to actively promote their drugs for unapproved uses.

The report found that most of the decline in the number of total settlements came from a drop in single-state settlements where companies were accused of overcharging government health care programs. The large drop in the amount of financial penalties was mostly linked to a decline in the size of federal settlements over off-label drug promotions.

Public Citizen notes that even during the most active years over the last quarter-century, penalties have never been harsh enough to deter illegal activity by drug companies.

“To our knowledge, a parent company has never been excluded from participation in Medicare and Medicaid for illegal activities, which endanger the public health and deplete taxpayer-funded programs,” the study notes. “Nor has almost any senior executive been given a jail sentence for leading companies engaged in these illegal activities. Much larger penalties and successful prosecutions of company executives that oversee systemic fraud, including jail sentences if appropriate, are necessary to deter future unlawful behavior. Otherwise, these illegal but profitable activities will continue to be part of companies’ business model.”