In his book Too Big To Jail: How Prosecutors Compromise with Corporations, author Brandon Garrett addresses how large corporations can routinely be accused of wrongdoing and somehow evade serious punishment. Primarily, companies that play a central role in major industries have more money to settle lawsuits, and their contributions to the economy give them more bargaining power to avoid prosecution.
Many of the companies mentioned in Too Big To Jail have entered non-prosecution agreements with the government. These agreements are typically contingent upon some type of corporate reform. As Garrett illustrates, however, not all companies use their agreements as opportunities to reform, and many of them face recurring fraud allegations despite previous lawsuits.
The top companies in the pharmaceutical industry are a prime example of Garrett’s thesis. They have the advantage of monopolizing worldwide drug research and they rake in billions of dollars per year.
Unfortunately, after spending decades profiting from Americans’ trust while settling again and again in court, these corporations have continued to fall short of their promises. The trust that drug companies have bought is dangerously misplaced, and some of our nation’s most trusted brands are the most egregious offenders.
The Corporate Integrity Agreement
To incentivize proper conduct after a settlement has been reached, the Office of Inspector General at the U.S. Department of Health & Human Services often institutes a Corporate Integrity Agreement (CIA.) It’s a way of allowing the company not to face formal prosecution while acknowledging that the allegations filed are serious, and that the company needs to take measures to reform.
A CIA requires each corporation to hire an internal compliance officer, create written corporate integrity policies, and submit to independent reviews. The company also has to create employee training programs and internal systems that promote confidential disclosure of any wrongdoing. These agreements usually last five years, and annual implementation reports must be submitted to the OIG.
Corporate Integrity Agreements are very common, and the government updates the full list as new agreements arise. Most major pharmaceutical companies have been accused of fraud; here are just five that have faced repeated allegations and yet are still hugely profitable.
Johnson & Johnson (J&J)
Johnson & Johnson is arguably one of the most trusted names in the pharmaceutical industry, which makes its history of fraud allegations and charges particularly disappointing.
- In 2013, J&J paid over $2.2 billion to resolve illegal promotion and kickback allegations. The company’s subsidiary Janssen pled guilty to promoting antipsychotic drug Risperdal to suppress difficult behavior in elderly patients with dementia, even though the drug was approved only to treat schizophrenia.
- A case resolved in February 2016 addressed allegations linked to J&J’s baby powder products. The plaintiff developed ovarian cancer after years of using J&J’s baby powder and died at the age of 62. J&J was ordered to pay $72 million to her family.
- In addition to the baby powder scandal, J&J is under ongoing scrutiny for the possibly severe side effects of some of its medical products, including Levaquin and Xarelto.
Merck has positioned itself at the forefront of medical research, but it has also faced recurring legal battles over its marketing practices and transparency.
- In 2007, Merck paid $4.85 billion to settle 27,000 personal injury lawsuits related to painkiller Vioxx. The drug was recalled in 2004 due to serious heart risks, after millions of Americans had taken it.
- In 2011, Merck pled guilty to illegal marketing charges, also for Vioxx. The company promoted Vioxx for the treatment of rheumatoid arthritis before the FDA had approved that use. Merck paid $950 million in penalties.
- In 2010, two whistleblowers that had worked as virologists at Merck filed a qui tam lawsuit against the company. They claimed that Merck falsified tests related to the MMRII (measles, mumps and rubella) vaccine. This case is still in progress.
Pfizer manufactures many of America’s most popular drugs, including Celebrex, Viagra and Lipitor. It has also had a very disturbing legal history involving deadly clinical trials and illegal marketing practices.
- In 1996, Pfizer conducted clinical trials in Nigeria for a new meningitis drug called Trovan. At the time, an existing drug was available and proven to be effective at a certain dosage. Pfizer allegedly lowered the dosage of the existing drug to make Trovan appear more effective. During the trial, 11 children died and dozens faced severe long-term disabilities. In response to these clinical trial fraud allegations, Pfizer paid $75 million to Nigerian authorities and additional settlements to some of the affected families.
- Like many other pharmaceutical companies, Pfizer’s marketing practices have often come under scrutiny. In 2009, the company settled fraudulent marketing allegations for $2.3 billion, then a landmark settlement. The company was accused of illegally promoting Bextra, Geodon, Zybox and Lyrica. Pfizer was also accused of a kickback scheme involving healthcare providers.
Novartis entered its Corporate Integrity Agreement in 2010, but its compliance over the years has not been particularly exemplary.
- In 2010, Novartis pled guilty to illegal marketing and kickback allegations tied to six of its drugs. The company paid $420 million in penalties. This case prompted the company’s CIA.
- After the initial kickback allegations, further lawsuits were filed against Novartis for similar misconduct.
- In 2012, the company paid $99 million to resolve allegations that its sales representatives were not paid for overtime hours.
- In 2015, the government sued Novartis yet again for kickback allegations and received a $370 million civil fraud settlement. The company admitted wrongdoing for the illegal distribution methods of two drugs.
GSK is a British-based manufacturer of many prominent drugs, vaccines and consumer products. It has also been making headlines for years for serious fraud allegations.
- In 2010, GSK was sued for selling contaminated products due to faulty manufacturing procedures. The company pled guilty and paid $750 million.
- In 2012, GSK made headlines for paying a $3 billion settlement after pleading guilty to additional fraud allegations. The company illegally promoted Paxil, Wellbutrin and Avandia.
- The company paid a $489 million fine to the Chinese government in 2014 for the country’s doctors and officials. Separate charges alleged that GSK had possibly bribed Syrian officials as well in an effort to boost drug sales.
What’s at stake?
Compliance with Corporate Integrity Agreements enables companies to maintain their participation in federal healthcare programs. Medicare, Medicaid and other federal programs are funded by taxpayer dollars. Mismanagement of these funds affects the entire nation and should not be a recurring issue.
Corporate Integrity Agreements are an important step, but they are not enough. Big Pharma very urgently needs to evolve, and it will take a combination of stronger legislation, enhanced corporate accountability, and individual responsibility within these companies to make a lasting change. Click here to view the full list of Corporate Integrity Agreements and to see whether your company has one.