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November 27, 2020
David Burda
Economics Policy System Dynamics

Why We Still Need to Keep Drug Companies on a Short Leash

Drug companies may end up saving us from the pandemic, but that doesn’t mean we can take our eyes of them for a second. 

A new research letter in the Journal of the American Medical Association found that most of the world’s largest drug companies routinely violate the law and pay billions of dollars out in financial penalties for a wide range of offenses. You can download the research letter here

Researchers from the University of North Carolina, San Francisco State University and the University of Nebraska searched for any settlements between 26 of the biggest drug companies and state attorneys general offices and federal agencies. The federal agencies include the U.S, Justice Department, the U.S. Securities and Exchange Commission and the U.S. Environmental Protection Agency. The study period was January 2003 through December 2016. 

They found that 22 of the 26 companies paid a total of $33 billion in financial penalties to the agencies for illegal activities over that 14-year period. Only four of the companies did not. 

The 22 companies paid 196 separate penalties involving a total of 276 separate violations. Seven out of 10 violations were what I would consider sales related. The four biggest violation categories were:

  • Pricing like overcharging or underpaying (78 violations)
  • Off-label marketing of drugs approved for other purposes (50 violations)
  • Kickbacks to providers to prescribe drugs (33 violations)
  • Misleading or deceptive marketing practices (32 violations)

“Given the scope and nature of the illegal activities involving financial penalties, physicians and regulators should exhibit vigilance over the activities of large pharmaceutical firms,” the study said.

What about the four companies with no penalties over those 14 years? The researchers speculated that they either have really good ethics and compliance programs or a knack for engaging in illegal activities that go undetected by state and federal regulators. 

I’m not going to name names, but many of the companies now being heralded for developing effective COVID-19 vaccines are listed in Table 1 in the research letter. Nor do I want to rain on anyone’s parade or be a party pooper. But this research letter reminds us that drug companies are businesses like those in any other industry. They do what they do to generate revenue and profits for their owners. Further, drug companies have a long and documented history of going outside the lines to do that. 

So, no matter how giddy we get over the prospect of effective COVID-19 vaccines to turn the tide in the pandemic, we can never let our regulatory guard down. No matter how appreciative we are.

Thanks for reading.

Stay home. Stay safe. Stay alive. 

About the Author

David Burda

David Burda began covering healthcare in 1983 and hasn’t stopped since. Dave writes this monthly column “Burda on Healthcare,” contributes weekly blog posts, manages our weekly newsletter 4sight Friday, and hosts our weekly Roundup podcast. Dave believes that healthcare is a business like any other business, and customers — patients — are king. If you do what’s right for patients, good business results will follow.

Dave’s personnel experiences with the healthcare system both as a patient and family caregiver have shaped his point of view. It’s also been shaped by covering the industry for 40 years as a reporter and editor. He worked at Modern Healthcare for 25 years, the last 11 as editor.

Prior to Modern Healthcare, he did stints at the American Medical Record Association (now AHIMA) and the American Hospital Association. After Modern Healthcare, he wrote a monthly column for Twin Cities Business explaining healthcare trends to a business audience, and he developed and executed content marketing plans for leading healthcare corporations as the editorial director for healthcare strategies at MSP Communications.

When he’s not reading and writing about healthcare, Dave spends his time riding the trails of DuPage County, IL, on his bike, tending his vegetable garden and daydreaming about being a lobster fisherman in Maine. He lives in Wheaton, IL, with his lovely wife of 40 years and his three children, none of whom want to be journalists or lobster fishermen.

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