NEURONTIN UPDATE
November 30, 2004
Charfoos & Christensen Files Health Care Fraud
Lawsuit Against Pfizer
Charfoos & Christensen attorney Jason J. Thompson recently filed a multi-million dollar health care class action lawsuit on behalf of several state and national healthcare plans that paid Pfizer for off label prescriptions of Neurontin.
Illegal Marketing of Neurontin
In the Summer of 2004, Pfizer pled guilty to charges of healthcare fraud as a result of a U. S. Department of Justice investigation. Executives at Warner-Lambert’s Parke-Davis unit engaged in the misconduct, which Pfizer purchased. In short, executives devised a comprehensive marketing scheme to promote what are called “off-label” uses of Neurontin. Off label means a use that has not been approved by the FDA. Off label uses of drugs do occur and often beneficial when directed by a physician. However, when corporate executives seeking increased profits originate the off label uses, the result can be disastrous.
In the case of Neurontin, the off label uses were originated by corporate executives, artificially supported by phony so called scientific studies, and then systematically promoted to willing physicians through cash payments, consultant engagements, and junkets. The result was phenomenally successful for the company. In the end, 80-90% of Neurontin prescriptions were for the off-label uses, and sales totaled --- Billion dollars.
Pfizer Inc.'s Warner-Lambert unit’s guilty plea to U.S. criminal charges will cost the company more than $430 million to settle charges it promoted the medication for unapproved uses. (Pfizer has a market cap of over $200 billion) The Justice Department said that the company agreed to pay a $240 million criminal fine for health-care fraud and $190 million in civil settlements with government health-care programs. The criminal fine is the second-largest imposed for U.S. health-care fraud.
The Marketing Scheme
The specifics of the marketing scheme help explain recent testimony of Dr. Grahm about the problem the FDA has policing the Pharmaceutical industry. The DOJ investigation uncovered the following:
• Warner-Lambert's Parke-Davis unit promoted Neurontin for Lou Gehrig's Disease, attention deficit disorder and drug and alcohol seizures, non of which were FDA approved uses;
• Warner-Lambert, paid doctors to attend conferences in Hawaii, Florida and the 1996 Atlanta Olympics, where Neurontin was touted as a treatment for migraines and bipolar mental disorder;
• The company promoted Neurontin's use to treat bipolar disorder even as a scientific study showed a placebo worked just as effectively or better.
• Medicare and Medicaid were defrauded by such uses of the drug. Warner-Lambert “corrupted the medical decision making'' of doctors by vouching for the drug's efficacy as a treatment even where it had evidence to the contrary,'' said Michael Sullivan, the U.S. attorney in Boston.
• The company deliberately didn't seek FDA approval for other uses of Neurontin because it feared makers of low-cost generic drugs would offer an alternative once the medication's patent expired.
Healthcare Fraud Lawsuits
Healthcare fraud accounted for more than half the $1.5 billion the Justice Department collected from civil fraud cases, including doctors and medical groups who billed Medicare for unnecessary lab test last. In recent years, the DOJ, State Attorney Generals, and Trial Lawyers have filed and/or settled lawsuits against several of the worlds largest drug companies involving price fixing, Medicare fraud, Anti-trust violations, and marketing violations for drugs.
For example, TAP Pharmaceutical Products, a joint marketing venture of which 50 % is owned by Abbott Laboratories and 50% is owned by Takeda Chemical Industries, pleaded criminally guilty to illegal marketing and health care fraud. The proposed $290 million settlement would be the largest criminal fine ever in a health care fraud matter. TAP had previously agreed to pay $559 million to settle the civil portion of the case.
The case against TAP Pharmaceutical Products involves improper billing by physicians for free medical samples that they received from the drug company. TAP will pay a total of $875 million to settle the criminal and civil charges of fraud against the Medicare and Medicaid programs.
A coalition of consumer groups filed a complaint in the U.S. District Court in Boston accusing 28 drug companies of engaging in an "industry wide" scheme of overcharging elderly Medicare patients. The suit involves the "average wholesale price" system, which the complaint alleges were set too high. The coalition represents consumers in 11 states and alleges the overcharges last year was over $800 million. As has been documented the AWP is not an accurate indication of the true price of a drug.
U.S. Drug Sales
The old phrase “If you want to figure out the problem, follow the money” applies when trying to understand healthcare fraud in the Pharmaceutical industry. During the past decade, U.S. prescription drug sales have quadrupled to $192.2 billion a year in 2002 from $48 billion in 1992.
According to the analysis of figures for the Fortune 500 the drug industry is still the most profitable industry in America on all three counts: return on revenue (18.5%), return on assets (16.3%) and return on shareholders' equity (33.2%). The U.S. is the only major industrialized nation without some version of government price control for drugs. In Europe restrictions are also placed on the amount of advertising that drug companies are allowed to utilize.
Listed below is a ranking of the 12 largest drug companies as ranked by the Wall St. Journal edition of May 21, 2004 by revenue for 2003 in billions:
- Pfizer, Inc.-$45.2.
- Johnson & Johnson-$41.9 (includes non-pharmaceutical revenue also).
- GlaxoSmithKline PLC-$37.9
- Sanofi-Aventis-$30.9 (the companies are in the process of merging).
- Novartis-$24.9 (includes non-pharmaceutical revenue also).
- Roche-$24.4 (includes non-pharmaceutical revenue also).
- Merck-$22.5.
- Bristol-Myers Squibb-$20.7 (includes non-pharmaceutical revenue also).
- AstraZeneca-$18.9.
- Wyeth-$15.9 (includes non-pharmaceutical revenue also).
- Eli Lilly-$12.6.
- Schering-Plough-$8.3 (includes non-pharmaceutical revenue also).
The U.S. is the only major industrialized country without price controls for its drug companies. We also are the only major industrialized country that allows direct to consumer advertising by drug companies.
Drug Pricing Outpaces Inflation
A report issued by AARP that examined the cost of 197 of the drugs that are most frequently used by older Americans showed an overall increase of 3.4% in the first quarter of this year. The drug price increases on a yearly basis more than doubled the rate of inflation. Of the 30 brand name drugs used most frequently by the elderly, all but 4 have been on the market for over three years. On average, the costs of these 30 drugs increased by 6.5% from January 2003 to January 2004, while the rate of inflation, excluding energy, was 1.5% during that same period.
Bristol-Myers Squibb Co. and Pfizer Inc. had 12 of the 25 top selling drugs, and every one of the 12 had price increases in 2003. Merck & Co. which had 3 of the top 25 selling drugs increased the price on one of them, Fosamax by 4.9%m but kept the price the same for Zocor (cholesterol) and Vioxx (rheumatoid arthritis).
Health Care Spending, Medicare & Medicaid
Health-care spending in 2002 reached 14.9% of gross domestic product, up from 13.9% in 2000. This amounted to $5,440 per person in 2002, up from $5,021 in 2001. Cynthia Smith, an economist at the Centers for Medicare and Medicaid Services concluded in an article that she wrote that appeared in the journal Health Affairs that prescription drug spending jumped 15.3% in 2002 over 2001, and accounted for 16% of the overall health-cost increase.
Researchers also found that the costs for Medicaid were approaching the costs for Medicare. Medicaid spending soared 11.7% in 2002, to $249 billion, while Medicare spending increased 8.4% to $267 billion. The two programs taken together accounted for about one-third of total health-care costs.
According to a report by the National Governors Association, the cost of Medicaid is growing faster than any other expense item in the average state's spending budget. The cost for Medicaid grew 6% in the fiscal year ended June 2003. The report also concluded that Medicaid spending accounted for 21.9% of total state spending compared with 21.5% for K-12 education spending.
The Charfoos & Christensen Neurontin Lawsuit
The current Neurontin lawsuit seeks reimbursement of prescriptions costs paid by insurers for off-label prescriptions of Neurontin. The basis for the lawsuit is that the Warner-Lambert marketing scheme resulted in increased prescriptions for Neurontin to treat illnesses for which it was ineffective in treating. Without the illegal marketing scheme, the drug would not have been prescribed, and the plaintiff health care plans would not have incurred the prescription costs.
Currently the firm represents 12 health care plans, with more discussing joining the litigation. The bulk of the firm’s clients are state approved private Medicaid insurers. The total estimated amount of prescriptions wrongfully paid by Charfoos & Christensen clients is estimated at over $25,000,000 and growing with each new client joining the litigation. Jason Thompson has been appointed to the discovery committee of the Plaintiff Steering Committee for the Neurontin MDL #1629.
The current lawsuit is merely an extension of Charfoos & Christensen’s fight against corporate abuses over the years, especially in healthcare. The firm was one of the leaders in the DES litigation in the 1970’s. More recently, Doug Peters represented many people injured by Phen-fhen and who received defective Sulzer hip and knee implants and Jason J. Thompson represented and resolved most of the Baycol cases in Michigan.
Charfoos & Christensen’s Philosophy
Marketing schemes like TAP’s. Warner-Lambert’s, and others caught in recent years significantly drive up the cost of healthcare in America, especially the cost of Medicare and Medicaid expenditures. Those who would rather blame personal injury lawsuits and trial lawyers for increased health care costs have too long minimized the role of corporate misconduct.
Jason Thompson addressed the problem in a Crain's article entitled, "Corporate misconduct helps fuel lawsuits," (Aug. 30, 2004) where he wrote:
"If we want to identify forces that are killing our economic competitiveness, it make sense to start with those forces that are causing the largest drain on the economy. We need to raise public consciousness about the corporate misconduct that costs all of us and weakens our competitive edge, not ignore it. Attacking trial lawyers and personal injury lawsuits may be popular, but if strengthening our economic competitiveness is the goal, it sure misses the mark."
Mr. Thompson believes public awareness of the costs of medical practice lawsuits relative to corporate healthcare fraud is important to actually solving the problem. He explains:
Trying to control the cost of healthcare by eliminating medical malpractice lawsuits is like trying to reduce rush-hour traffic by banning motorcycles from our roads. The effort is misdirected. The forces that rally against medical malpractice suits and trial lawyers are disingenuous when they claim to be trying to solve the healthcare problem. Additionally, the so-called tort reform laws cause an undeniable collateral effect: valid lawsuits get thrown out with the bath water. How does that help? In contrast, enforcing laws against corporate healthcare fraud goes a long way to reduce billions in healthcare waste, and it does not harm anyone except the wrongdoers, and they deserve it.
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