Civil, Criminal Settlements Down: Public Citizen

Public Citizen says that the number and size of federal and state settlements in criminal and civil cases against drug companies decreased significantly in 2014 and 2015. “It remains to be seen whether this decline represents a longer-term trend,” the advocacy group says in a report updating a 2012 study of settlements and court judgments. “Financial penalties continue to pale in comparison to company profits, with the $35.7 billion in penalties from 1991 through 2015 amounting to only 5% of the $711 billion in net profits made by the 11 largest global drug companies during just 10 of those 25 years (2003-2012).”

The report also says that no parent company has been excluded from participating in Medicare and Medicaid for illegal activities and few company senior executives have been jailed for leading companies engaged in 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,” Public Citizen concludes. “Otherwise, these illegal but profitable activities will continue to be part of companies’ business model.”

The report says that of the 373 settlements in the years between 1991 and 2015, 140 were federal settlements totaling $31.9 billion and 233 were state settlements totaling $3.8 billion. GlaxoSmithKline and Pfizer reached the most settlements and paid the most in financial penalties, $7.9 billion and $3.9 billion, respectively. In the 25 years, 31 companies entered into repeat settlements with the federal government. The violation resulting in the most federal penalties was unlawful promotion, usually off-label marketing, the report says.

The report raises several possible reasons for the drop in settlement activity, including a decline in federal enforcement, a shift in the focus of federal prosecutions away from off-label marketing and toward other forms of illegal activity, changes in state Medicaid pharmaceutical reimbursement strategies, and shifts in industry marketing strategies.

“We don’t know yet why there were fewer and smaller settlements in the 2014 to 2015 period,” says report lead author Sammy Almashat. “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 has routinely violated for decades.”