Big Pharma, Big Fines, Bigger Profits


From low-impact fines to questionable DTC advertising, a few reasons why emergency physicians need to maintain a healthy skepticism of today’s pharmaceutical industry.

I’m having some increasing trouble with the pharmaceutical industry these days. I understand that the goal of these companies is to make money – it’s the same for every for-profit business – but we’re dealing with healing the sick here. You’d hope there’d be at least some kind of positive aura associated with these companies’ missions, as there is with much of the for-profit healthcare world.

But if you take even the most casual glance at how pharmaceutical companies act, there is just a lot that disappoints. Take lobbying, for instance. Every major trade group does it. The AMA (third largest spending organization at $295 million between 1998 and 2013) and the American Hospital Association (right behind the AMA at $249 million) put serious money into lobbying (overall, health professions and hospitals each totaled about $1 billion). You would think the real big boys would be the defense industry and aerospace as a whole, or perhaps Big Oil. But you would be wrong – it’s actually the pharmaceutical industry. They spent over $2.7 billion between 1998 and 2013 according to the Center for Responsible Politics. To put this amount into perspective, oil and gas paid $1.5 billion over the same period and the defense and aerospace industry contributed a paltry $711 million.


Spending a ton of money doesn’t necessarily make you evil. The question, then, is what do the pharmaceutical companies get in return for their lobbying investments. For one thing, they received a huge windfall when, in 2006, the Bush administration created Part D of the Medicare program (the part that pays for drugs – saving seniors approximately $6 billion a year). The concession received by the drug companies was virtually equivalent to a printing press to make money – the government agreed not to bargain with them on the price that Medicare would pay for drugs.

The Congressional Budget Office estimated that the government could save an estimated $112 billion over ten years if Medicare had the right to negotiate drug prices. To put that into perspective, 2006 was the year that drug company profits really started to soar – they’ve gone from about $58 billion then to $84 billion in 2012 (per According to a report dated November 20, 2013, from Yardeni Research, the operating profit margin for the pharmaceutical industry was 22.5% in 2013. Depending on the year, that number puts pharma as the most profitable, if not in the top three most profitable, industry segments in the American economy.

Despite the huge clout that Medicare could have had, being the largest purchaser of drugs in the United States by a multiple, it agreed not to use this power to negotiate drug prices with the pharmaceutical industry. Both the Veterans Administration and the military are allowed to bargain for price concessions, but not CMS. This makes no sense.


And what about the paternalistic laws prohibiting Americans from buying from Canadian mail-order pharmacies? We’re told that we can’t trust the drugs made elsewhere in the world and that rogue mail-order pharmacies are sending all manner of fake drugs to the U.S. Sounds like we should be grateful to the Feds for protecting us. Recently, the state of Maine said, “enough” and passed a law allowing their citizens to purchase drugs this way. But as it turns out, Federal law takes precedence and the Feds say this is illegal, regardless of what Maine has to say. This is analogous to Washington and Colorado’s conflicting marijuana laws (the states allow it and the Fed looks the other way).

The fact is that Americans pay more for their drugs than just about anyone in the world. Each year the Canadian government’s Patented Medicine Prices Review Board releases a report on worldwide drug prices. In 2006, patented drugs cost about 70% more in the U.S. than in Canada. Since then the gap has increased – in 2011 the difference was 100%. And that gap is likely to widen more quickly given that drug prices are rising at a rate of about 11% annually in the States – faster than in other country.

But wait a minute! The increased charges in the U.S. pay for research to develop new drugs, right? Well if so, why doesn’t the rest of the world help pay? But is drug development really so expensive? Apparently, not as expensive as marketing. A recent study claimed that drug companies spend 19 times more on marketing than they do on R & D.

And, to make matters worse, extensions to patents seem to be extremely easy to get. Recently the makers of aerosolized meds had to change their propellants because they were making a hole in the ozone layer or some such thing. Prior to this change albuterol metered dose inhalers cost around $10. When the propellants got changed, a new patent was issued for each converted MDI. Now there is no generic albuterol inhaler and the trade name products cost about $52 on the Costco website.


And what about Xopenex? Albuterol has a levo and dextro isomer. The active isomer is the levo and the inactive is the dextro. Old albuterol contained both isomers. Seems if you can delete the inactive one the patent office says you have a new drug – voila!! Xopenex. And what about getting patent extensions? The patent on Viagra was due to run out in 2012 – sildenafil was originally patented as a blood pressure drug in the early 90s. Pfizer applied for another patent for the drug in 2002 as a treatment for ED. So now the patent expires in 2019. But there is good news. The Viagra patent expired in Europe on June 21, 2013. So look for those nasty, mean, rogue Canadian pharmacies to be selling the generic versions very soon. At least 20 drug makers are interested in making the drug at an expected price of about $1.55 a pill (about 1/10th the European price and about 1/20th of the U.S. price).

And what about that direct-to-consumer marketing we see bombarding us on TV? New Zealand is the only other country that allows it. The idea is to have consumers ask – no, tell – their physicians they want the drugs seen on TV. Have you flunked the “low T” test? If you do, look out. Axiron, the latest topical testosterone promoted on the tube costs $440 a month at Costco. And that’s cheap compared to the local pharmacy, where it can run $480!

Thankfully, Big Pharma is being kept in check by big fines, right? Sort of. GlaxoSmithKline agreed to pay a $3 billion fine in July of 2012 for marketing Paxil and Wellbutrin for unapproved uses and withholding safety data regarding Avandia (a NEJM study claimed it was associated with a 43% increase in heart attacks – but it may be getting partially exonerated by a more recent study). But to put this fine into perspective, reported 2011 GSK sales were $44 billion and profit was $9 billion. This fine is just a blip, and one of many. In May of 2012 Abbott Labs settled for a $1.6 billion fine over its marketing of the anticonvulsant, Depakote. Johnson and Johnson agreed to pay $2.2 billion in November of 2013 for the off-label promotion of its antipsychotic drug, Risperdal (for off-label use in dementia) and inappropriate promotion of Natrecor and a newer antipsychotic, Invega.

And, although J & J pleaded guilty to criminal misdemeanor charges, as is customary, no individuals were charged with anything and nobody went to jail – even though patients were likely harmed. These fines are not the only costs the drug companies have had to bear – there are a huge number of patient lawsuits against these companies as well. A Forbes story on July 12, 2012 noted an estimated 1500 Paxil birth defects suits had been settled along with 50,000 Avandia cases.

Are there any solutions to these problems that seem endemic to the pharmaceutical industry? Unfortunately, the answer might not come from the FDA. Many think the FDA works for the drug companies in that funding is largely derived from the drug companies and new drugs only have to be shown to be better than placebo – not better than any other drugs used to treat a certain condition. Also, once a drug is approved for marketing for an approved indication the drug companies are supposed to do “post-marketing surveillance” for side effects not demonstrated in prior clinical trials. As noted in the abstract below, their enthusiasm for doing these studies may be lacking given that it is not in their interest to find reasons why a drug should not be prescribed (remember Vioxx?).

There is the “no free lunch” movement which encourages physicians to take no “gifts,” no matter how apparently inconsequential, from drug companies. The psychology is that even apparently small gifts will create a sense of indebtedness. Many residency programs have banned drug companies from providing food and the like at grand rounds and the little black bags that we got from Eli Lilly when I graduated are long gone.

Increased awareness on the part of clinicians regarding the many aspects of pharmaceutical company behavior may also create an increased sensitivity when reading studies promoting the efficacy of the drug under consideration. Also, awareness of the concept of surrogate markers can be helpful, in that drugs that lower blood pressure can easily be shown to decrease pressure – but the real question is their effect on heart attacks, kidney function and strokes. It is easy to measure BP (a surrogate marker) but much more difficult to measure a patient-oriented outcome. The same is true for oral hypoglycemics – they all lower glucose but what is their effect on patient-oriented outcomes? Glucose is easy to measure – it is the surrogate – but clinical outcomes of diabetes are much more difficult to assess. The same with cholesterol pills – measuring cholesterol is easy, but measuring effects on cardiovascular outcomes is a lot more difficult. Below are a couple of abstracts from the EMA database focusing on some drug company-related issues. Bottom line? We would all best serve our patients if we maintained a very healthy skepticism.

Outterson, K., N Engl J Med 367(12):1082, September 20, 2012
The author, from Boston University School of Law, comments on the nature of sanctions against the pharmaceutical and other healthcare-related industries for corporate misconduct. He lists nine pharmaceutical manufacturers who have been involved with the Department of Justice for issues relating to off-label promotion, kickbacks, deceptive marketing and withholding of safety and side effect information. He suggests that fines and penalties levied against these companies, ranging from $0.42 to $3.0 billion (the latter levied against GlaxoSmithKline in 2012, the largest recorded settlement in a case involving healthcare fraud in the US), often represent only a small percentage of the company’s global profits. As such, these fines might be perceived by industry as a mere “cost of doing business.” Settlements with the Department of Justice for commission of healthcare fraud often include completion of a “corporate integrity agreement” (a listing of 26 such agreements in place as of July 2012 is provided). These agreements typically require increased reporting and independent monitoring of the corporate entity but are in place for a period of only five years. This author feels that these fines and agreements have not changed corporate culture, and presents suggestions that might prove to be more effective in reducing corporate misbehavior. These include imposition of penalties on individual corporate executives rather than on the company as a whole, elimination of incentive-based compensation for sales representatives for promotion of off-label use, requiring senior executives and other employees to repay bonuses and other compensation if they have been involved in fraudulent behavior, exclusion from participation in federal health programs and requiring more transparent dissemination of clinical trial data. 5 references (PMID: 22970920)

Copyright 2013 by Emergency Medical Abstracts – All Rights Reserved 4/13 – #12 (PCMA 4/13 – #25)

Gotzsche, P.C., et al, Br Med J 345:e8462, December 14, 2012
The author, from the Nordic Cochrane Center, expounds about reported criminal activities on the part of the pharmaceutical industry. He notes that in a Google search of the word “fraud” and the names of the ten largest drug companies, the most common crimes identified included illegal marketing for off-label use, misrepresentation of research results, hiding data on harms, and Medicaid and Medicare fraud, all involving the USA and settlements and fines in excess of $1 billion. He notes that the fines and settlements paid represented only a small portion of profits made from the involved drugs and were, thus, unlikely to present a deterrent to the conduct exhibited. He suggests that this represents a large disconnect between the pharmaceutical industry’s claims of adhering to high ethical standards and actual practice. He further cites polls conducted in Denmark and the USA indicating that confidence in the pharmaceutical industry barely exceeds levels of confidence in auto repair firms, and oil and tobacco companies. The author contends that crimes on the part of the pharmaceutical industry have resulted in “the unnecessary deaths of thousands of people” and many billions in losses to the national economy each year. He also cites the complicity of physicians in the perpetration of these crimes. He calls for tougher sanctions, fines so large as to cause the bankruptcy of the involved company, personal accountability of top pharmaceutical executives to include a risk of imprisonment, and laws to protect and reward whistleblowers. 13 references ( – no reprints)

Copyright 2013 by Emergency Medical Abstracts – All Rights Reserved 6/13 – #24 (PCMA 6/13 – #19). Reprinted with Permission, Emergency Medical Abstracts, January 2014


Dr. Bukata is the Editor of Emergency Medical Abstracts.


  1. I just wish we could have the old, cheap and effective drugs back. This pattern of trashing an old, effective and often cheap (off-patent) drug because there is a new, more “effective-safer”, but super expensive (on patent) drug is so obvious, that we cannot longer ignore it. But what bothers me the most is the complicity of medical organizations which continue to get cozy with big pharma. Yes, I got it… pharmaceutical companies are a business like any other and their primary aim is to increase profits; but increasing a price of a highly needed drug by 3000% is not ethical and should not be permitted.

  2. Excellent article. I started out as a pharmacist, and when I needed to change career, I considered the drug industry. It would have been easier to pursue than medicine, especially with a background of academic probation. Fortunately, With work and luck, I was able to eventually able to become a physician.
    That decision was 42 years ago. Unfortunately, there has been little positive change, in my opinion, by the industry to help those who really need help. That includes a large portion of the population. I chose EM as a career track, and have enjoyed taking care of all comers, regardless of ability to pay.
    Capitalism does have its positives, allowing many of us to enjoy the lifestyles that we have, while the negatives of capitalism have contributed much to the social unrest and political ineffectiveness present today. It presents a real dilemma.
    I’ve been around long enough to see the pendulum swing to and fro on several issues, such as dietary recommendations, but I doubt that I will see the it swing back on the drug issue in my lifetime. We physicians and pharmacists have lost any control or power in this issue. The current generation of graduates are, of necessity, concerned,much more than mine, with money as they exit their training. My generation has truly been blessed. We have also contributed to the current situation by our passivity. It is said that if you are not part off the solution, you are part of the problem. I do not have a solution to offer, and wish the younger generation much luck in the pursuit of their professional and societal goals.

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