This
article was on the front page of the New York
Times on Sunday, June 27. Many people
emailed me and wrote various comments regarding
this article. Most people were saying that they
were amazed to see that what I have been saying
for years is now on the front page of the New
York Times.
By GARDINER HARRIS
NY Times
The check for $10,000 arrived in the mail unsolicited.
The doctor who received it from the drug maker
Schering-Plough said it was made out to him
personally in exchange for an attached "consulting"
agreement that required nothing other than his
commitment to prescribe the company's medicines.
Two other physicians said in separate interviews
that they, too, received checks unbidden from
Schering-Plough, one of the world's biggest
drug companies.
"I threw mine away," said the first
doctor, who spoke on the condition of anonymity
because of concern about being drawn into a
federal inquiry into the matter.
Those checks and others, some of them said
to be for six-figure sums, are under investigation
by federal prosecutors in Boston as part of
a broad government crackdown on the drug industry's
marketing tactics. Just about every big global
drug company — including Johnson &
Johnson, Wyeth and Bristol-Myers Squibb —
has disclosed in securities filings that it
has received a federal subpoena, and most are
juggling subpoenas stemming from several investigations.
The details of the Schering-Plough tactics,
gleaned from interviews with 20 doctors, as
well as industry executives and people close
to the investigation, shed light on the shadowy
system of financial lures that pharmaceutical
companies have used to persuade physicians to
favor their drugs.
Schering-Plough's tactics, these people said,
included paying doctors large sums to prescribe
its drug for hepatitis C and to take part in
company-sponsored clinical trials that were
little more than thinly disguised marketing
efforts that required little effort on the doctors'
part. Doctors who demonstrated disloyalty by
testing other company's drugs, or even talking
favorably about them, risked being barred from
the Schering-Plough money stream.
Schering-Plough says that the activities under
investigation occurred before its new chief
executive, Fred Hassan, arrived in April 2003,
and that it has overhauled its marketing to
eliminate inducements.
At the heart of the various investigations
into drug industry marketing is the question
of whether drug companies are persuading doctors
— often through payoffs — to prescribe
drugs that patients do not need or should not
use or for which there may be cheaper alternatives.
Investigators are also seeking to determine
whether the companies are manipulating prices
to cheat the federal Medicaid and Medicare health
programs. Most of the big drug companies, meanwhile,
are also grappling with a welter of suits filed
by state attorneys general, industry whistle-blowers
and patient-rights groups over similar accusations.
In many ways, the investigations are a response
to the evolution of the pharmaceutical business,
which has grown in the last quarter-century
from a small group of companies peddling a few
antibiotics and antianxiety remedies to a $400
billion bemoth that is among the most profitable
industries on earth.
Offering treatments for almost any affliction
and facing competition in which each percentage
point of market share can represent tens of
millions of dollars, most drug makers now spend
twice as much marketing medicines as they do
researching them. Their sales teams have changed
from a scattering of semiretired pharmacists
to armies of young women and men who shower
physicians with attention, food and - until
the drug industry recently agreed to end the
practice - expensive gifts, just to get two
to three minutes to pitch their wares. A code
of conduct adopted in 1990 by the American Medical
Association suggests that doctors should not
accept any gift worth more than $100, but the
guidelines are widely ignored.
A quarter-century ago, the Food and Drug Administration
was the lone cop on the drug industry beat.
But the F.D.A.'s enforcement powers over drug
marketing have been severely curbed since 1976
by a series of court rulings based mainly on
the companies' free-speech rights. That left
a vacuum that many companies decided to exploit,
said William Vodra, a former F.D.A. lawyer.
"A lot of people decided there was no
check on what they were allowed to do,"
Mr. Vodra said. Using fraud, kickback and antitrust
statutes, federal prosecutors, state attorneys
general and plaintiffs lawyers stepped into
the void, asserting that the companies' sales
pitches have cost the government billions of
dollars in payments for drug benefits.
This legal scrutiny can be expected to intensify.
Once the new Medicare drug benefit takes full
effect in 2006, the government will pay for
almost half of all medicines sold in the nation.
So the marketing programs will cost the government
even more money and, if they are uncovered and
determined to be illegal, will probably result
in even larger fines.
Last month, Pfizer agreed to pay $430 million
and pleaded guilty to criminal charges involving
the marketing of the pain drug Nuerontin by
the company's Warner-Lambert unit. AstraZeneca
paid $355 million last year and TAP Pharmaceuticals
paid $875 million in 2001; each pleaded guilty
to criminal charges of fraud for inducing physicians
to bill the government for some drugs that the
company gave the doctors free.
Over the last two years, Schering-Plough, which
had sales of $8.33 billion last year, has set
aside a total of $500 million to cover its legal
problems - mainly for expected fines from the
Boston investigation and from a separate inquiry
by federal prosecutors in Philadelphia who are
investigating whether Schering-Plough overcharged
Medicaid.
Besides looking into whether Schering-Plough
paid doctors large sums to prescribe the company's
drug for hepatitis C, prosecutors are investigating
whether many company-sponsored clinical trials
for the drug were simply another way to funnel
money to doctors.
Dr. Chris Pappas, director of clinical research
for St. Luke's Texas Liver Institute in Houston,
said that Schering-Plough "flooded the
market with pseudo-trials."
Dr. Pappas and eight other liver specialists
who were interviewed say the system worked like
this: Schering-Plough paid physicians $1,000
to $1,500 per patient for prescribing Intron
A, the company's hepatitis C treatment. In conventional
clinical trials, participants are given drugs
free, but the doctors said that in these cases
the patients or insurers paid for their medication.
Because patients usually undergo Intron A treatment
for nearly a year and the therapy costs thousands
of dollars, Schering-Plough's payments to physicians
left plenty of room for the company to profit
handsomely, the doctors said.
In return for the fees, physicians were supposed
to collect data on their patients' progress
and pass it along to Schering-Plough, the doctors
said. But many physicians were not diligent
about their recordkeeping, and the company did
little to insist on accurate data, according
to Dr. Pappas and the others.
One of the nation's most prominent liver disease
specialists, who spoke on condition of anonymity
for fear of angering big drug makers, called
the trials "purely marketing gimmicks."
"Science and marketing should not be mixed
like that," the doctor said.
Schering-Plough did more than encourage physicians
to place patients on Intron A, many of the physicians
said. They said the company would remove any
doctor from its clinical program - and shut
off the money spigot - if he or she wrote prescriptions
for competing drugs, participated in clinical
trials of alternatives to Intron A or even spoke
favorably about treatments besides Intron A.
The main competitor to Intron A, which Schering-Plough
now sells as Peg-Intron, is Roche's comparably
priced drug Pegasys.
Dr. Donald Jensen, the hepatology director
at Rush University Medical Center in Chicago,
said he wanted to perform clinical trials using
drugs from both Schering-Plough and Roche. "I
was told by Schering-Plough that I couldn't
do both - that I had to sign an exclusive agreement
with them," Dr. Jensen said. "That
was the juncture when Schering and I parted
ways."
Six specialists in liver disease said Schering-Plough
also paid what it called consulting fees to
doctors to keep them loyal to the company's
products. The letter accompanying a check for
$10,000 explained that the money was for consulting
services that were detailed on an accompanying
"Schedule A," said a doctor who insisted
on anonymity. But when the doctor turned to
the attached sheet, he said, "Schedule
A" were the only words printed on an otherwise
blank sheet of paper.
Dr. Pappas, who in the past has consulted for
Schering-Plough and worked for Roche, said that
stories about the enormous sums that Schering-Plough
paid its consultants were common among liver
specialists. "These were very high-value
consulting agreements with selected opinion
leaders that looked like payments of money with
no clear agreements on what was supposed to
be executed," Dr. Pappas said.
In an interview, Mr. Hassan and other top executives
declined to discuss past marketing practices.
Richard Kogan, the company's previous chairman
and chief executive, declined to be interviewed.
Schering-Plough's current management says that
much has changed at the company since Mr. Hassan
took over. The company no longer allows sales
representatives or marketing executives to have
any say over its clinical trials, physician
education or medical consulting, they said.
And in all clinical trials begun in the last
year, they said, drugs have been provided free
to the enrolled patients, rather than being
billed to them or their insurers.
"The temptation to give clinical grants
to high prescribers and consulting agreements
to high prescribers is why we pulled those decisions
out of the hands of the sales representatives,"
said Brent Saunders, who was named senior vice
president for compliance and business practices
last year. "Sales representatives had an
input into that process before, which I think
is still fairly normal in the industry."
In the separate Philadelphia investigation,
Schering-Plough is expected to plead guilty
soon to charges that it failed to provide Medicaid
with its lowest drug prices, as is required
by law, and to pay a fine. Investigators are
examining whether Schering-Plough, to gain sales
with some private insurers, offered premiums,
such as free patient consulting arrangements,
with its drugs. Prosecutors are arguing that
such incentives had a market value and meant
that Schering-Plough was offering drugs to private
payers at prices well below those offered to
Medicaid. Many other drug companies are the
targets of similar inquiries.
The Boston inquiry into suspected kickbacks
and improper marketing by Schering-Plough could
take months more to resolve, people close to
the investigation say. Schering-Plough may also
be charged with obstruction of justice and document
destruction as part of the Boston inquiry, according
to the company's filings with securities regulators.
Industry experts say the federal inquiries
into Schering-Plough and the other drug giants
have led some companies to adopt significant
changes in the way they peddle drugs to doctors.
Other companies have been slower to react. "These
investigations came out of left field, and no
one saw them coming," said Peter Barton
Hutt, a former F.D.A. general counsel who now
advises drug companies. "The industry has
since had to reshape entirely what they are
doing, but it was too late to redo what they'd
been doing for years."
Tony Farino, leader of the pharmaceutical consulting
service at PricewaterhouseCoopers, said that
as a result of the investigations many companies
in the drug industry were hiring executives
to police marketing and sales practices.
"Reputational risk is something they're
all trying to manage," Mr. Farino said,
"because the damages from failure can be
significant."
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