Compliance Doesn't Need to Be So Costly

The announcement of a $950 million settlement between Merck and the FDA for off-label promotion and false statements about risks for heart attacks and strokes should come as little surprise to anyone, particularly given the upcoming $3 billion dollar settlement by GlaxoSmithKline publicized in early November (and other recent large settlements). Unfortunately, drug companies do not seem too keen on avoiding behavior that results in massive financial penalties for illegal activities.

But wait! Aren't companies doing more and more to stay compliant these days? Haven't corporate integrity agreements included stricter and more detailed requirements? While Merck's settlement dates back to incidents occurring prior to the 2004 withdrawal of Vioxx from the market, the question still remains: Why then are these companies willing to risk massive fines for something that can be done as a normal part of business? My firm outlines specific guidance on this in our article "The Need for Compliance as Business Strategy."

While others have argued that the FDA is too strict on what is considered "off-label promotion" based on First Amendment claims (see Greg Conko's recent piece on this settlement), clarity and transparency about evidence is really important to protecting the public's safety...and reforming the image of the pharmaceutical industry itself. Regardless, right now, off-label promotion does not fall into the category of free speech, and the regulations need to be followed. And based on past history, we don't expect this to change any time soon either.

Let's ignore the specific consequences of potential false statements for a moment - Merck never admitted to them, and it is entirely possible they settled to avoid other criminal charges being brought against their executives. These charges can devastate individuals, as well as the company, regardless of innocence or guilt. Instead, Merck accepted the settlement and plead guilty to a misdemeanor, and in doing so, the government agreed that there was no basis for incriminating high-level management in the violation. Irrespective of this, false statements about safety are blatantly illegal, and this type of speech is not protected, no matter which side of the "off-label free speech" fence you sit. The key point here is that, according to the terms of its plea agreement with the United States, Merck promoted its product in a 'suspect' way.

Merck - and others - make a lot of money from off-label sales, but the cost of litigation, fines, and other damage may become too great going forward, requiring new approaches to compliance. The stakes are really high. Often, additional investigations grow out of concerns over illegal marketing. Recent settlements and corporate integrity agreements (CIAs) generally address a range of activities from commercial to clinical. CIAs cover issues ranging from monitoring of speaker programs, sales rep observations and sales force compensation, consultant arrangements, clinical research activities, publication activities, and grant funding. Pfizer's $2.3 billion settlement with the government (2009) and subsequent Regulatory and Compliance Committee lawsuit settlement (finalized in April 2011) goes even further, covering areas such as manufacturing quality control, clinical studies quality control, and drug safety reporting.

The implication of these types of settlements is clear: trouble in one area (e.g. off-label marketing) can lead to oversight and accountability requirements for a much broader range of activities. Future CIAs will likely extend beyond commercial activities to include manufacturing practices and other areas related to product safety. Companies need to regularly assess risk, and compliance groups need to be able to demonstrate the effectiveness of their programs. You can read more about that here.

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