GSK To Pay $3 Billion; FDA's "Debarment Trap" Strikes Again

Via The New York Times, an Associated Press article reported yesterday that GlaxoSmithKline has agreed to pay a record $3 billion in fines to settle various criminal and civil charges associated with 10 of the company's drugs -- making this the largest such settlement in history. (The Times has its own article in today's paper.)

From several sources, including the AP article, Pharmalot, the Justice Department's complaint, and other government materials, we see that the bulk of the settlement was for promoting Paxil, Wellbutrin, Advair, Lamictal, and Zofran for off-label uses. But the company also allegedly failed to report safety problems associated with its diabetes drug Avandia. It allegedly overcharged Medicaid for some drugs by reporting false "best prices" and underpaying rebates owed under the Medicaid Drug Rebate Program. And the company allegedly paid illegal kickbacks "including cash payments disguised as consulting fees, expensive meals, weekend boondoggles, and lavish entertainment to prescribers and other health care professionals to induce them to prescribe and recommend GSK's drugs."

Some of these allegations are, to be sure, troubling. If it's true, for example, that GSK failed to report safety data to FDA and/or submitted false pricing information to Medicaid, then the prosecution on those counts would appear to be fully justified. But as I've written before, promoting drugs for off-label uses when there is evidence of safety and efficacy for those uses should not only be legal, it is also constitutionally protected speech. (I'll stipulate that I don't know whether that evidence exists for the uses in question, but prosecutors in these cases don't ever bother trying to discern whether such evidence does or does not exist.) In those situations, off-label promotion also tends to redound to the benefit of patients by providing prescribers with useful information about treatment options.

What makes off-label promotion prosecutions especially egregious is the government's attitude that a drug claim cannot possibly be true unless the FDA has said it is. In announcing the settlement, Deputy Attorney General James Cole said that, "Today's multi-billion dollar settlement is unprecedented in both size and scope. It underscores the Administration's firm commitment to protecting the American people and holding accountable those who commit health care fraud." Note that the "fraud" Cole was referring to was the off-label promotion.

And the news media, whom you might expect to be defenders of free speech, buy this argument hook, line, and sinker. In what is ostensibly a straight news article, the AP goes so far as to claim that, "This is the latest in a string of settlements related to drug companies putting profits ahead of patients." In reality, it's more like the mainstream media putting its anti-corporate animus ahead of patients and any semblance of fairness.

In his seminal WLF v. Friedman opinion holding unconstitutional the FDA's ban on the dissemination of medical journal articles discussing off-label uses, federal Judge Royce Lamberth dispensed with this argument by revealing it for the absurdity that it is: "In asserting that any and all scientific claims about the safety, effectiveness, contraindications, side effects, and the like regarding prescription drugs are presumptively untruthful or misleading until the FDA has had the opportunity to evaluate them, FDA exaggerates its overall place in the universe" (Washington Legal Foundation v. Friedman, 13 F.Supp.2d 51, 68 (D.D.C. 2000), emphasis added).

The view that a statement must be fraudulent if the government has not approved it is both narrow-minded and dangerous. Fortunately, in the WLF case, FDA was taken to task so soundly that government attorneys had to change their strategy on appeal and acknowledge that manufacturer communication about off-label uses was not ipso facto illegal. Henceforth, the attorneys claimed, prosecutors would only treat off-label speech as one piece of evidence supporting a charge that the company "mis-branded" a drug. In practice, though, off-label speech is almost invariably treated as illegal per se.

That said, GSK acknowledged that some of its sales representatives did promote various drugs for off-label uses, but the company continues to dispute "many allegations and legal conclusions" regarding its behavior. So, why would it cop a plea and agree to the now-record penalty?

As I pointed out in a post back in March, "the federal government has a tool at its disposal that makes an out of court settlement almost guaranteed: the potential exclusion of any of the company's products from Medicare and other federal health programs. Federal anti-fraud laws permit government programs to exclude, suspend, or 'debar' corporations that have merely been accused in an indictment of fraudulent behavior from doing business with the federal government. No guilty verdict is necessary."

Given how big a portion of health care spending is controlled by government, Ropes & Gray attorney Joan McPhee, explains "that virtually all rational corporations ... conclude, as a business matter, that they cannot incur the risks associated with taking an indictment and going to trial, even when, in the corporation's assessment and that of its seasoned counsel, the threatened case is without factual or legal merit."

Government prosecutors leverage this power and the vagueness of federal regulations to force defendants to settle out of court, routinely securing payments from the firms of hundreds of millions, or even billions, of dollars. And it seems that prosecutors are using the threat of debarment to their increasing advantage by rolling together more and more unrelated counts (such as the charge the GSK failed to report certain safety data to the FDA) in order to get drug makers to settle those charges as well.

This "debarment trap" is unfair, and it strips those caught in its web of basic due process rights. In few other areas of law are Americans willing to tolerate the punishment of individuals before any evidence of wrong-doing is produced in court. It is reminiscent of the Red Queen's demand in Alice and Wonderland: "Sentence first -- verdict afterwards." Yet this charade of justice persists largely because few Americans even know it occurs.

I've written for years about the harms to patients that result from FDA's prosecution persecution of off-label speech. But I am increasingly coming to the conclusion that the threat of debarment represents an even bigger threat to the well-being of Americans -- not just patients, but all of us.

Anyone who cares about due process principles and procedural fairness should be made aware that these fundamental rights are being jeopardized by out-of-control federal prosecutors and a set of poorly written anti-fraud laws. It is essential that we begin to reform these laws that effectively strip due process protections from businesses and individuals who now face real criminal punishment with little real opportunity to defend themselves in court.

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