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Report: Federal Criminal Penalties for Lawbreaking Pharma Companies Have All But Disappeared

March 14, 2018

Report: Federal Criminal Penalties for Lawbreaking Pharma Companies Have All But Disappeared

Stronger Prosecutions of CEOs – Including Jail if Appropriate – Are Needed to Deter Illegal Behavior

WASHINGTON, D.C. – Criminal penalties against pharmaceutical companies that engage in illegal activities have plummeted in recent years while prosecutions of executives of these companies remain extremely rare, and both must be increased to deter future unlawful behavior, according to a new report by Public Citizen.

The report, “Twenty-Seven Years of Pharmaceutical Industry Criminal and Civil Penalties: 1991 Through 2017,” updates data that Public Citizen previously released in 2016 on criminal and civil settlements and court judgments reached between the federal and state governments and pharmaceutical manufacturers.

The report’s most striking finding is that federal criminal penalties against pharmaceutical companies have dropped precipitously since 2013. In 2016-2017, federal criminal penalties totaled just $317 million from four settlements. This represents a nearly 90 percent plunge in financial penalties compared with 2012-2013.

The report also reveals that among all federal penalties – both civil and criminal – the number of settlements fluctuated, but the size of the penalties has dropped steeply since 2013.

Because of this, it is concerning that companies now are virtually guaranteed to escape severe punishment despite the serious charges that underpin these settlements, the report states.

Financial penalties from criminal and civil settlements involving the unlawful promotion of prescription medications also have fallen drastically, by 94 percent, to reach their lowest two-year total in 14 years in 2016-2017.

At the same time, the report found that the states now are doing much less to police the industry. In 2016 and 2017, there were just nine state settlements that amounted to the lowest two-year total for both the number of settlements and the amount of financial penalties since 2004-2005.

The largest settlement announced in the 2016-2017 period was reached in April 2016 with Pfizer’s Wyeth subsidiary for $785 million in civil penalties over allegations that the company hid from Medicaid bundled discounts it had given to hospitals as incentive to buy its medication Protonix – which helped the company avoid paying hundreds of millions in Medicaid rebates.

“Not only must the government hold accountable individual executives, but it must impose meaningful penalties on their companies,” said Dr. Michael Carome, director of Public Citizen’s Health Research Group and co-author of the report. “Such efforts would go a long way toward eliminating fraud as a business model within the pharmaceutical industry, a model where crime does in fact pay.”

The report also notes that despite government authority to do so, parent pharmaceutical companies never have been banned from participating in Medicare and Medicaid for their illegal activities, which have endangered public health and hurt taxpayers.