NYTimes.com Article: As Doctors Write Prescriptions, Drug Company Writes a Check

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As Doctors Write Prescriptions, Drug Company Writes a Check

June 27, 2004

By GARDINER HARRIS

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 &

, 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 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. 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. 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.

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 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 Pricewaterhouses, 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. "

http://www.nytimes.com/2004/06/27/business/27DRUG.final.html?ex=1089352182 & ei=1 & \

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