As Doctors Write Prescriptions, Drug Company Writes a Check

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As Doctors Write Prescriptions, Drug Company Writes a Check

The New York Times

June 27, 2004

As Doctors Write Prescriptions, Drug Company Writes a Check

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. "

Copyright 2004 The New York Times Company

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http://www.nytimes.com/2004/06/27/business/27DRUG.final.html?th ]

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