Glaxo Settles Bribery Charges with SEC for $20 Million; Cozy Relation of Pharma with Docs a Thing of the Past?

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GlaxoSmithKline PLC (London) will pay $20 million to settle civil charges that it masked bribes to foreign officials in China by disguising them as legitimate travel, entertainment and marketing expenses, U.S. regulators said. The pharmaceutical company agreed to settle the case with the Securities and Exchange Commission without admitting or denying any wrongdoing, according to Reuters.

@GSK to pay $20 million in civil charges that it masked bribes to foreign officials in China Click To Tweet

Specifically, the agreed-upon fine of $20 million settle charges that Glaxo violated the Foreign Corrupt Practices Act when its China arm used travel agencies to funnel $489 million in bribes to local doctors and healthcare professionals.

According to the SEC, Glaxo violated the FCPA’s internal controls and books-and-records provisions by recording the corrupt payments–which took many forms, including gifts, shopping excursions and cash–in its books as legitimate business expenses, such as conferences, speaker fees and marketing costs.

The British drugmaker also “failed to devise and maintain a sufficient system of internal accounting controls and lacked an effective anti-corruption compliance program to detect and prevent these schemes,” the SEC said.

To Glaxo’s credit, the company has tried to move on after admitting its transgressions in China, says FiercePharma. Since the scandal broke out, Glaxo has publicly apologized, forbad doctor speaking fees and abandoned quotas for its sales reps.

In China, it has also tripled an in-house compliance team that now checks every submitted receipt, and some industry-watchers say the moves may even be hindering GSK’s drug sales in an incentive-hungry climate, say FiercePharma.

Despite such actions, bribery scandals have continued to hound the company by cropping up around the world. Most recently, the company in April said it was conducting an internal investigation into allegations that its Yemen-based subsidiary brought on government workers to influence purchasing decisions and beef up drug sales.

Meanwhile, the SEC’s $20-million penalty blanches in comparison to what China fined Glaxo for its prohibited conduct in that country. Last September–following a trial that was held behind closed doors–China charged the company nearly $500 million–though it also allowed a former top local exec, Mark Reilly, to escape without serving jail time.

Fast-forwarding to the present day in the US, the SEC’s $20 million civil settlement with Glaxo resolves the latest case to emerge from an industry-wide sweep that started in 2010. Since then, a number of other companies including Novartis AG (Basel CHE) and AstraZeneca PLC (London) have also settled similar charges with the SEC.

Steve’s Take: I don’t buy the notion that this $20-million payment by Glaxo to the SEC signifies a fundamental change in Big Pharma’s crucial relationship with doctors, although it clearly implies that.

And I also don’t believe the vast majority of doctors are as complicit in any meaningful economic relationship with the companies that sways their opinion on which drug to prescribe when there are alternatives.

After all, the only people who can cause the cash register to ring for a company’s prescription product are doctors (and some nurses, dentists, etc.)–another notion that seems to pervade the mainstream media.

This latest settlement for allegedly bribing doctors and other health professionals is a drop in the bucket by comparison with the staggering amounts of monies companies still are spending to influence their prescribing practices.

Let’s revisit some numbers. In the July 9 MondayMorning briefing, I reported that drug and device makers sustained their payments to US doctors and teaching hospitals at nearly $6.5 billion last year, according to the figures released from a federal database. And physicians or their family members held $1 billion in ownership or investment interest in those companies.

Novartis AG (Basel CHE) topped the list with more than $539 million reported in payments to healthcare providers, a big jump from $302 million in 2014, according to the Open Payments database maintained by the U.S. Centers for Medicaid & Medicare Services.

Next was Genentech Inc. (South San Francisco), which reported $470.3 million. In 2014, Genentech led the pack at nearly $385 million. In third place was Pfizer Inc. (New York City), with more than $436 million, although the company filed the largest number of reports. Figures for ownership and investment interests were not available. Publicly held companies are not required to report ownership and investment interests, according to the CMS.

As for physicians, those receiving the highest payments were doctors in nuclear medicine. They received average payments of more than $51,200, followed by neurological surgeons, whose average payments were $26,100. In 2014, orthopedic surgeons received the highest average payment, which was nearly $34,600, but that fell to slightly to less than $26,100 last year.

The database was created under the Sunshine Act provision of the Affordable Care Act in response to concerns that industry payments to doctors might unduly influence medical practice and research. Drug and device makers are required to provide data to Open Payments, which was launched in September 2014. The database initially covered part of 2013 and all of 2014.

In July, CMS provided 2015 transaction data for the first time. At a number of community hospitals, well more than half of the affiliated doctors were beneficiaries of payments, according to a new analysis. Overall, CMS said drug and device makers reported $7.52 billion in payments and ownership and investment interests to physicians and teaching hospitals. The agency counted 11.9 million total records attributable to nearly 619,000 physicians and more than 1,100 teaching hospitals.

Adding more intrigue to the “dollars-for-docs” spending picture, a recent study in the June 20 online issue of JAMA Internal Medicine strongly suggests that doctors who get a free lunch from drug company representatives are more likely to prescribe the company’s costly medications. The study covered Medicare prescriptions in four drug classes: statins, beta blocker heart medicines, ACE and ARB blood pressure pills and SSRI-type antidepressants.

The conclusion of the study was that brand-name drugs were favored after a drug company-sponsored meal of less than $20. If the meal cost more than $20 or if there were more than one meal involved, the brand name medications that were being promoted were even more likely to be prescribed over less costly generics.

Another article in JAMA Internal Medicine (May 11, 2009) demonstrated that fourth-year medical students:

“exposed to Lipitor promotional items had more favorable implicit attitudes about the brand-name drug compared to the control group…”

These and other articles clearly imply that even small favors like a $16 lunch, may have an impact on practicing physicians, and, of course, they should know better!

I’m still not buying this notion that the old adage, “there’s no such thing as a free lunch,” is as true today vis-a-vis doctors as it was back in the 19th century when bars gave their customers a free lunch in exchange for buying a drink or two.

I consider myself fortunate to have many friends and colleagues who are MDs, DMs and DOs. And I’ve come to my own personal conviction that they truly care for each one of their patients, first and foremost.

I’ve tried to imagine the scenario wherein a doctor, who upon diagnosing a patient’s illness, suddenly stops and thinks: “Aha! Here’s my chance to prescribe XYZ Pharma Company’s heart medicine in return for that really exquisite Reuben sandwich last week.”

According to a 2013 survey by the American Academy of Family Physiciansthe average member of that group had 93.2 “patient encounters” each week–in an office, hospital or nursing home, on a house call or via an e-visit. That’s about 19 patients per day.

Steve's Take: Anyone who believes doctors are influenced by a free lunch is out to lunch Click To Tweet

Anyone who thinks doctors have the time, let alone the inclination, to formulate their patient prescribing choices based upon free lunches is out to lunch, in my opinion. What I view as a deliberate campaign to malign healthcare professionals with such trivial-mindedness needs to be re-directed to far more important issues in our sector today, like fighting the Zika virus.

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