Scandals Leave a Black Eye on the Pharma Industry

Published: May 04, 2018 By

Scandal

Scandals are nothing new in any industry. The pharmaceutical and biotech industry are certainly no strangers to scandals – just ask convicted scandal-magnet Martin Shkreli.

Scandals can come in all forms. Some of the biggest scandals in the industry concern drastic price increases in drugs – of which Shkreli has served as the poster boy.

Pricing

Shkreli was unrepentantly pleased with the 5,000 percent increase for the price of Daraprim, a drug that had been on the market more than 60 years when he acquired it from Impax Laboratories for $55 million. The medication was available for $13.50 per tablet, but Turing increased the price to $750 per tablet. Shkreli was eventually put on trial, but not for the price increase, which wasn’t illegal, but for securities fraud.

Shkreli was certainly not the only individual known for increasing the price of older drugs. Canada-based Valeant Pharmaceuticals was also embroiled in its own PR battle over pricing. Company executives spent some time in Washington before a congressional panel while they were grilled over pricing strategies. Another company that was excoriated for pricing was Mylan NV. After acquiring the EpiPen Auto-Injector in 2007 the company increased the price from $57 to nearly $500, an 800 percent increase.

Most recently Horizon Pharmaceuticals has been excoriated for raising the price of its opioid Vimovo to nearly $3,000 per prescription. The average wholesale price increase was nearly 10 percent, CNN Money reported in February. That's a dramatic increase from the $168 AstraZeneca charged in 2013 when it sold the medication to Horizon. The painkiller accounts for a little bit more than 10 percent of Horizon's annual revenue.

Investor treatment

As mentioned before, Shkreli was convicted and sentenced to jail for wire and securities fraud when he helmed a hedge fund while he also guided the pharma company Retrophin. The indictment said Shkreli’s scheme, which caused his investors to suffer a loss of more than $11 million, was carried out over a five-year period, from 2009 to 2014.

Shkreli is not the only head of a pharmaceutical company to be publicly decried over defrauding investors. Elizabeth Holmes, the founder of beleaguered Theranos, agreed to pay a fine of $500,000 to the U.S. Securities and Exchange Commission over her role in what was called “years-long fraud” in which she and another executive exaggerated or lied about the efficacy of the company’s proprietary technology and the state of its finances. The company routinely promoted the capabilities of its blood-testing technology that it claimed would revolutionize the healthcare industry. The SEC said the company’s technology could only perform a small number of tests and the majority of patient tests it did conduct were done on “modified and industry-standard commercial analyzers manufactured by others.”

Kickbacks

Multiple companies have been caught up in kickback schemes designed to get doctors to prescribe more medications. With the opioid crisis running rampant across the United States, several companies have been caught up in those kinds of scandals, including Purdue Pharma.

While Purdue has faced its share of criticism over opioid addiction, Arizona-based Insys has also felt the sting of allegations. Last year the U.S. Department of Justice leveled charges at Insys founder John Kapoor saying he lead a “nationwide conspiracy to profit” through the use of bribes and fraud in order to sell the company’s fentanyl-based sublingual spray, Subsys, used to treat cancer pain.

Last year Danish drugmaker Novo Nordisk settled a U.S. Department of Justice probe into is the company’s marketing activities for its diabetes drugs that allegedly included paybacks to doctors and disguising salespeople as medical educators. The company was charged with engaging in kickbacks in order to sell more prescriptions three diabetes drugs, NovoLog, Levimir and Victoza.

Earlier this year Medtech company Abiomed, Inc. agreed to pay the U.S. government $3.1 billion over kickback allegations the company influenced doctors to use the company’s line of heart pumps.

Legal maneuvers

Fighting to protect patents can also generate scandalous headlines. Last year Allergan attempted to sell the rights to eye drug Restasis to the Saint Regis Mohawk Tribe in New York in order to take advantage of the Mohawk tribe having been recognized as a sovereign government. Allergan hoped the tribe’s sovereign immunity would shield the drug from Inter Partes Review (IPR) challenges to its patents on the blockbuster treatment.

Another legal move that cost a company more than it hoped for involves the patent fight between Merck and Gilead Sciences. The behavior of Merck’s attorneys forced a judge to reverse a $200 million award against Gilead Sciences. In 2016 U.S. District Judge Beth Labson Freeman found patterns of misconduct on the part of the plaintiffs, Merck & Co., Merck scientist Phil Durette. Merck appealed the case, but last week the U.S. Court of Appeals agreed with the decision made by Freeman.

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