The case against protecting Pfizer's profits

After agreeing to pay the biggest criminal fine ever, Big Pharma's biggest firm says profits equal good healthcare


Andrew Leonard
October 19, 2009 11:41PM (UTC)

Pfizer is the largest pharmaceutical company in the world, so it makes sense that, when caught red-handed marketing its drugs for "off-label" purposes not approved by the FDA, it should pay the largest criminal fine "ever imposed in the United States for any matter." Now we know why Big Pharma needs big profits -- if you're going to make a habit of paying billion-dollar fines, you going to need a lot of revenue.

Thanks to Jim Edwards' BNET Pharma blog, I just spent the last hour or so reading the Department of Justice's sentencing memo explaining why the DoJ would have crushed Pfizer in court had the company not agreed to pay a $1.3 billion dollar fine for its unapproved off-label marketing of its Cox-2 pain-relieving drug Bextra.

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For anyone who thinks that by golly, the U.S. has got the best damn healthcare system money can buy, and we better not interfere with drug company profits because that will reduce innovation and cause unnecessary suffering and death, well, I think a close reading of the sentencing memo might be instructive.

Some sample readings:

Bextra was officially launched at a national meeting for sales representatives in Atlanta, Georgia from April 9-12, 2002. During this meeting, the sales force was given a vivid message of how to promote Bextra for the "power" position. They were inundated with displays of music, light shows, acrobats and dancers. The marketing managers led the entire audience in thrusting their fists into the air (the marketing symbol of Bextra) and pounding them against their upraised hands in unison to symbolize the power of Bextra and to "Power Up" the sales force. Ultimately, simulated large steel doors crash down on the stage, and the Bextra fist symbol crashed through the doors. The events from the launch demonstrates the sales frenzy that accompanied Bextra, as the company strove to make the drug reach "blockbuster" (billion dollar a year sales) status.

(Next time someone tells you how many billions it costs to develop a new drug, ask yourself, what was the sales and marketing budget?)

The fundamental structure of the sales force, including their compensation, contributed to encouraging off-label promotion of Bextra. Sales representatives were given quotas for the amount of a drug that had to be purchased in their district, without regard to whether those sales were on or off-label for use or dosage. Moreover, because sales representatives were judged on a competitive basis, they would have been negatively affected if they did not capture the off-label sales but their colleagues did. If the doctors in a sales representative's district failed to prescribe a certain amount of the drug, Pharmacia [a Pfizer subsidiary] determined that the representative was underperforming because he or she was below quota.

...Pharmacia paid targeted physicians both airfare and two to three days' accommodations at lavish resorts in the Bahamas, Virgin Islands and across the United States; entertained them with golf, massages and other recreational activities; and paid them honoraria in the range of $1,000 to $2,000 for their attendance. The number of attendees at these events often ranged from 50 to 100 health care professionals.

...As described above, the illegal conduct was pervasive throughout the company and stemmed from messages created at high levels within the national marketing team. The corporate culture contributed to causing the conduct and allowing it to continue. Sales employees explained that off-label promotion was tolerated and no big deal, even though they knew it was illegal. The goal was to avoid getting caught. Employees, including district managers, explained that they did not question their supervisors about the illegal conduct that they were being instructed to carry out, because to do so would be considered a "CLM" or "Career Limiting Move." A CLM meant that an employee took an action that possibly ended his/her promotion potential or led to being disfavored by management and, ultimately, fired.

In a strange bit of serendipity, moments after I finished reading the sentencing memo, I found myself directed (via The Baseline Scenario) to read a four-part attack on how Atlantic magazine economics editor and uber-blogger Megan McArdle has been defending the sanctity of Big Pharma profit margins, written by Thomas Levenson, a professor of science writing at M.I.T.

McArdle, who has been attacking the case for healthcare reform with a relentless intensity that would put most pitbulls to shame, is one of the leading proponents of the theory that anything that reduces Big Pharma profits will lower the quality of available healthcare on an ongoing basis.

Levenson's demolition of the way McArdle has defended her thesis can be boiled down to one paragraph, featuring a very familiar name.

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I've used two posts so far to ridicule McArdle's attempt to demonstrate her intellectual chops by basing this argument on a paper by the Rand Corporation, paid for by Pfizer (the world's largest drug company) that relies on a secret-sauce "model" to produce the conclusion that free market negotiation by large customers (the U.S. government, e.g.) and/or price controls would reduce the pace of innovation in the drug business, resulting in a loss of months of life expectancy.

Pfizer -- where criticizing management's illegal behavior is a "career-limiting move" -- wants to tell us how limiting its profits will kill us faster. Such is the healthcare model that opponents of healthcare reform want to preserve.


Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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