Zee
Practices not likely limited to the mentioned drugs.
And pharmas.
New York Times June 27, 2004 As Doctors Write Prescriptions,
Drug Company Writes a Check By GARDINER HARRIS
he 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 Johnson & Johnson, 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 William 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. Chris Pappas, director of clinical research for St.
Luke's Texas Liver Institute in Houston, said that Schering-
Plough "flooded the market with pseudo-trials."
Ds. 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.
Dt. Donald 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.
Du. 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. Richard 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 Peter 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 PricewaterhouseCoopers, 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."
And pharmas.
New York Times June 27, 2004 As Doctors Write Prescriptions,
Drug Company Writes a Check By GARDINER HARRIS
he 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 Johnson & Johnson, 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 William 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. Chris Pappas, director of clinical research for St.
Luke's Texas Liver Institute in Houston, said that Schering-
Plough "flooded the market with pseudo-trials."
Ds. 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.
Dt. Donald 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.
Du. 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. Richard 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 Peter 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 PricewaterhouseCoopers, 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."
