The US Department of Justice filed criminal charges last week against Lauren Stevens, a former VP and assistant general counsel at GlaxoSmithKline. Going after pharma execs marks a seismic shift in the government’s efforts to stem the tide of fraud and other illegal pharma marketing practices, which a raft of billion-dollar settlements have so far failed to end.

Stevens is charged with obstruction of an investigation, concealment and falsification of documents, and making false statements to the FDA in its 2002 investigation of off-label promotion of the antidepressant Wellbutrin for weight loss, an indication for which it has never been approved but has shown some clinical benefit. The DoJ says that it has evidence, in the vast paper and electronic documentation turned over by GSK, showing that Stevens hid and otherwise misled the agency about some 1,000 instances of GSK-paid doctors promoting Wellbutrin for weight loss to other doctors.

Officials had warned that they would target “repeat offenders,” and GSK certainly qualifies for that dubious distinction. The British firm has racked up some of the biggest settlements of the past decade, including $750 million in October to put to rest civil and criminal charges arising in part from a whistleblower suit filed by a quality-control cop who was fired after she advised temporarily shutting down one of its major manufacturing plants because it was routinely producing adulterated drugs (and selling some of them on the black market) between 2001 and 2005. GSK execs chose instead to look the other way. The former compliance advisor’s cut of the settlement was a record-setting $96 million.

In fact, GSK has been making headlines for all the wrong reasons this year: Prior to the whistleblower suit settlement news came the denouement of the Avandia side effects case revealing that the company had failed to disclose damaging data and otherwise misled the FDA about the diabetes drug’s heart-attack risks.

But the new charges against a former VP in its legal department and all the bad press are almost certainly coincidental, says Daniel Carpenter, a professor of political science at Harvard and leading expert on the FDA. “I am not inclined to read anything political into the fact that it is a Glaxo employee,” he says. “The real symbolic feature of this action is the general message that any criminal proceeding sends to the pharmaceutical industry, namely that the FDA general counsel is now willing to use criminal proceedings—something it has had the power to do for seven decades.”??Lauren Stevens, who was said by a GSK spokesperson to be “retired,” has hired a high-profile team of defense attorneys who told the media that their client was innocent and looking forward to her day in court. Be that as it may, if convicted, Stevens could spend at least some of her retirement years in the slammer because the charges are felonies carrying lengthy prison sentences.

BNet’s Jim Edwards has raised the possibility on his Placebo Effect blog that the DoJ may offer Stevens immunity for spilling the beans on other misdeeds at GSK, especially those committed by top management. That lineup include, of course, several of the industry’s most powerful players: former GSK CEO Jean-Pierre Garnier; his successor in 2008, Andrew Witty; Chris Veihbacher, who was GSK’s head of US pharmaceuticals from 2003 to 2008, when he became the CEO of Sanofi-Aventis; and David Stout, the head of global pharma operations from 2003 to 2008.

But the most probable scenario, according to Pharm Exec’s legal sources, is that the DoJ has picked a first case that it is confident it can win a conviction in. And Stevens is likely merely the first shoe to drop. It is widely assumed that the coming months will offer other executives at other firms the opportunity to do a perp walk, with some insiders betting that J&J is next on deck following recent congressional hearings into the company’s recent series of OTC product recalls, including a “phantom” recall of defective Motrin during which consultants posing as consumers attempted to buy out the product.

Slammed for failing to announce an official recall in a speedy fashion, FDA deputy commissioner Josh Sharfstein told Congress last June that J&J had misled the agency about the scope of the retrieval, not to mention its bizarre counterfeit style. But when J&J CEO William Weldon took the hot seat, he countered that his firm had informed the agency of its plans.

One of the two men is lying to Congress, so this line of speculation goes, and if it’s Weldon, the FDA may be expected to pounce—calling its no. 2 a liar only adds insult to injury.

Walter Armstrong

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Last week, Big Pharma’s practice of paying doctors to do medical education, promote its products, or both was the focus of a multimedia blitz launched by ProPublica in collaboration with National Public Radio, the PBS Nightly Business Report, the Chicago Tribune, the Boston Globe, and Consumer Reports. In what must be seen as a wake-up call for the industry on its handling of compliance issues, each of these major media outlets ran its own major story raising questions about the ethics of paying physicians to help increase sales of medicines. Whether the avalanche of data and juicy anecdotes of physician behavior found in ProPublica’s “Dollars for Docs” report actually answered any of those questions l depends on your point of view.

That pharma sales strategies can encompass elements of fraud, kickbacks, and other funny-money exchanges isn’t exactly news. Billion-dollar settlements with the Department of Justice have become so ho-hum over the past decade that the chorus of threats of criminal prosecutions of drug-company executives by officials at Justice, HHS, and FDA is reaching almost credible levels. What is news—and ProPublica’s new contribution to the debate—is the searchable database for consumers containing the names of some 17,700 US doctors and other practitioners who raked in a total of $257.8 million in pharma payments since mid-2009, a considerable technological feat (aided by Google Refiner) given the mix and sloppiness of the data. The list remains far from complete—it records the fees for speaking, consulting, researching, or related activities paid to doctors by only seven of the top pharma firms: Pfizer, Glaxo, Merck, J&J, AstraZeneca, Lilly, and Cephalon. Of the seven, only Merck and Glaxo volunteered the info; ProPublica got the rest from disclosures the other five companies were forced to make as a condition of false-claims and other settlements.

The sharing of its database with other news organizations (and ultimately the public) is central to ProPublica’s alternative business model. The nonprofit Internet news organization’s mission is public-interest investigative journalism—a resource-consuming enterprise increasingly viewed as nonessential by an industry in financial free-fall. Since its launch in mid-2008, the group has earned its credibility, winning many of the nation’s top journalism awards, including a Pulitzer last year for investigative reporting. It counts among its funders the Gates, MacArthur, and Ford foundations; its newsroom is led and staffed by veteran editors and reporters from the New York Times and the Wall Street Journal. By lending its pharma-physician database to other national and local news outlets—and orchestrating a simultaneous delivery—ProPublica ensured that it got maximum bang for its investigative buck. And the investigations into the pharma industry’s financial ties continue this week with a report based on research into its payments to lobbyists and to political campaigns.

In the week since the stories broke, many lines of debate have developed among readers, including physicians, sales reps, patients, and pharma analysts. There is the usual shouting match between the pro- and anti-pharma lobbies, but the conclusions that emerge from ProPublica’s analysis are based on data that has been independently sourced from credible third parties.  ProPublica’s analysis contradicts a  few of the pharma industry’s most frequent justifications for the practice of putting the very professionals who write prescriptions for its products on its own payroll.

Contrary to drug makers’ claim that they only hire thought leaders and other top specialists to move their message, the sheer volume of names in the database indicates this contingency is broadly framed. Among the 384 doctors who earned $100,000 or more during this period, more than one in nine had no board certification in any specialty at all. A search of physician licensing records in 18 states found that more than 250 doctors who accepted speaker fees, including some very high earners, had been sanctioned for misconduct, not surprisingly including inappropriately prescribing drugs. More than 40 got slapped by the FDA for research wrongs, lost hospital privileges, or had criminal convictions, while at least 20 others had two or more malpractice judgments or settlements.

These numbers inevitably give rise to some unsettling questions. For example, why is pharma paying anything at all to doctors who have been sanctioned for professional misbehavior?

When asked if background checks are done on doctors, only Cephalon and J&J said that they review state websites. Nevertheless, ProPublica data base shows that one physician accused of sexual misconduct with female patients was Cephalon’s  third-highest-paid speaker in 2009.

Critics of the ProPublica presentation, including healthcare journalists, point out that the accounting was incomplete, even unfair, because it failed to put the final tally in perspective. Most notably, only 1.5 percent of doctors on company pay  had been sanctioned, while the average payment to a physician came to $15,000, not exactly small potatoes but not necessarily an amount worth risking your reputation over. But at the same time, in a survey by Consumer Reports that accompanied its own reporting, about half of all Americans said that they would be concerned about the quality of care from a doctor who took even as little as $500 from pharma.

According to Medscape, pharma paid more psychiatrists than any other specialists—they also had the highest number in the $100,000-plus club, 116 out of 384. This frequency may be explained by the fact antipsychotics topped the 2009 list of best-selling drugs, while antidepressants came in at no. 4. In addition, the off-label use of these drugs is among the highest for any category.

Neither ProPublica nor any of the other news organizations reports in significant detail about the content of the speaking or consulting or researching for which pharma is paying these many thousands of doctors. While PhRMA reps and many physicians have been quick to point out that all materials must strictly conform to the product label and are regulated by FDA and other agencies, it’s an open secret that many of the scripts and slides that doctors rely on are produced by agencies paid by drugmakers and never vetted by any official. Companies invest in such information in order to reach as many prescribers as possible with a message about a brand-name drug that is as positive as possible. Whether you call this medical education or product promotion is beside the point. ]

Starting in 2013, the new US healthcare reform law requires all drugmakers to publicly disclose the amount and date of every physician payment, the name and address of the physician, and the drug or device that the doctor helped promote. This is should help build confidence in the integrity and accuracy of the data, which some experts have questioned as leading to extreme conclusions when accessed by investigative journalists.   Until then, the ProPublica-based media blitz will continue to spark controversy and conversation over the ethics of industry practices.

To their credit, both Lilly and GSK responded to the ProPublica revelations that the companies had sanctioned doctors on their payroll by launching their own investigations. In a statement, GSK said “we do have criteria in place to evaluate potential speakers.  However, ProPublic has raised issues to our attention that we are investigating further. We will also use this information as we continue to improve the processes by which our speakers are evaluated.”  Likewise, Lilly noted that “reporting by ProPublica and other media outlets has raised valid and important questions about some of our processes, which we take seriously.” And over the past week, all seven of the drugmakers featured in the stories have commented on the reporting. The PBS Nightly Business Report has posted these responses on its website.  Hence the debate continues—and soomer rather than later, expect the investigations to spread to practices in other countries led by renewed regulator interest in provisions of the 1977 Foreign Corrupt Practices Act.

GlaxoSmithKline’s diabetes drug Avandia became mired in such controversy regarding its safety in recent years that it was dubbed “another Vioxx”—exactly what the pharmaceutical industry had vowed never to produce. Two weeks ago, FDA’s decided to restrict access to Avandia, earning it “drug of last resort” status. This long-awaited decision was expected, but there were many unexpected aspects to the way the agency made its decision public.

Pharmaceutical Executive asked Daniel Carpenter, a professor of government at Harvard University and the author of a big new book about FDA called Reputation and Power (Princeton University Press) that is getting a lot of attention in the press, for his take on how the Avandia story has played out—and what it may mean for both FDA and pharma in the future. Walter Armstrong

Pharm Exec: FDA decided to leave Avandia on the market and to impose a REMS that essentially turns it into a diabetes drug of last resort. (The drug already carried a black box warning about cardiovascular risks.) GSK has said it will no longer spend any money marketing Avandia, and most analysts agree that new prescriptions will likely come to a halt. So why didn’t the FDA, like the EMA, simply yank the drug?

Daniel Carpenter: I see the Avandia decision as a kind of withdrawal, with a very strong, long-term message for the pharmaceutical industry. Essentially 95 percent or more of the drug’s once-robust market is gone, and the decline is attributable almost entirely to post-marketing studies by third parties and a series of FDA regulatory decisions.

GSK’s decision to discontinue marketing for Avandia was not unrelated to FDA’s decision. My guess is that GSK had an implicit understanding that FDA would allow sales for existing Avandia patients without other alternatives, but only if marketing stopped to new patients.?The FDA can now use a REMS to carve out virtually all of a drug’s market while also satisfying medical libertarians by leaving it to be prescribed for the few who have no alternative. Some consumer advocates have decried the decision to leave the drug on the market. I see it differently: Avandia has been all but taken off the market, and a critical precedent has been established.

If I had told you four years ago that, in the absence of a single randomized clinical trial demonstrating greater cardiovascular risk for the drug, 95 percent of that drug’s market was going to be taken away by virtue of a meta-analysis and post-market epidemiology studies—plus some unsavory evidence revealed about a company’s clinical trial practices and failure to disclosure risk information—I think you would have bet against me.

Vioxx was pulled only when a randomized clinical trial demonstrated greater myocardial infarction risk. In some ways, given the evidence base, FDA’s decision on Avandia is a more aggressive regulatory action. It may well be the right one, but regardless, it’s momentous.

If I had to wager one other thought—based on this case’s circumstantial evidence—it’s that FDA’s leadership might be using Avandia as a try-out opportunity for a tougher REMS. Again, there is a real signal being sent to the drug industry that these REMS are not mere “management tools” but can be used to reduce a drug’s market to a fraction of the sponsor’s original ambitions.

Three aspects about the way the decision was communicated seemed surprising to me: First, FDA and the EMA made their announcements in a coordinated fashion.
Second, FDA posted on its website the memos written by John Jenkins at the Center for New Drugs, David Graham at the Center for Drug Safety, and other key officials, showing the dramatically conflicting views of their risk/benefit analysis of the drug.
Third, Commissioner Margaret Hamburg, Deputy Commissioner Josh Sharfstein, and CDER head Janet Woodcock co-wrote a piece in the New England Journal of Medicine explaining the difficulty of coming to a conclusive decision. Each of these actions was a remarkable departure from FDA tradition. They appear to speak to the new transparency at the agency, which seems to be a very high value of the Margaret Hamburg.

DC: I think you’re right about transparency being cherished by the new leadership. It’s being pursued for a number of reasons, not least because the new FDA leadership understands, in ways the past few commissioners did not, that the FDA’s credibility has been severely compromised in the last two decades.

The current FDA leadership also understands the symbolic importance of their actions, and I can only surmise that that understanding, plus the possible confusion caused by separate EU and US decisions, was the reason for the coordination with the EMA.  ?There are, of course, risks to transparency. In this case, by not presenting a united front to the public and the scientific community, people will perhaps begin to view FDA as characterized by massive infighting. That said, in an age when anyone can tweet, blog, talk to a reporter, and so on, I think Commissioner Hamburg understands that there is a greater risk from trying to present a united front when there isn’t one.

Her policy of transparency serves other purposes, too. It now forces people like Jenkins and Graham to come clean and public with their strong views. Graham had been doing that already, but this policy requires him and other drug safety officials to articulate their views on the same platform (scientific and administrative memoranda) shared by Jenkins and Woodcock, the people whom they regularly oppose. Jenkins’ view that Avandia needed essentially no further regulation had been articulated internally in the past, but from now on it has to be communicated openly and immediately.

So this policy may make it more difficult for people like Jenkins and Graham to maintain rigid stances. To keep credibility, they may need to pick and choose their battles.

GSK attempted to refute the charge that Avandia caused more heart attacks and other CV complications than other diabetes treatments by saying that the two most damning studies were both meta-analyses, while their own RECORD trial, which didn’t show an increased risk, was gold-standard randomized controlled trial (RCT). (Of course, their defense was demolished when an FDA investigator revealed that some of the outcome data in the trial had been dropped or faked.)Do you agree that the two different kinds of studies are too different to be usefully compared?

DC: On the memo from FDA reviewer Thomas Marciniak severely criticizing the RECORD trial, I have claimed elsewhere (Pharmalot, July 2010) that its effect was to undermine GSK’s credibility in running trials. That could have long-term damaging consequences for the company, especially when combined with the New York Times reports and the evidence coming from the Senate Finance Committee. The issue is not so much whether New York Times readers trust the company’s trials, but whether advisory committees and FDA and EU medical reviewers trust the company’s trials.

This question—the comparability and relative value of RCTs versus epidemiologic studies—is one of the critical issues facing 21st century governance and science of pharmaceuticals. It’s clear that RCTs are still preferable for many questions, but it’s also the case that other kinds of evidence (such as pharmacoepidemiology) are becoming more rigorous.

The question of internal and external validity is also very important. I tell my students that perhaps the most important medical and public health finding of the 20th century—that cigarette smoking causes lung cancer and heart disease—came entirely from observational studies.

One other thing. If we are truly entering a world where we care not just about a single average treatment effect, but instead a battery of treatment effects that differ by phenotype or genotype, then we are likely entering a world where observational studies are more—not less—important to the scientific inferences we make.

How would you characterize GSK’s approach to the entire question of its drug’s association with CV events, especially heart attacks. The coverage in the New York Times, in particular, of the documents GSK gave to the Senate Finance Committee paints the picture of a company almost trying its hardest not to get to the bottom of the problem—in fact, using tactics like intimidation of critics, hiding negative data from the public and even the FDA, and possibly paying doctors to fudge clinical data. Is that the grim reality of pharma’s methods?

DC: Large pharmaceutical companies have a severe trust deficit right now—in the public, in academic medicine and science, and among regulators and public health officials. And I daresay that trust deficit has been richly earned.

Every time another memo is leaked suggesting that risk information has been suppressed or shrouded, every time a critic has been bought off or intimated, every time a clinical trial has been oversold or sloppily analyzed, the reputation of the entire industry suffers. It really is a case of one bad apple ruining the whole bunch.

In my scholarship, I’ve noticed this kind of associative property of reputations and trust, where people who had nothing to do with success or malfeasance are nonetheless implicated symbolically in the success or malfeasance by virtue of their common membership in an organization or an industry.

Part of the problem is that we all inhabit a world where institutions and organizations generally have lost legitimacy. My own “sector”—higher education and places like Harvard—are not immune from this critique. But the reputation of the pharmaceutical industry seems to have fallen in a different way, by a different magnitude. If I had to name the top two or three issues facing pharmaceutical managers and executives over the coming generation, restoring public trust through circumspection and transparency would have to be one of them. This issue isn’t going away.

(Pharm Exec’s November issue will contain an in-depth interview with Daniel Carpenter about his 10-year study of FDA for his book, Reputation and Power, as well as some of the intense responses the book has already received in the media.)

MedImmune, the biologics shop bought by AstraZeneca (AZ) for a staggering $15 billion in 2007 promising one new drug a year for the foundering British firm, has made precious little news since the deal. But all of a sudden the post-Labor Day wires were crackling with MedImmune stories: its big new monoclonal antibody, motavizumab, for prevention of a common but serious respiratory virus in infants got shot down by FDA for the second time, while the SEC charged a hedge fund heavy and his buddy who just happens to be executive director of business development at Merck’s vaccine unit of insider trading around the AZ/MedImmune deal.

With neither story lending itself to happy spin, MedImmune made a lame effort to change the subject with what appeared to be a hasty pitch to PE (and, we presume, other rags) that caught our interest: Its new R&D strategy for copycat biologics will focus exclusively on so-called biosuperiors rather than biosimilars. Now, given that FDA has been authorized to define a regulatory pathway for generic versions of biologics only with the passage of the healthcare reform legislation, MedImmune’s bet on biosuperiors might be viewed as putting the marketing before the molecule, so to speak. Yet it’s a signal that the top pharmas are already deep into their plans for how to play in this largely notional market, albeit one that is estimated to reach $17 billion by 2017, according to Decision Resources.

Biosuperiors, aka “biobetters,” are to biosimilars what, say, Apple’s iPod Touch is to its iPod shuffle. Where a biosimilar will be a mere structural imitation of an Avastin or an Enbrel promising the same effect at a reduced price, a biobetter will possess some molecular or chemical modification or other that constitutes an improvement over the originator drug (and its biosimilar competitors). The enhancement may range from a longer half-life, allowing for less frequent dosing, to more potency or less toxicity. If these were small-molecule drugs, the gussied-up me-too version would be a branded product that had proved its specific advantage to FDA.

So why would MedImmune commit entirely to developing biosuperior antibodies? Unfortunately, we can only speculate, because the Virginia-based biotech told us it was “premature” to get into the weeds about the refocus.

Although little is known for certain about how the biosimilar market will develop, the one unambiguous feature is that copycat biologics are unlikely to cannibalize sales of the innovator product with the same bottomless appetite as small-molecule generics. The discounted price tag of a biosimilar is estimated to range from as little as 10 percent to as much as 50 percent off the branded drug. That’s more than chump change for products that may typically run $100,000 or more, but given the anticipated cost of manufacturing and marketing, the margins may not inspire sufficient awe to attract the kind of intense competition that would make substitution a no-brainer for doctors and consumers, who are expected to remain more than a little wary of the entire idea of copycat cancer drugs and the like for some time. Over the several years since the launch of growth-hormone Omnitrope, the first-ever FDA-approved biosimilar, the drug has managed to capture a mere 1 percent of the total market and make less than $4 million in annual sales, according to IMS Health.

After sizing up all the hurdles, MedImmune apparently came up with a sound economic rationale for taking the higher risk, higher reward route promised by value-added biobetters. And the risk will most definitely be higher, says Ernst & Young’s Global Biotechology Leader, Glen Giovannetti. “In order to support any claim of superiority, FDA is almost certain to require Phase 3 trials,” he says. “They may be smaller and faster than those for innovator drugs, but the investment will be greater—perhaps considerably so—than for a straightforward biosimilar.”

When asked for clarification, FDA gave a rather frosty reply. “The addition of a pathway for those biologics that do not intend to be ‘biosimilar’ but instead facilitate development of improvements to currently licensed products was not included in the legislation.”

It’s worth noting that AstraZeneca is widely viewed as the most wobbly pharma giant, due to lose up to half of its profits over the next few years as a result of patent expirations. And MedImmune has already bailed on its promise of a drug a year. To compete with the presumed biosimilar big boys like Novartis, Merck, Pfizer, Teva, not to mention the Indian pharmas that are already selling knockoff biologics in the developing world, AZ has to move fast to make the most of MedImmune’s impressive antibody development and manufacturing assets.

“From the outside, all we can say is that a biosuperior strategy makes sense economically, in terms of being able to make a ‘cheaper but better’ pitch,” says Giovannetti. “But MedImmune may have other more technical reasons, such as the fact that they already are an originator biotech or they want to leverage their existing technology.”

Suffice to say, it will be entertaining, at the very least, to watch Big Pharma do battle over the biosimilar and biobetter (and biobest?) billions.

Wealthy nations that donated many billions to create the Global AIDS Fund in 2001, pledging universal access to treatment by 2010, still owe billions. So two out of every three HIV patients—some 10 million—in most of Africa and much of Asia, Russia, Eastern Europe, and even Latin America still can’t afford drugs. Without them, they are doomed to terrible deaths.

As for the 5 million on the standard three-drug cocktails, a growing number are developing HIV resistance, and they need a second (or third or fourth or … ) combination of new drugs or old drugs or anything.

And what about the children? Only half of the 20 or so HIV drugs on the market are available to kids.

The inconvenient truth about AIDS is, the drugs cost a lot, and you have to take three at once for the rest of your life, and when the forever-mutating virus finds a way around your cocktail, you have to take three new drugs. In the US, the total lifetime cost of HIV drugs for one person averages about $750,000.

Yet almost miraculously, a global activist movement forged an uneasy coalition over the past decade with the UN, HIV drugmakers, generics shops, and the developing world (led by big-daddy donor the US) around the shining belief that every person with HIV had the right to effective treatment, no matter the price. But the will energizing that belief is flagging.

One possible bright spot in Vienna was the launch of the Medicines Patent Pool by UNITAID, an international drug-purchasing agency for HIV, malaria, and tuberculosis. Three leading HIV drugmakers—Merck, Gilead, and Tibotec—were said to show “considerable interest” in licensing their entire HIV portfolios to the pool, not excluding best-selling, state-of-the-art products like Merck’s novel Isentress, Gilead’s fixed-dose combo Truvada, and Tibotec’s resistance-busting Prezista. Bristol-Myers Squibb and Abbott were said to be warming to the pool, but ViiV Healthcare, an HIV joint-venture between GlaxoSmithKline and Pfizer intended to restore the British firm’s early leadership in the AIDS market, remains ice cold to the pool party.

The patent pool idea materialized for AIDS advocates as the most practical mechanism to spur investment in the large-scale development of generic versions of not only the best HIV drugs but—equally essential—new fixed-dose combinations and formulations that Gilead, Glaxo, and the rest, left to their own incentives, have shown no interest in producing. Yet only a tiny fraction of people in the developing world have access to these drugs—they’re second-class patients on suboptimal therapy, but beggars can’t be choosers, right?

Once the innovator company contributes its IP to the pool, which will be funded and run by UNITAID, copycat companies will manufacture and market the antiretrovirals at affordable prices. As generics competition heats up, drug costs will fall further. Currently, first-line triple-drug therapy using branded products costs between $600 and $1,000 in places like South Africa, while generic competition has cut older first-line treatment to $87. For second-line cocktails, in the absence of generics, the prices are 17 times more expensive. 

In return for their compassion, the branded firms will get 5 percent royalty on all sales—chump change for Big Pharma, but more than they are already making by not selling these new drugs, combinations, and formulations to millions of people who can’t pay for them anyway. Plus, with free patents in the pool, generics-makers won’t have to entangle the pharmas in wasteful lawsuits.

A patent pool may not be the perfect solution, as the HIV drugmakers’ fear of commitment, even after long, drawn-out discussions with UNITAID makes plain. But self-interests clash, and then a compromise is struck. Above all, Big Pharma is loath to give aid and ammunition to its enemy, the generics industry. Yet for the mountains of men, women, and children with untreated HIV who are sick, the status quo is a death sentence. That is the ultimatum driving UNITAID—and it appears that Merck, Gilead, and Tibotec get it. 

But Glaxo doesn’t. This snub may seem surprising, given CEO Andrew Witty’s conspicuous display of concern for neglected diseases and the health of the world’s poorest since he took the job two years ago. In his most earnest, caring, and new kind of pharma CEO mode, Witty won weeks of glowing headlines for his big speech at Harvard last year about how the industry had to become a catalyst for positive global change—and he proceeded to make a series of Glaxo pledges to the developing world, including “a more flexible approach to IP,” a 75 percent discount on drug prices, and the re-investment of 20 percent of sales in local infrastructures.

He liked the idea of a patent pool so much that he started his own—the Least Developed Country Patent Pool. “We need to make sure nothing gets in the way of access, least of all price,” he said, earnestly and caringly.

Yet the UNITAID pool? Not his cup of tea. “HIV isn’t a neglected disease,” Witty said, explaining that while his pool is intended for malaria and other diseases long underfunded R&D, HIV is positively humming with innovation. ViiV Healthcare alone has promised to turn out a new drug every year starting in 2012.

No doubt Glaxo and other HIV drugmakers have other issues with the UNITAID pool agreement: ViiV reportedly opposes the inclusion of the BRIC nations, with their fast-growing middle-class; opposes the administration of the patent pool by UNITAID; and opposes the creation of what may turn out to be an independent public/private R&D enterprise, with its competitive potential. About all this, an advocate is tempted to say, “Tell that to the people who are dying for want of your drugs.” 

Medecins sans Frontiers, Oxfam, and some 15 other public health nonprofits have been dogging Witty to get in the pool, with letter, petitions, and public statements. (Witty’s AIDS-is-not-a-neglected-disease dismissal could be parodied nicely on an activist T=shirt.) “He is wrong,” MSF immediately responded, arguing that innovations that meet the specific medical needs of the HIV populations of the least developed countries—cheap new fixed-dose combinations, say, and pediatric formulations—are being neglected by Big Pharma because the market for such products in rich nations is so small. Generic manufacturers—the logical innovators—are discouraged from investing in the development  because of the patents. If the Glaxos of the industry aren’t up for the emergency, shouldn’t they just get out of the way?

The top priorities for UNITAID’s HIV pool are a protease inhibitor for children and a new combination of Gilead’s Viread and an experimental Tibotec compound. These don’t require billion-dollar, decade-long, cutting-edge R&D prowess—a Chinese or Indian copycat shop can whip them up once free IP lowers the manufacturing bills. And as for Witty’s pledge of a 75 percent discount on drugs, MSF said that over the past decade most antiretrovirals became affordable in poor nations only when the price fell by at least 95 percent.

Otherwise, MSF and other advocates have applauded Witty for his new global health initiatives. What activist would be so cynical or paranoid as to believe that Witty got the jump on the patent pool idea to steal UNITAID’s thunder or to deflect fallout from his own rebuff? Still, on the very day when the British government publicized a big study exhorting drugmakers to join the UNITAID venture, Witty turned up in, of all places, a dusty village in rural Uganda. He went there to make AIDS pledges, including $80 million to develop pediatric HIV formulations. Life is full of crazy coincidences. 

But all the pledges and patent pools in the world won’t bend the curve of the plague without the overdue funding from US and other rich (or rich enough) nations. By 2030, there will be 500 million people with HIV in Africa, Asia, Eastern Europe, and Latin America who need the drugs. 

Of course, reading the tea leaves in FDA’s cup is often an exercise in futility. Determined to make as few waves as possible, FDA officials have perfected the art of “split-the-difference” decision-making. But Hamburg and Sharfstein are reputedly a different breed of leader. And given the longstanding guerilla war between FDA’s safety officials and its drug reviewers, the outcome of Avandia’s trial may signal a possible shakeup inside the agency itself.

But portents aside, will justice be done in the case of GSK’s once-heralded, now much-maligned diabetes drug?

Imagine the process as a courtroom drama. At the prosecution’s table sit two familiar doctors: David Graham, the outspoken FDA drug safety expert; and Steve Nissen, the equally outspoken chairman of cardiology at the Cleveland Clinic. Both made their names a decade ago leading the charge against Vioxx, and the Avandia dustup has further burnished their reputations as anti-pharma crusaders. Both advocate Avandia’s withdrawal and have published studies making that case to the FDA advisory panel.

Graham’s study, published June 28 by the Journal of the American Medical Association (JAMA), is based on a retroactive analysis of the 1999–2009 records of 227,571 Medicare patients on Avandia or its same-class competitor, Takeda’s Actos. The report finds that Avandia was associated with a higher risk of stroke, heart failure (but not heart attack), and death, and concludes that more than 47,000 people could have escaped these health emergencies had they been on Actos rather than Avandia. Graham has long maintained that Avandia remains on the market only because FDA reviewers are defending their original decision to approve it.

Nissen’s study, published June 28 by the Archives of Internal Medicine, updated his 2007 meta-analysis, using a database of 56 trials including 35,531 patients. He found that Avandia raised the heart attack risk by 39 percent, compared to placebo; however, the rate of mortality was not elevated. Nissen attributes the differences between his data and Graham’s to the fact that his cohort’s average age was 54, while Graham’s was 74. “It is really impossible to argue that this drug has benefits that exceed its hazard,” Nissen told The New York Times.

Additional evidence includes a February 2010 bipartisan Senate investigation into 250,000 internal GSK documents. The most serious findings charge that GSK knew about the increased cardiovascular risks for two years, and FDA for about half as long, without alerting the public.

At the defense table sit a row of lawyers flanked by PR flaks, with a few slightly rumpled scientists sprinkled in for effect. “Results from six controlled clinical trials have been reported since … FDA last reviewed questions about the cardiovascular safety of Avandia in 2007. Taken together, these trials show that it does not increase the overall risk of heart attack, stroke, or death,” the suits intone as one.

The most recent study, presented on June 28 at the annual meeting of the American Diabetes Association (ADA), was designed to test how best to treat patients with both diabetes and coronary artery disease. In this 2,400-patient observational study, Avandia was not prescribed randomly but by the individual doctor’s discretion: Some patients got medication alone, others medication plus angioplasty or bypass surgery. At 4.5 years of follow-up, the rates of heart attack, stroke, or death were slightly less for those on Avandia (or Actos) than metformin.

As for the Senate’s accusations about concealing known dangers from the public, GSK denies all such charges. It also insists that the two new studies critical of Avandia, as retrospective analyses, are open to interpretation. Citing opposition by doctors—including ADA and American Heart Association officials—to any move to yank Avandia, GSK’s legal eagles rest their defense with a rhetorical plea to let science prevail over uncertainty.

The FDA advisory committee will certainly sweat over the mass of Avandia science, but uncertainty is likely to remain. Following FDA’s 2007 decision to allow GSK to keep selling Avandia despite possible dangers, the agency ordered the company to conduct a large, randomized trial comparing Avandia to Actos to determine which is safer. Yet with enrollment flagging, the drug may well be off patent before results are in.

Now that study looks like a waste of time and money. As the JAMA editorial accompanying Graham’s study says, “Converging lines of evidence suggest that Avandia is less safe than Actos, whereas no data suggest that the converse is true. The real question is, given all the accumulating safety concerns about Avandia, why, exactly, a patient might want to receive the drug or why a physician would choose to prescribe it when there is an available and quite possibly safer alternative?”

In other words, it is a question not merely of safety and efficacy but also of value. Commissioner Hamburg may decide to ask GSK to pull Avandia to make precisely that point.

Sound harsh? Lewis Morris, a 29-year veteran of the Office of the Inspector General and its top lawyer, was more than happy to make the “responsible corporate official” case to Pharm Exec.

Pharm Exec: Can you begin by explaining what you do as the counsel to the Office of the Inspector General?

Lewis Morris: Over the last decade, the Department of Justice and the Inspector General’s Office have been pursuing a significant number of cases involving the pharmaceutical industry, as well as device manufacturers, hospitals, and doctor. Under the civil False Claims Act, a company can be liable either for promoting the off-label use of a drug, for misrepresenting the pricing of a drug to Medicaid or Medicare, and other fraudulent conduct. In addition, a pharmaceutical manufacturer can be liable under our criminal authorities for submission of fraudulent claims, paying kickbacks to doctors, and other activities. After a case has been thoroughly investigated by our agents and other partners in law enforcement, the question becomes how to structure a global settlement that puts the matter to rest in the best interests of the American people—and that’s where our Office of Counsel comes in.

The OIG has a unique authority to exclude from Medicare and Medicaid any individual or entity that has been convicted of healthcare fraud, abuse, or related offenses. If a company has engaged in, say, a $100 million fraud—that’s a pretty modest sum these days—we have to make a decision whether to seek to throw them out of the Medicare and Medicaid programs. If they’ve been convicted of Medicare fraud, a criminal conviction, their exclusion is mandatory. More likely than not, that would be a deal breaker for any company [because most of its profits come from sales to the federal government]. It’s not going to voluntarily commit suicide by pleading to a criminal charge. So they’re likely to have brought their high-priced lawyers into the act, negotiated a settlement, which gives them at least the option of staying in business.

Pharm Exec: There’s been talk in the media that you’re going to start going after individual executives at drug companies responsible for committing healthcare fraud. Is that true?

Morris: Yes. Part of our strategy is to say to companies, “it’s not business as usual anymore.” And the reason is that the first time around, we give everybody the benefit of the doubt. Everybody was entitled to have one mistake in the integrity of their company. And, particularly, in light of the importance of pharmaceuticals and the needs of our beneficiaries, that is a good policy.

Pharm Exec: Do you prioritize your array of tools—selling meds, relinquishing exclusivity, holding individual executives accountable—in terms of severity?

Morris: We are going to look at the facts and the circumstances of a particular case and decide which of our many tools will do the best job of protecting our beneficiaries and our program. But ultimately the Inspector General’s Office is not here to mete out punishment. We are here to protect the integrity of the Medicare and Medicaid programs, to promote their efficiency and their effectiveness, and Congress has given us a mandate to remove from the program those who have abused our patients and demonstrated that they’re not trustworthy.

Read the whole Q&A in the June issue of Pharm Exec.

Wall Street smiles when a drug company gets with the program by “restructuring” and “rightsizing”—cutting costs through headline-grabbing layoffs. But for Main Street, the story of hundreds or thousands of sales reps, say, and researchers getting kicked to the curb is quite different.

The two gi-normous mergers that closed in the past month offer Pfizer CEO Jeff Kindler and Merck CEO Richard Clark plenty of opportunities to win kudos from The Street, what with all the synergies and economies of scale rendering whole divisions and layers of employees—many of them highly skilled and in middle age—suddenly redundant. In terms of lost jobs, both firms have set the magic formula at 15 percent of their workforce, or an estimated 19,500 and 16,000 positions, respectively.

Ever since the deals were first announced, towns and cities—not only in New Jersey—have been fretting at the prospect that a local plant or other facility might not make the cut in the Pfizer or Merck integration. Friday’s New York Times had a page one story about one such community, New London, CT, where Pfizer built its $294 million, 750,000-square-foot global R&D headquarters in 2001 at the mouth of the Thames River. Eight years later, this state-of-the art edifice is set to be shuttered by 2012.

What lifts “Pfizer To Leave City That Won Land-Use Case” out of the ordinary woe of pharma job layoffs and plant closings is the sharp sense of betrayal that Pfizer leaves in its wake? However unfairly, the drug giant’s brief encounter with New London is entangled in local memory with a bitter property-rights lawsuit brought by homeowners city officials who had marked their neighborhood for demolition—to be reborn as an “urban village” of high-end hotels and shops, tourism and commerce. Pfizer, while not part of the litigation, was central to this “economic revitalization” scheme: In exchange for erecting its biomedical Xanadu, the firm got 80 percent off its property taxes and other financial incentives.

The battle over eminent domain went all the way to the Supreme Court, which decided in 2005 against the homeowners in Kelo v. City of New London. The old neighborhood was razed to the ground, but the hotels and stores never materialized, and neither did the economic redevelopment.

Pfizer plans to move the remaining 1,400 jobs to its Groton site, just across the river. What the company once hailed as the world’s biggest privately funded biomedical research center has become, in the high keep of 235 E. 42nd St. in Manhattan, merely a piece of redundant real estate. Eventually Pfizer will manage to sell it, but probably for a loss.

The losses for New London are of a different order, as the Times piece makes dramatically evident. No doubt Pfizer brought many benefits to the city during its stay, but the firm may not be remembered very fondly, to say the least.

“Look what they did,” one New Londoner told the Times, pointing at the ragged field where a his neighborhood once stood. “They stole our home for economic development. It was all for Pfizer, and now they get up and walk away.”

PhRMA chief Billy Tauzin so far shows no sign of waving the white flag in response to an accusatory missive from House Minority Leader Rep. John Boehner bludgeoning his former Republican colleague for leading the drug industry’s support of President Obama’s healthcare reform effort. Pointedly CC’d to pharma CEOs – Tauzin’s employers—and simultaneously released to the media on Monday, Boehner’s attempted takedown of Tauzin predictably made big news across the media spectrum, being widely quoted in the political blogosphere and on cable news shows.

In an abrupt and dismissive tone, Boehner disses President Obama as a “schoolyard bully,” accuses the trade group chief of “helping [Obama] steal others’ money as the price of protecting your own” and “[choosing] to accommodate a Washington takeover of healthcare at the expense of the American people in hopes of securing favorable treatment and future profits,” More importantly, the letter insinuates that Tauzin is a dupe because “[the deal] has now gone sour.” And that both Tauzin and his pharma CEOs are politically naïve to expect that “appeasement” of the Administration would produce a concrete deal amenable to liberals in Congress.

Dupe or not, Tauzin and PhRMA are refusing, for now, to budge from their seat at the pro-reform table. The industry trade group posted on Tuesday a “Statement on Commitment to Health Reform,” reaffirming its position in support of universal coverage and bipartisan reform legislation.

And in an email to Pharm Exec, PhRMA senior VP Ken Johnson took the high road: “Emotions are running high on both sides of this important issue and we’re not going to fan the flames. We believe we’re doing what’s best for patients and America. When people go into the emergency room, they don’t sign in as a Republican or Democrat. They’re sick and they need help. Our goal is to make certain that everyone in America has access to that critically important help.”
Johnson said Tauzin would have no comment.

The general outline of the deal struck between PhRMA and the White House has been clear since President Obama first announced it almost two months ago. The industry promised, in a series of meetings with Senate Finance Committee Chairman Max Baucus, to forego $80 billion in potential profits from drug purchases over ten years (about half via a 50 percent cut in brand-name drugs for seniors stuck in the “doughnut hole” of Medicare Part D coverage gap). PhRMA would also bankroll as much as $150 million in pro-reform advertising.

Heaping praise on the industry, Obama called the concession a “major step forward.” What he failed to do was to disclose that this was, predictably enough, a quid pro quo.

When details of the deal began to leak out (most accurately in a July 22 New York Times piece by business reporter Duff Wilson), Tauzin’s apparent coup immediately began gathering a dust cloud of controversy.

According to Tauzin, the Obama administration gave assurances that in exchange for offering up to $80 billion in potential profits over 10 years, any final reform would leave untouched two Bush-era artifacts dear to pharma’s pocketbook: the noninterference clause in Medicare Part D, preventing the government from negotiating drug prices, and federal legislation prohibiting drug reimportation from Canada and elsewhere. (The latter assurance, Tauzin said, was offered at a July 7 meeting with Obama’s chief of staff, Rahm Emanuel, Sen. Baucus, and the CEOs of Pfizer, Merck, Abbott, AstraZeneca, and Amgen.)

Rep. Henry Waxman (D-CA) and other influential progressive House Democrats weren’t quiet about their intention to ignore any agreement to which they had not been privy. Waxman singled out the noninterference clause as a deal-breaker. As the left wing of the party pushed back, the Obama administration beat a hasty retreat, tripping over its own conflicting versions of the unwritten agreement.

Tauzin, meanwhile, went on the offensive, loudly broadcasting the specifics of the agreement. “We were assured: ‘We need somebody to come in first. If you come in first, you will have a rock-solid deal,’ ” Tauzin told The New York Times on August 6. “Who is ever going to go into a deal with the White House again if they don’t keep their word? You are just going to duke it out instead.”

The political stakes within PhRMA may be just as important as the larger prognosis for reform.  Tauzin’s carefully laid plan, starting soon after he took over the industry group in 2005, has been to “liberate” Big Pharma from its anti-government, GOP-backing traditions. A different, more frank way of communicating is at the heart of his strategy; PhRMA today emphasizes what the industry is FOR, rather than what it is against. Being first among healthcare industries to step up to the pro-reform table marks the culmination of Tauzin’s unabashedly pragmatic pharma policy makeover. It might be seen as a setback for industry traditionalists, who are skeptical of both the Administration outreach effort and the internally generated forecasts that indicate drugmakers will benefit from the expanded ranks of covered patients anticipated under the reform legislation.

The fate of healthcare reform is, at this point, anybody’s guess. But it’s likely that Tauzin’s own fate as head of PhRMA is hitched to that star, falling or not. As Boehner’s letter makes clear, the Republicans, reportedly fuming over PhRMA’s palling around with liberal groups like SEIU and Families USA to promote “Obamacare,” are seizing their opportunity to drive a wedge between Tauzin and his CEO backers.

Boehner’s office did not return calls for comment.

Abbott’s CEO Miles White, a stalwart Republican, had no comment when Pharm Exec contacted the firm.

Meanwhile, the trade group’s pricey promotion of healthcare reform continues apace as part of an initiative PhRMA is pursuing with other groups outside its traditional circle of friends. The most widely broadcast spot is a re-do of the infamous “Harry and Louise” ads that are believed to have played a key role in turning public opinion against the Clinton administration’s efforts to reform healthcare in 1994. This summer, an older, and presumably wiser, Harry and Louise smile on reform: “We need good coverage people can afford,” says one ad. “A little more cooperation, a little less politics, and we can get the job done this time.” That smile already seems out of date.

It’s a photograph taken late last month during the first Congressional hearings on the trillion-dollar healthcare reform legislation. Actually, it’s not just a photograph but a panoramic, four-frame, interactive feature complete with cutesy rollover icons. More importantly, it shows not the 22 members of the Senate Committee on Health, Education, Labor and Pensions who were the presumptive stars of the occasion, but the audience.

Who are these 200 or so people sufficiently interested in the issue at hand to show up in Room 106 at the Dirksen Senate Office Building?

The answer is revealed as your cursor rolls over an icon: These pleasantly innocuous faces in this predominantly female, modestly diverse standing-room-only crowd are, as anyone versed in inside-the-Beltway business would know, lobbyists of one stripe or another. Or, as NPR more politely refers to them in its headline, “healthcare stakeholders.”

The feature’s gimmick is asking readers to identify familiar faces via email for posting on the site. For example, one icon reads: “Katie Pahner, Health Policy Source, Firm’s 2008 Lobbying Income: $1.3 million.” Unfortunately, we’re left in the dark about which companies, professional organizations, advocacy groups, etc., pay Pahner’s firm’s fees.

By the end of the day, the icons were few in number—only a handful of IDs had been made. That might be because to Washington outsiders, not only the faces but the very beings and doings of most lobbyists are nondescript to a remarkable degree. They are peddlers of “influence”—the most elusive of commodities—who, if the mainstream media is to be believed, are forever holding closed-door meetings with politicians, meetings about which they have “no comment” afterward. And they are invariably singled out for blame when one or another piece of legislation or reform comes to dust.

This may help explain the subtle but unmistakable hostility to NPR’s “spot the lobbyist” game. After all, asking for positive identifications is generally the purview of the police department. The implication is that something shady is taking place in 160 Dirksen Senate Office Building and that lobbyists—excuse me, healthcare stakeholders—are, if not perpetrators, at least bystanders. But this game of shining light on the shadiness may make them feel uncharacteristically a little like the victims.

Beginning to attach specific faces and names to the multifarious influence may be the point of this NPR exercise. Greater transparency, in turn, may make the Capitol Hill reporters’ job easier—it may even lead to greater accountability of, and accessibility to, the Katie Pahners of the world. That would be a good thing.

But here’s the confusing part: The lobbyists with the most influence are generally so well known that they require no identification. On Monday the Washington Post ran a hard-hitting investigative piece about the enormous number of new lobbyists hired by insurers, hospitals, medical groups, and drugmakers to lean on the pols during the healthcare debates into which we are about to be plunged. The vast majority of these 350 fresh-faced influence peddlers are either former elected officials or former members of their staff.

The title of this important piece? Familiar Players in Health Bill Lobbying. The prime example of what the Post refers to as the “revolving door” between Capitol Hill and K Street? Billy Tauzin, head of PhRMA.