Archive for May 12th, 2010

Wednesday, May 12th, 2010

Jury finds Pfizer committed fraud and racketeering through off-label Neurontin promotions; Awards $142 Million

April 16th, 2010

Consumer advocates concerned about the drug industry and health care fraud were given a rare treat two weeks ago — a jury trial highlighting the fraudulent drug promotions by the nation’s largest drug maker Pfizer. Even better, the jury awarded $142 Million in actual and trebled damages.

The successful trial and jury verdict on behalf of California-based insurer Kaiser Foundation Health Plan marks a significant victory for insurers and consumers, as well as a stark warning to drug makers who engage in illegal or fraudulent promotion of drugs.

Kaiser, the first insurer to try a Neurontin case against Pfizer, the world’s biggest drug maker, claimed it was forced to pay $90 million more than it should have for Neurontin.

The jury was asked to determine whether the world’s largest drug maker, Pfizer (through it subsidiary Warner-Lambert) had committed fraud by marketing the drug Neurontin for unapproved uses. That is, the jury considered whether the extensive, 10 year campaign engaged in by Pfizer’s staff of drug representatives to repeatedly promote Neurontin as an effective treatment for bipolar disorder, migraines, neuropathic pain, nociceptive pain, and for uses at very high doses, was fraudulent, in light of the fact that Pfizer knew that their own studies had never shown the drug to be more effective than a sugar pill for these unapproved uses. (Neurontin had only been approved as a treatment for epilepsy. While it is not illegal for a physician to prescribe Neurontin to treat other illnesses or conditions, it is illegal for a manufacturer to promote a drug for an unapproved, or ‘off-label’ use.)

After deliberating for two days, the jury found that sufficient evidence that New York-based Pfizer violated the both the federal Racketeer Influenced and Corrupt Organizations Act, or RICO, and California’s Unfair Competition Law by promoting four of these five off-label uses.  The jury awarded Kaiser $47.36 million in actual damages, which was trebled to $142 under provisions of the federal RICO statute.

According to Bloomberg news, the jury described the activities by Pfizer to defraud doctors and insurers as “shocking” and that one juror described Pfizer’s promotional schemes targeting doctors as “clearly a snow job.”

Pfizer attempted to hide behind the very doctors they misled, arguing that plaintiff Kaiser had not presented a single doctor who would state that they would not have prescribed Neurontin even if they knew of Pfizer’s misleading representations of omissions concerning the effectiveness of Neurontin. But the jurors aptly saw right through this ruse. Bloomberg news reports that Jury foreman Pierrotti said “no doctor wants to admit they were defrauded.”

The jury also noted that the steps that Kaiser had taken to reduce Neurontin use by covered beneficiaries after the fraud was revealed in 2002.

This verdict is a rarity in the world of drug litigation, because most cases settle long before they reach a trial or jury. It is important also as the first RICO verdict in a prescription drug case, allowing triple damages. Finally, it sets a very positive precedent for insurers and others to bring future claims against both Pfizer, and other drug companies for fraudulent promotional practices. For instance, Judge Saris previously noted that fraud findings against Pfizer in the case decided yesterday could be binding against it in future trials.

While this ruling is good news for Kaiser and some other insurers, a companion class action lawsuit by consumers before the same court continues to face significant challenges. On May 13, 2009, Judge Saris ruled that consumer and insurer classes could not be certified due to various factors related to predominance of individual factors over common facts, and issues relating to proof of causation. 

Still, a $142 Million verdict for one of thousands of insurers bodes well for future claims. Shining a light on Pfizer’s liability, this verdict illustrates how drug industry fraud and greed adds billions in unnecessary and wasteful spending to our health care costs. The lawsuit itself is an example of how litigation by non-profit insurers and consumers is necessary to confronting this waste in the private sector. For both these reasons, the successful trial merits attention by the public and policy makers, and celebration by consumer advocates.

Cost Plus Hospital Reimbursement VS PPO Discounts

Wednesday, May 12th, 2010

Now that we have empirical data, here is the math:

Typical PPO hospital discount – 57%

Typical Cost Plus Discount Equivalent – 87%

$100,000 in billed charges means the typical PPO allowed is $43,000 while the Cost Plus Discount Equivalent is $13,000. 

Under the PPO alllowable in the example above, hospital profit margin, according to filed CMS reports are approximately $31,000. Under the Cost-Plus method, the hospital’s estimated profit margin is $1,400.