This blog was also posted on Health Policy Hub.

Drug safety is now as American as apple pie, based on the 96-1 vote the Senate took to reauthorize the Prescription Drug User Fee Act (PDUFA). Few things pass through Congress with such overwhelming support, and we are heartened that Senators came together to pass this “must-pass” legislation.

Millions of Americans rely on medications every day, from people with chronic illness, to seniors, to anyone who takes a pill for allergies or a headache. As a member of the Alliance for a Safe Drug Supply, Community Catalyst has advocated for solutions to this critical issue. Assuming the House will also pass similar legislation and we’ll have a new law soon, one piece of the complicated health care puzzle will have been made safer. How do you spell relief? P-D-U-F-A.

Truly, the bill marks a momentous occasion for consumers. Today, roughly 80 percent of ingredients used in U.S. medicines are made overseas, and there has been a historic disparity between the number of inspections conducted at U.S.-based plants and foreign plants. Under the new bill, the fees paid by name-brand and generic drug manufacturers will allow more frequent inspection of foreign manufacturing sites that produce drugs imported into the United States, addressing a critical gap in supply chain safety. As Pharmalot notes, 12.7 percent of capsule makers in China were recently found to be making unsafe capsules. While it is unclear whether those particular capsules were being introduced to the international supply chain, as Ed Silverman so eloquently puts it, “the episode underscores the larger concern that some Chinese companies that are intertwined in the pharmaceutical supply chain operate as if China is a modern-day version of the Wild West.” Of course, there’s also been a drumbeat of recalls and egregious safety problems in U.S. plants—but we only know about them due to more inspections here in the U.S. Now we’ll have parity in foreign inspections, too.

The PDUFA bill also marks the first time the generic drug industry will be contributing to the FDA’s inspection and oversight funds, pitching in nearly $1.6 billion over the next five years. We view this commitment from generic pharmaceutical producers as a notable contribution to ensuring the safety of the effective, affordable generics that we all rely on today.

In addition, the bill requires pharmaceutical companies to track each batch of drug products along the supply chain, from the factory to the pharmacy or hospital. This has been a long-sought after consumer protection, given that “track and trace” systems can be utilized to ensure counterfeit drugs are not introduced into the supply chain. Prescription drug counterfeiting is one of the most lucrative crimes in the world, and the infamous heparin contamination is believed to have been economically-motivated. And although it is relatively rare in the United States, there are far too many instances of intentionally-adulterated or counterfeit medications having breached the supply chain and been consumed by Americans, and we need to put an end to it.

One more piece of good news is the updated system to proactively address drug shortages. According to the Pew Health Group, more than 200 drugs went through periods of shortages in 2011. The bill puts in place an early warning system that manufacturers must inform FDA in advance of discontinuing manufacture of any drug. Hopefully, patients receiving cancer treatment will soon be able to cross one thing off their list of worries.

The bill was not perfect, however. Patients would greatly benefit from the earliest possible access to generic drugs when brand name patents end, so we were disappointed that the “pay-for-delay” amendment was defeated. Additionally, there are grave concerns about medical device safety, and we are disappointed that the Senate did not authorize medical device user fees to be used to evaluate the safety of devices in the market, despite the many recalls of dangerous devices in the past few years.

While there is room for improvement, we applaud the FDA, the Senate, and drug manufacturing companies for working together to pass this legislation, and eagerly await the House to follow suit.

 – Anna Dunbar-Hester, Program Coordinator and Policy Analyst

The Affordable Care Act created some desperately needed means to start controlling ever-rising health care costs. Many — like preventive care or delivery reforms — will take some time to realize savings. In contrast, new anti-fraud efforts look to be paying off right away, in amounts much bigger than expected.

The health reform law provided $350 million over ten years to increase anti-fraud investigation and enforcement resources for the Department of Justice (DOJ) and State Attorneys-General. The goal? Saving $6.4 billion over the next decade. Given that some estimate that fraud and waste cost as much as $60 billion a year, or $600 billion over a decade, saving one percent of that amount seems a pretty modest impact.

But wait! New estimates project that current or pending settlements of drug fraud litigation by the DOJ and the Attorneys-General will top $8 billion in FY2012 alone, according to the group Taxpayers Against Fraud. (See their list below.) This is not the culmination of hundreds of lawsuits; it’s just the eight biggest. So it looks like this anti-fraud effort under the ACA will meet and then surpass this ten-year goal in less than two years!

To be fair, some of these fraud investigations were undoubtedly underway before the increased funding for anti-fraud efforts reached the DOJ and State Attorneys-General offices. But there is little doubt that providing these over-worked regulators with increased resources was a big help in increasing enforcement. DOJ probably has fewer lawyers working on all their pending drug fraud cases than some of the biggest drugmakers hire to defend in just one lawsuit. But despite these disparities, the results show that very modest government investment in fighting fraud, coupled with hard work by government lawyers and whistleblowers, can pay off big.

For example, earlier this week drugmaker Abbott Labs in Chicago settled a civil and criminal investigation of their illegal promotion of the anti-convulsant drug Depakote as an unapproved treatment of dementia in seniors, and of various conditions in children. Abbott pleaded guilty to promoting these unapproved, or ‘off-label’ uses of Depakote, and agreed to pay $1.6 billion – one of the biggest settlements for the illegal promotion of a single drug.

There could be a couple hundred pending whistle-blower lawsuits that are filed under seal and being investigated now by the federal or state regulators. These pending lawsuits may add up to billions of dollars of additional settlements.

Some critics have warned that even billion-dollar fines are an inadequate deterrent when a drug company can profit far more on illegal sales of a drug.

For instance, the $1.2 billion record-breaking settlement with Eli Lilly in 2009 for illegal promotion of their antipsychotic drug Zeprexa was less than 5 percent of Lilly’s gross sales. Yet eight months later, DOJ shattered this record with an even bigger $2.3 billion settlement with Pfizer, which amounted to 14 percent of their gross sales of eight illegally marketed drugs.

Similarly, this month’s $1.6 billion Depakote settlement is nearly 12 percent of the drug’s $13.8 billion in gross sales revenue from 1998 to 2008. Furthermore, DOJ is pioneering two mechanisms to deter future illegal conduct by Abbott, along with this hefty fine.

First, the Depakote settlement places Abbott on probation and imposes a corporate compliance and monitoring program, for five years. If Abbott violates the compliance agreement or significantly violates the law, the government can exclude Abbott, and all their drug products, from federal health care programs. That would cost Abbott billions in lost sales on numerous drugs.

The settlement also aims to hold Abbott’s corporate leadership accountable. Abbott’s CEO must personally certify compliance and the board of directors must review and report on compliance each year. If the CEO or board is lax in these duties, they could be excluded from their positions at Abbott. And if they intentionally lie to the government to cover up any misconduct, they could face personal criminal liability under the federal False Statements Statute.

Sadly, Abbott’s illegal promotion of ineffective and dangerous uses of Depakote has both harmed and put at risk what is arguably the most vulnerable patient population – seniors suffering from dementia, who live away from their families in nursing homes. Undoubtedly millions of seniors were and continue to be given Depakote inappropriately as a result of Abbott’s illegal promotional campaign.

More to come on (1) actions that Medicare and Medicaid can take to address the continuing effects on patients of illegal promotions of off-label use of drugs and (2) how the Arkansas AG fought prescription drug fraud, winning huge fines to plug the state’s Medicaid budget deficit. This blog was also posted on Health Policy Hub.

– Wells Wilkinson, Director, Prescription Access Litigation
Staff Attorney, Community Catalyst

Projected Drug Fraud Settlements in FY 2012