June 27, 2004

As Doctors Write Prescriptions, Drug Companies Write Checks

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 behemoth 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."

Dr. 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.

Dr. 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.

Dr. 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."

	The PWA Health Group Newsletter "Access to Information Precedes Access to Treatment" Spring 1999, Issue #39   Banding Together to Challenge Schering-Plough's Monopoly on Hepatitis C Treatment The PWA Health Group has been importing ribavirin since the late 1980's, when its potential anti-viral activity against HIV was first being looked into. Ribavirin's promise as an anti-HIV agent didn't pan out; however, over the last few years, studies have shown the drug to be useful against hepatitis C when used in combination with alpha-interferon. Until last June, ribavirin remained unapproved in the United States, and more people with hepatitis C looked to the PWA Health Group to help them access the drug. In many ways, the current state of hepatitis C treatment is similar to what was going on with HIV treatment in the early 90's. Understanding how the virus works is confusing, questions of when or whether to start treatment are completely unclear, treatment options are very limited, how to interpret the relative success or failure of treatment is difficult, and one pharmaceutical company, Schering-Plough, is trying to "own" the disease in much the way that Burroughs-Wellcome attempted to "own" and profiteer off of HIV in the late 80's. Now that ribavirin has been approved, although in an obscene package, the PWA Health Group continues to import ribavirin for people who want to create a hepatitis C treatment combination other than the one being forced on them by Schering-Plough. This continues the Health Group's tradition of carrying medications at lower prices than the pharmaceutical companies charge. We are also working with smart, imaginative and dedicated individuals to spearhead a national campaign to force Schering-Plough to respond in an ethical manner to the needs of people with hepatitis C. This campaign has included: working with the media; bringing together a coalition of organizations and individuals to work on the issue, including seasoned AIDS activists, people with HIV and hepatitis C co-infection, and people with hepatitis C who are new to advocacy work; meeting with representatives from Schering-Plough; calling for congressional hearings; and, if necessary, direct action. The following consensus statement, endorsed by hepatitis C, HIV, and other health care organizations and individuals throughout the country, was sent to Schering-Plough and representatives at the FDA last month. If you or your organization would like to endorse the statement, please contact us at the Health Group. As this issue of Notes from the Underground goes to print, Schering-Plough is arranging a meeting for community representatives in April. This meeting must address the issues raised in the consensus statement in a substantive manner rather than provide the company a forum for a dog and pony show. We'll see.     Consensus Statement to Schering-Plough Pharmaceuticals from the Health Care Community Regarding Rebetron Development and Marketing February 19, 1999 Raul E. Cesan President and Chief Executive Officer Schering-Plough Corporation Dear Mr. Cesan: Last year's FDA approval of ribavirin (Rebetol) as an anti-viral agent to be used in combination with alphainterferon is an indisputable advance in the treatment of Hepatitis C (HCV). Unfortunately, with that approval came a precedent-setting packaging practice which has created impediments to patient/doctor treatment choice and access the likes of which we have never seen. Schering-Plough's bundling and pricing decisions negatively affect every individual considering HCV treatment. The undersigned coalition of organizations and individuals affected by Hepatitis C and, therefore, Schering-Plough's unethical practices demands the following:   Ribavirin must be unbundled from Intron-A;   The price of ribavirin must immediately be lowered in line with other anti-virals in the same nucleoside analogue class;   HCV viral load results must be unblinded for participants in Schering-Plough clinical trials; and   Schering must create access to Rebetron for those who cannot afford it and, until it is unbundled, create access to ribavirin for those who wish to use it in combination with another interferon. UNBUNDLING OF REBETRON: Ribavirin must be unbundled from Intron-A and made available as a separate anti-viral agent to be used in combination with other interferon formulations. It is to be clearly labeled so that the drug is not used as a single agent for HCV, but only in combination with another HCV treatment. In addition, clinical trials comparing the efficacy of Rebetron with combinations of ribavirin and other interferon formulations must be developed immediately through inter-company cooperation and access of ribavirin to private researchers. Never in the history of drug development, approval or marketing has bundling like this been forced on any patient population. For example, Glaxo Wellcome manufacturers Combivir, which combines two of that cornpany's anti-HIV drugs, AZT and 3TC, in one pill. However, each of these drugs are also available individually, allowing people with HIV to pick and choose the most useful combination treatment for them. If Glaxo did what Schering has done, treatment options for people with HIV would be severely -- and dangerously -- limited. The bundling of ribavirin with Intron-A prevents doctors from the legal and common practice of prescribing off-label. We know that the FDA is prepared to work with Schering on the unbundling process. People with Hepatitis C must be able to choose from the available interferons in order to have the best shot at ribavirin/interferon combination treatment. This is a matter of individual patient choice! PRICING: Ribavirin is to be cut in price by 75% from the current estimated price of $1,020/month (1,200 mg/day dosing)to $255/month, near its 1995 price and in line with current drugs in its class. Ribavirin is an easy-to-manufacture nucleoside analog, yet its price is exceptionally high. It costs 346% more than Ziagen (abacavir), the most expensive anti-HIV nucleoside analog. Ribavirin is available as a single agent in Mexico and Western Europe, where Schering-Plough does not yet control the supply, and the price there is at least 265% lower than the putative U.S. price (calculated as the price of Rebetron minus that of Intron-A). Schering would have ample opportunity to make substantial profits with a lower-priced, unbundled ribavirin product since it is in high demand for use with other companies' interferons. UNBLINDING OF VIRAL LOAD RESULTS IN CLINICAL TRIALS: Schering-Plough must immediately unblind the results of clinical trial participants' HCV viral load tests. Rather than advising doctors to explain the reasons for blinding to their patients, Schering-Plough should initiate and finance an education campaign, implemented by the primary care physicians treating people with Hepatitis C, which will endeavor to explain the importance of viral load test results in assessing the full clinical picture of the individual's response to his/her treatment regimen. With such education, people enrolled in the clinical trials can make thoughtful, well-informed choices about whether or not to continue in the trial if their viral loads are increasing. Schering-Plough must learn to treat trial participants as fully intelligent individuals capable of making informed decisions based on complete, clear and accurate communication between the investigators and the participants. Studying the history of HIV clinical trial design and the ethics involved in the creation of those trials would be of enormous value. There are members of the HIV and co-infected community who would be invaluable in these discussions. THE CREATION OF ETHICAL PATIENT ASSISTANCE PROGRAMS: Schering-Plough must develop two truly comprehensive, ethical drug assistance programs: a true, meaningful expanded access/compassionate use program to help individuals gain access to ribavirin alone in order to create viable personal treatment regimens with other available interferons, and   a more conventional program to provide individuals access to Rebetron free-of-charge when they have no means to pay. Until the products are unbundled, the expanded access/compassionate use program must allow individuals, through their doctors, to obtain ribavirin alone and free of charge for use with other interferons or different doses of Intron-A -- without having to jump through hoops and undergo substandard therapy first. Guidelines for both patient assistance programs must be clearly written, publicly available, and must not be used to recruit patients into clinical trials. Schering must keep a record of all individuals who apply to the program, protecting anonymity by the use of unique identifier numbers, and provide a monthly report, publicly available for review, on the use of the programs. Schering-Plough Pharmaceuticals is clearly invested in the development and marketing of Hepatitis C treatments. Schering representatives have indicated that the company understands the importance of developing a cooperative working relationship with the HCV community and its allies, including the HIV community and other individuals and organizations concerned with equitable access to health care and the ethical development of useful treatments. Since the issues discussed in this statement were first raised last summer, there has been little indication from Schering-Plough that the company takes patient concerns seriously. Rather, there has been obfuscation and the occasional bone. The major concerns remain unaddressed. Continuing such a strategy will only exacerbate the division between Schering-Plough and the broad community, satisfying neither party. The leadership to accomplish these goals clearly exists within the community. We look for similar leadership from Schering-Plough-leadership that leads to positive action. Therefore, in the interest of public health, we the undersigned demand that Schering-Plough respond immediately to the concerns set forth in this statement. We look forward to being contacted by you within the next two weeks to make arrangements to discuss these issues in a substantive manner. Please contact James Learned at the PWA Health Group, Brian Klein at HAAC, or Ben Cheng at Project Inform. People with HCV have waited long enough. cc: Richard Zahn, President, Schering Oncology/Biotech Heidi M. Jolson, MD, MPH, Director, Division of Antiviral Drug Products, Food & Drug Administration Richard Klein, Office of Special Health Issues, Food & Drug Administration Robert M. Tenery, Jr., Council on Ethical and Judicial Affairs, American Medical Association Kathleen Hurtado, Vice-President, Marketing & Sales, Schering-Plough Pharmaceuticals Stephen Taglienti, Senior Product Manager, Schering Laboratories