Drug makers find whistle-blowing a bitter pill to swallow


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By John Russell

If rising costs and demanding regulators aren’t enough to torment pharmaceutical executives, here’s one more thing to worry about:

Some of your employees might be wearing a wire. And collecting documents and voice mails. And looking for a lawyer who can help them blow the whistle on what they consider your dirtiest secrets.

This year, the pharmaceutical industry is caught in a wave of whistle-blower cases, as employees help the government shine a bright light on what they consider fraudulent behavior.

Pharmaceutical fraud accounts for the largest amounts of money paid out under the False Claims Act, a 146-year-old federal law that allows ordinary people, usually employees, to file civil actions against federal contractors for fraud, kickbacks and shoddy services.

In January, Eli Lilly and Co. agreed to pay $1.4 billion to settle charges it illegally promoted its antipsychotic drug, Zyprexa, for unapproved uses. Nine whistle-blowers, former Lilly employees, split about $100 million of the settlement as their reward.

In September, Pfizer said it would pay $2.3 billion to settle charges that it illegally promoted numerous drugs, including the painkiller Bextra. Six whistle-blowers split about $102 million.

In October, AstraZeneca reached a $520 million agreement to settle investigations into illegal marketing of its psychiatric drug, Seroquel. Several whistle-blowers will split an undisclosed amount of money.

And last week, in a courtroom in Trenton, N.J., the latest case began, as a former sales worker at Janssen (owned by Johnson & Johnson) testified she was fired in 2004 for complaining about what she considered pressure to illegally promote the antipsychotic drug Risperdal for unapproved uses.

Meanwhile, more than 1,000 active whistle-blower cases are backlogged at the Department of Justice, and about 200 of them deal with drug companies.

“The seeds for these cases were planted a number of years ago, and they’re finally coming to fruition,” said Reuben Guttman, a lawyer in Washington who specializes in whistle-blower cases. “There’s lots more coming.”

Whistle-blowers typically get 15 percent to 30 percent of any recovered damages, an amount that can let them retire with millions in the bank.

Last year, a former Merck sales manager collected $68 million for helping expose an alleged drug-pricing scheme. And a microbiologist at Warner-Lambert was awarded $26.6 million for helping expose illegal marketing of an epilepsy drug for unapproved uses.

Of the top 20 False Claims Act cases, measured by the amount of money recovered, 12 involved judgments or settlements against pharmaceutical companies, accounting for billions of dollars in recoveries.

The issue is a touchy one for pharmaceutical companies. The cases are drawing big headlines just as the industry is talking about how it is becoming more ethical and transparent and trying to win public support during the health-care reform debate.

The last things the drug makers want to talk about are past legal problems.

“From our perspective, our matters are settled, and now it’s just time to look forward,” said Angela Sekston, a Lilly spokeswoman.

The industry’s trade association, the Pharmaceutical Research and Manufacturers of America, said the cases are often complex and take years to sort out. Often, a company knows very little about the allegations during that period, the group said.

“It’s not completely unexpected that the cases would be filed in waves as the government wraps up a group of investigations,” the association said in a statement. “And publicity in one case can spawn others.”

One reason the pharmaceutical industry is in the cross-hairs is the way the law is being used now. Previously, it was used to fight profiteering and fraud against the government, such as defense contractors padding contracts.

But with the government picking up more of the nation’s health-care costs — generally through the Medicaid and Medicare programs — the focus shifted to doctors, hospitals, drug makers, device makers and other industry players. And by dangling rich rewards, the government suddenly got lots of help from ordinary workers.

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