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GSK, Pfizer and J&J among the most-fined drug companies, according to study

Financial penalty

[Image courtesy of JP Valery on Unsplash]

GlaxoSmithKline (LON:GSK) paid nearly $10 billion in inflation-adjusted financial penalties between January 2003 and December 2016, the highest tally for any drug company, according to research published in JAMA. That sum was more than any other in a sampling of 26 companies paying fines inside the U.S.

Pfizer (NYSE: PFE) was next in line with almost $3 billion in fines.

Johnson & Johnson (NYSE: JNJ) came in the third slot with $2.7 billion in penalties.

“The pharmaceutical industry is unique in that all large pharmaceutical firms explicitly state that they are focused on promoting patient welfare, yet the majority of large pharmaceutical firms engage in illegal activities that harm patient welfare,” said Denis G. Arnold, a coauthor of the study and a professor at the University of North Carolina at Charlotte.

“The industry also has the worst reputation of any industry according to Gallup polling. This is an intriguing problem for anyone interested in business ethics and public health,” Arnold stated.

Spokespeople for the three companies could not be immediately reached for comment.

In all, the 26 pharmaceutical companies paid some $33 billion in fines during the 13-year period. The top 11 alone accounted for $28.8 billion, or 88%, of the total.

Financial penalties as a share of revenue were highest (greater than 1%) for Schering-Plough, GlaxoSmithKline, Allergan and Wyeth.

An overwhelming majority, 85%, of the pharmaceutical companies sampled had received financial penalties between 2003 and 2016.

A variety of state and federal authorities meted out the fines.

Pricing violations were the most common reason for fines. In all, there were 78 total fines among the 26 companies related to overpricing drugs reimbursed by the government, fraudulent billing, underpaying rebate obligations and other pricing offenses.

The study did not consider the cost of class-action settlements or penalties from governments outside of the U.S.

“Big pharma has such a bad reputation that the surprise, for me, was that four firms had no settlements or evidence of illegal activity over the course of our study and another four had comparatively minimal incidences of misconduct, whereas the worst offenders had multiple instances of misconduct over many years,” Arnold said. “In other words, big pharma is not monolithic. Several firms have succeed in being profitable and ethical, presumably because of ethical leadership and good governance.”

When asked what the pharma industry can do to improve its reputation, Arnold pointed to the defense industry, which has “succeeded in instilling a strong ethics culture in each firm in the industry via cooperation and strong ethics and compliance programs,” he said. “The pharmaceutical industry can and should do the same. Indeed, given its terrible reputation, and its failure to adhere to PhRMA codes, it comes across as an incompetent industry when it comes to self-regulation and ethical leadership.”

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