In part I, we discussed the background of frauds committed by the pharmaceutical industry in the context of the recent imposition of heavy fines on India’s leading company Ranbaxy by the US govt for irregularities committed by the company on several counts of civil as well as criminal nature. As a logical continuation of the theme, the nature and extent of frauds committed by companies in recent years and the role of whistleblowers in the detection of the frauds, particularly in the wake of the growing generic drugs market across the globe will be discussed.
 
Deliberate vs opportunistic frauds
The definition of fraud itself varies a great deal. Some are accidental or opportunistic in nature often times due to ignorance that  a punishable fraud is being committed. A case in point is the unlawful promotion of off-label use of drugs for indications for which the drug has not been approved. Similarly, off label promotions can also include use in patient populations (geriatrics, children, women in reproductive phase etc) for whom the drug has not been approved for marketing or are contraindicated. Recommending dosages higher than approved ones also constitute off label use. Usefulness of a drug for off label indications or in unapproved populations is first observed in clinical practice and the information is then passed to the company representatives who in turn promote it for such use with or without authorisation from the management or sometimes even from the marketing team. This happens often times in good faith that the drug will benefit patients even though legally it is unauthorised by the authorities and therefore is a fraud. If a physician is convinced that the off label use is beneficial to the patient, he prescribes it even if it is legally not allowed. However, apart from the action being illegal, there is a danger that since the new use is not supported and validated by any pre-clinical or clinical data, it can be truly harmful for the patients. One has little evidence based knowledge on the dosages to be used for the new indications in the absence of clinical data for use in such indications.

With reference to non-reporting of adverse drug reactions (ADRs) observed during clinical trials, the relationship between the use of the experimental drug to the ADR may  not be clear in many cases. In such cases the sponsor of the trial together with the investigator makes a judgement of the cause-effect relationship and the risk to benefit ratio. In the absence of data to show that they are related to the use of the  drug, unless they are truly of a serious nature,  adverse effects are often not reported in good faith.

Detection of frauds - the role of whistleblowers
The regulatory agencies in all countries have under their respective laws statutory provisions and requirements to continuously monitor the performance of drug companies to assure good manufacturing and marketing practices, prescribed quality control systems at all levels  and ethical behaviour. However, most countries fall well short of meeting their obligations under the law due to inadequate resources of skilled manpower, infrastructure, finances and systems and therefore have a poor record of implementation. Routine inspections of facilities, products and practices are carried out even in the more efficient countries in not more than 10% of the target groups and appropriate action taken in case of defaults even in a fewer number. The concept of whistleblowing which essentially means reporting to the concerned authorities by an employee or associate to expose the employer company which commits misconduct, dishonesty or illegal activity is well entrenched in a few countries, notably in the US. In 1989, the US legislated a Whistleblower Protection Act to protect the whistleblower from reprisals by his employer or even third parties and ensure safety and security. In the US, there are even professional whistleblowers hired by Federal Agencies to report such misconduct. It has been reported that in 2012 alone there have been around 900 whistleblow suits filed in the State and federal US courts of which 10% were in the pharma segment. One of the first frauds involving a whistleblower on which the US govt penalised the defrauding party Schering Plough was in the case of Claritin for which the company was fined $ 345 million. To encourage employees and others to whistleblow, the govt officially pays out a per cent of the fine imposed on the company to the whistleblower. In the case of Dinesh Thakur, the whistleblower in the Ranbaxy case, who worked with the US Federal Govt for over seven years on the case, a payment to the order of Rs. 244 crore was reportedly made. In India, there have been attempts to bring in legislation under the term Public Interest Disclosure Act,  the draft of which have been approved by the Cabinet and presented to the Lok Sabha. The Bill is fashioned after the British Act of 1998 which was meant to protect the informer from any possible retaliatory action including legal action by the employer. It is doubtful whether even when the Indian Act is notified and the rules framed, it will meet the standards obtaining in the US and some other countries and make it an effective system for detection of fraud by corporations and other agencies including Govl and NGOs and protection of the concerned whistleblowers.

Extent of frauds
Even though the pharmaceutical industry is the most regulated and controlled industrial segment, it is well nigh impossible to continuously monitor the activities of companies which number several thousands and deal with the manufacturing and marketing of tens of thousands of drug formulations and several hundred APIs. Not even the best and professionally set up regulatory agency has the capacity or the skills required to ensure adequate vigilance of the industry’s activities. Self regulation and strict compliance with the regulatory standards are thus very crucial. For every irregularity on the part of the companies detected by the regulatory agencies, there are possibly several which go undetected. Over the years many companies including some of the most dominant and respected ones have been guilty of several unacceptable irregularities bordering on outright frauds. In 2012, the US govt raked up over $ 6 billion by way of penalties from such companies more than double that of the previous year. In the US, during the period 2010 to 2012, 14 companies were fined by  States and 5 by the Federal Agency for major offences. The list of companies included GlaxoSmithKline, Johnson & Johnson, Pfizer, Abbotts, Amgen, Allergen, Serono, Bristol Myers Squibb and Merck, all reputed companies with an excellent track record of providing quality products to global markets. The fines ranged from $ 500 million to $ 3.8 billion, not counting settlement with patient groups. In fact companies whose products are banned or withdrawn due to unacceptable adverse effects detected post-marketing, make provisions for payment of product liability claimed by patients particularly if there is evidence that relevant information during pre-clinical and clinical studies was supressed. For example, in the case of Vioxx, the anti arthritic drug, Merck has provided for payment of up to $ 1 billion to settle claims from patients.

Major offences  by the companies were related to promotion of off label usage of drugs (for indications other than those which were approved for use), bribery and kick backs for members of the medical profession, insurance frauds of diverse nature, defrauding Government health programmes, manipulating pre-clinical and clinical trial data, supressing information on adverse effects, non-compliance with statutory requirements under GLP, GCP and GMP, price manipulations, anti-competitive practices etc.

The heaviest fine so far imposed on a pharmaceutical company has been in the case of GlaxoSmithKline, where two products Paxel and Welbutrin both anti psychotic drugs as well as Avandia the anti-diabetic drug were implicated and the total fine amounted to $ 1 billion on criminal fines and $ 2 billion in Civil penalties following a nine year investigation into the company’s activities. The charges levelled against the company which were admitted to by the company included bribing doctors, false reporting on effectiveness, fabricating safety data, defrauding Medicare and Medicaid schemes and National Government Health Programmes.

Would these developments and deterrent penalties reduce the incidence of fraud in the future? Hopefully they will, not necessarily due to interventions by the regulatory agencies, but more likely due to more internal vigilance, self regulation and affirmative action on the part of top managements of companies.