Healthcare Revisited -Legal Factors in Healthcare Costs (con’t)

Healthcare Revisited –Legal Factors in Healthcare Costs (con’t)

The following is a list of some of the largest settlements reached between the United States Department of Justice and pharmaceutical companies from 1991 to 2012, ordered by the size of the total settlement.”

YearCompanySettlementViolation(s)Product(s)Laws allegedly violated
(if applicable)
2012GlaxoSmithKline[1][6]$3 billion ($1B criminal, $2B civil)Criminal: Off-label promotion, failure to disclose safety data.Avandia (not providing safety data), Wellbutrin,False Claims Act/FDCA
Civil: paying kickbacks to physicians, making false and misleadingPaxil (promotion of paediatric use), Advair,
statements concerning the safety of Avandia, reporting false bestLamictal, Zofran,
prices and underpaying rebates owed under the Medicaid Drug Rebate ProgramImitrex, Lotronex,
 Flovent, Valtrex;
2009Pfizer[2]$2.3 billionOff-label promotion/kickbacksBextra/Geodon/False Claims Act/FDCA
2013Johnson & Johnson[7]$2.2 billionOff-label promotion/kickbacksRisperdal/Invega/False Claims Act/FDCA
2012Abbott Laboratories[8]$1.5 billionOff-label promotionDepakoteFalse Claims Act/FDCA
2009Eli Lilly[9]$1.4 billionOff-label promotionZyprexaFalse Claims Act/FDCA
2001TAP Pharmaceutical Products[10]$875 millionMedicare fraud/kickbacksLupronFalse Claims Act/
Prescription Drug Marketing Act
2012Amgen[11]$762 millionOff-label promotion/kickbacksAranespFalse Claims Act/FDCA
2010GlaxoSmithKline[12]$750 millionPoor manufacturing practicesKytril/Bactroban/False Claims Act/FDCA
Paxil CR/Avandamet
2005Serono[13]$704 millionOff-label promotion/SerostimFalse Claims Act
kickbacks/monopoly practices

The Largest drug-related class action settlement was in 2000

“Fen-Phen diet drugs $3.8 billion

In 2000, a federal judge in Philadelphia approved a $3.75 billion settlement over a diet drug known as fen-phen that had been associated with potentially fatal heart valve damage. Six million people reportedly used fen-phen, sold by American Home Products, before it was pulled from the market in 1997. The settlement provides up to $1.5 million to users, depending on their injuries and how long they used the drug.”

“News flash, just announced by far the largest settlement offer to date and this is for only one drug and one company involved in the Opioid Crisis:                             The maker of OxyContin, Purdue Pharma, and its owners, the Sackler family, are offering to settle more than 2,000 lawsuits against the company for $10 billion to $12 billion. The potential deal was part of confidential conversations and discussed by Purdue’s lawyers at a meeting in Cleveland last Tuesday, Aug. 20, (2019), according to two people familiar with the mediation.

Brought by states, cities, and counties, the lawsuits — some of which have been combined into one m massive caseallege the company and the Sackler family are responsible for starting and sustaining the opioid crisis.

Additional Update: In November 2019 it was announced that the current offer to settle the Opioid Class action was now at $50 Billion for the two largest manufacturers of the product!

The point is that in the long run all of these costs end up being passed along to the consumer in the form of higher prices (you might say an added tax).

Healthcare Revisited -Legal Factors in Healthcare Costs

Healthcare Revisited –Legal Factors in Healthcare Costs

We have nine times as many lawyers per capita as France and forty times as many as Japan. Does this make sense to you? Medical issues have become a staple for the Legal Industry. I am convinced that when there is an oversupply of lawyers, they have no choice to create additional business opportunities. The result is an increase in costs to drug companies and physicians and hospitals in the form of malpractice insurance.

One example that amazes me is the blood thinner drug Xarelto. As of this writing, they had settled a class-action lawsuit. I found the following describing the results of the suit.

“Makers of the powerful blood thinner Xarelto have agreed to pay $775 million to settle about 25,000 lawsuits that claim the drug caused serious injuries such as internal bleeding, stroke, and death. “It may have taken more than four years and six separate trials but litigation like this is an important way for consumers to have a voice in matters of drug safety,” attorney Brian Barr, co-lead counsel for plaintiffs in the litigation, said in a news release.                                                            Bayer and Johnson & Johnson jointly sell Xarelto and will each pay half of the settlement. Neither company admitted liability.”

While this is not surprising, the fact that they are still aggressively advertising the drug on TV is!

I can’t excuse the abuses of Drug companies outlined in Chapter 4. But there is clear evidence that the legal profession is one industry that is milking the healthcare system and thus the taxpayer.

Source for the following:\

“The National Practitioner Data Bank, a computer database of the United States Department of Health and Human Services that collects information about physicians, has released its annual report concerning medical malpractice payouts. According to the published report, approximately $4,031,987,700 was paid to plaintiffs in medical malpractice lawsuits in 2018.

Healthcare Revisited The Cost of Prescription Drugs

Healthcare Revisited    The Cost of Prescription Drugs

2017 Prescription Drug Cost Savings

The average percentage saved outside the U.S. for select prescriptions.

France 67%                        Italy   53%

Spain   55%                        Japan      65%

Germany      51%

One significant factor in the cost disparity is that the R & D costs by US pharmaceutical companies are borne via domestic pricing. Export sales are considered “incremental” and pricing is much, much lower.

“Hopkins University, tells NPR that raising the cost of existing drugs benefits drugmakers and insurers.

Research and development is only about 17 percent of total spending in most large drug companies,” he says. “Once a drug has been approved by the FDA, there are minimal additional research and development costs so drug companies cannot justify price increases by claiming research and development costs.

The study did not examine why prices of existing drugs have gone up, but the researchers say a lack of competition and the regulatory environment in the U.S. allow “for price increases much higher than in other countries.”

From 2008 through 2014, average prices for the most widely used brand-name drugs jumped 128%, according to prescription-benefit manager Express Scripts Holding Co. Reasons include increasing research costs, insufficient competition, and drug shortages.

However, none of these issues completely explain the price disparity. We do need some form of price controls, especially on “mature drugs” and also some assurance that R&D costs are factored into worldwide pricing. Also, we need to investigate the pricing in the baseline countries for the most consumed drugs. If there is a significant price difference, then the companies should be called before Congress to justify. Based on the data from the baseline countries, these costs should be reduced by 50% at a minimum.