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Authors

John E. Osborn

Abstract

American pharmaceutical manufacturers are under siege. Even casual observers of this sector recognize the severe challenges to the prevailing business model: declining research productivity; heightened regulatory focus on safety and comparative outcomes with a correspondingly low number of new product approvals; decreasing market capitalization of mature companies; increasing product liability claims; evolving price restraints in the face of increasing managed care market power; and the looming uncertainty of the effects of federal health care reform. But, in fact, the single greatest threat to the pharmaceutical industry may be the policy environment within the United States, which is restricting the ability of companies to speak truthfully with physicians about their products.

During the past decade drug companies have endured intrusive government investigations of their business practices, particularly with respect to the marketing and promotion of their products. Firms face extraordinary civil and criminal liability if they discuss or otherwise attempt to influence prescribing other than for the indications approved by the U.S. Food and Drug Administration (FDA). There are now well more than one hundred ongoing civil and criminal investigations involving the U.S. Department of Justice (DOJ) and units of the U.S. Department of Health and Human Services (HHS), as well as associated investigations run by state attorneys general. Billions of dollars in civil and criminal penalties have been paid to date for alleged wrongdoing, and many billions more surely will be paid in the coming years, on top of the costs of the investigations themselves and the potential further liability that may stem from related private class actions brought by plaintiffs' counsel. The concomitant media and political scrutiny has irreparably harmed the reputation of the industry. If the history of Western civilization may be seen as one long battle pitting order against freedom, the government's effort to curtail off-label speech might be dismissed as a minor skirmish on the outskirts of town. However, this issue is anything but minor in policy terms. The eventual outcome will have significant implications for the practice of medicine, the development of new drugs, and the public health.