Pharma has landed a double blow against the American government. The US Court of Appeals in New York has ruled that a drug salesman was exercising his right to free speech by pitching a narcolepsy drug as effective against insomnia, chronic fatigue and other conditions the Food and Drug Administration had not approved. If the Supreme Court upholds this decision, companies will pay fewer multi-billion dollar fines and useless healthcare spending will increase.
Regulators argued that the pitch showed the salesman was illegally selling a misbranded drug. But the court said he had a free-speech right to give doctors truthful information so they could legally prescribe the medicine. The regulator violated that right, the judges ruled, by barring his off-label recommendations.
The decision applies only in three states, but the FDA is likely to appeal. That could put the case before the Supreme Court and make this victory for the pharmaceutical industry a national precedent. GlaxoSmithKline, for instance, shelled out $3 billion in July to settle three indictments, two of which were off-label marketing of antidepressants and other drugs. In the past four years Pfizer, Johnson & Johnson, Abbottand Eli Lilly have each paid, or are negotiating to pay, settlements over $1 billion.
It's not just missing these regular injections of cash that will cause the government pain. It will also increase medical spending. That's because pharma reps will be allowed to discuss studies of drugs that the FDA has not vetted. Unfortunately, some studies are shoddy and clinical trials cherry-picked by sales staff.
This encourages doctors to prescribe extremely costly drugs, which can have little benefit, to patients.
In the GSK settlement, for example, the company allegedly participated in preparing, publishing and promoting a journal article that misleadingly asserted its drug Paxil was effective in treating depression in minors. Other studies showed the drug didn't work in teens, with some demonstrating that antidepressants like Paxil may increase suicide risk.
The industry has engaged in such behavior because it is financially appealing. The ruling increases the temptation, which is likely to pile more costs onto Medicare and Medicaid, which spent $86 billion on branded pharmaceuticals in 2010. With Medicare already accounting for about 4 percent of GDP, that's bad news for the nation's financial health.