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GlaxoSmithKline Accused of Corruption by China

July 11, 2013 by Leave a Comment

The Ministry of Public Security said people working for the drug maker had bribed doctors, hospitals and government officials and funneled illicit payoffs through travel agencies, pharmaceutical industry associations and project financing.

The government did not name any executives or detailed figures. But it said the case involved “huge amounts of money.”

The investigation appears to be part of a broad government crackdown on fraud and corruption involving foreign companies.

The announcement came about a week after the authorities raided offices and detained people working for GlaxoSmithKline in three different cities, including Shanghai, according to the state-run news media.

The government findings released Thursday were unexpected because executives at GlaxoSmithKline had said just last week that an internal investigation of its China operations found no evidence of bribery or corrupt activities.

A spokesman for the company said last week that the company had initiated its own investigation after a whistle-blower at the company came forward this year with accusations of wrongdoing in the China operation.

On Thursday, a spokesman for GlaxoSmithKline said that the company was willing to cooperate with the investigation and that the Chinese announcement represented the first details of the case the company had been informed about.

The company also released a statement saying: “We take all allegations of bribery and corruption seriously. We continuously monitor our businesses to ensure they meet our strict compliance procedures. We have done this in China and found no evidence of bribery or corruption of doctors or government officials. However, if evidence of such activity is provided we will act swiftly on it.”

Like many other large pharmaceutical companies, Glaxo has been investing significantly in China and other emerging markets, seeking to capitalize on a growing middle class that can increasingly afford to pay for prescription drugs.

Although China still accounts for a small fraction of Glaxo’s business, sales in the country grew 17 percent in 2012, to $1.2 billion.

Sales in emerging markets accounted for about a quarter of the company’s business in 2012.

Earlier this year, The Wall Street Journal reported that a whistle-blower had shared some information with the newspaper and claimed that executives at the company had bribed doctors and hospitals.

It is unclear whether the investigation by the Ministry of Public Security is linked to the whistle-blower.

Regulators in China are reviewing the prices and production costs of major Chinese and global drug companies in what appears to be an effort to lower drug prices.

Feng Zhanchun, who specializes in public health at Huazhong University of Science and Technology in Wuhan, China, said that the Chinese pharmaceutical market was struggling to adapt to market forces.

“Economic crimes, including commercial bribery and kickbacks, are one of the negative results generated in the transitional period in China,” he said in a telephone interview. “In the midst of a transition from a planned economy to a market economy, laws and regulations are not fully in place, and medical institutions have no perfect operational mechanisms.”

China is one of the world’s fastest-growing markets for pharmaceutical products, but the government has long held tight control over pricing of certain drugs.

Still, in a country where kickbacks are common and the sales channels for many products are swayed by bribery, travel vouchers and payoffs, it is not unusual for major corporations to come under scrutiny from Chinese or Western regulators.

Stephanie Yifan Yang contributed research.

Article source: http://www.nytimes.com/2013/07/12/business/global/china-accuses-glaxosmithkline-of-corruption.html?partner=rss&emc=rss

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F.D.A. Approves Raptor Drug for Form of Cystinosis

April 30, 2013 by Leave a Comment

Reluctant to say it aloud, Natalie Stack wrote her 12th birthday wish on a restaurant napkin: “To have my disease go away forever.”

A decade later, her wish is a step closer to being realized.

On Tuesday, the Food and Drug Administration approved a new drug developed with early funding from a foundation that Natalie’s parents established in response to that plea. The drug, which will be sold by the Raptor Pharmaceutical Corporation under the name Procysbi, is for nephropathic cystinosis, an extremely rare inherited disease that, if untreated, typically destroys the kidneys by age 10 and even with a kidney transplant can lead to death by early adulthood.

The story behind Procysbi’s development is yet another example of the important role that determined parents and disease foundations can play in supporting drug development, particularly for rare diseases.

But Procysbi’s approval could also raise troubling questions about whether society can afford to pay extremely high prices being charged for drugs that treat rare diseases. That is because Procysbi is not a new chemical entity, but rather a more convenient and more tolerable version of an existing drug. The existing drug costs about $8,000 a year, whereas Procysbi is expected to cost $100,000 to $300,000.

High prices are typical for drugs to treat so-called orphan diseases. The health care system has tolerated that because, given the small numbers of patients, the overall cost is not that high. But as the orphan drug business model becomes increasingly popular among pharmaceutical companies, the collective cost of the drugs is beginning to mount.

The market research firm EvaluatePharma recently predicted that orphan drugs will constitute 15.9 percent of spending on prescription drugs by 2018, up from 5.1 percent in 1998. And a survey of 50 insurers and pharmacy benefit managers by J.P. Morgan found that drugs for rare diseases would be one of the areas increasingly subject to scrutiny and possible restrictions on use.

While many medicines are unpleasant to take, the existing drug for cystinosis — Cystagon, from Mylan Inc. — literally stinks. It has a strong rotten-egg smell that causes bad breath and body odor. It also causes nausea, vomiting and other abdominal problems. Moreover, it must be taken every six hours, which means patients have to get up in the middle of the night, or their parents must wake them.

Procysbi has the same ingredient as Cystagon but consists of enteric-coated spheres for delayed release. It can be taken every 12 hours instead of every six. The gastrointestinal side effect, halitosis and body odor, are reduced, though not eliminated, according to the parents of children with the disease.

Christopher M. Starr, co-founder and chief executive of Raptor, said he expected it would take time to persuade insurers to bear the extra cost.

“I get it,” he said. “It seems trivial when you first look at this.” He said doubters would think: “You’re dying of a disease. Take it every six hours if that is what you need to do.”

But Dr. Starr argued that the “subtle advantages” of Procysbi “add up to a significant benefit.” He said as many as 80 percent of patients skip doses of Cystagon, which studies have shown can lead to more rapid deterioration of the kidneys, eyes and other organs. The more tolerable Procysbi should allow people to better take their medicines.

Dr. Starr said the price reflected the value of the drug and the need to recoup Raptor’s development costs. The company’s regulatory filings show it has spent $37.4 million on research and development of the cystinosis drug from the company’s inception in 2005 through the end of 2012. Total corporate expenses in that period were $110 million.

Procysbi is the first drug approved for Raptor, which is based in Novato, Calif. Analysts expect sales could exceed $100 million annually. Shares of Raptor rose 10 percent in Tuesday trading.

Procysbi treats a very rare disease. Only about 500 people in the United States, and 3,000 worldwide, are estimated to have cystinosis, according to the F.D.A. The disease is characterized by a buildup in cells of the amino acid cystine. The buildup damages the kidneys and eyes and eventually the thyroid gland, muscles and other organs.

Procysbi works by breaking down cystine. Its active ingredient is cysteamine, the same as in Cystagon. Cysteamine was first shown to work in the 1970s by a team led by Dr. Jerry A. Schneider at the University of California, San Diego. The F.D.A. approved Cystagon in 1994.

The drug research got an added boost from the efforts of the Stacks.

When Natalie Stack was born in 1991, “we were told we’d be lucky if Natalie lived to graduate from high school,” said her mother, Nancy Stack, who lives in Corona del Mar in Southern California. But it was not until reading Natalie’s birthday wish in 2003 that Ms. Stack and her husband, Geoffrey, a real estate developer, formed the Cystinosis Research Foundation, raising almost $400,000 at an initial cocktail party.

Article source: http://www.nytimes.com/2013/05/01/business/fda-approves-raptor-drug-for-form-of-cystinosis.html?partner=rss&emc=rss

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Glaxo Settles Cases With U.S. for $3 Billion

November 4, 2011 by Leave a Comment

The settlement would be the largest yet in a wave of federal cases against pharmaceutical companies accused of illegal marketing, surpassing the previous record of $2.3 billion paid by Pfizer in 2009. In recent years, drug companies have been prime targets of federal fraud investigations, which have recovered tens of billions of dollars for Medicaid and Medicare.

The cases against GlaxoSmithKline include illegal marketing of Avandia, a diabetes drug that was severely restricted last year after it was linked to heart risks. Company whistle-blowers and federal prosecutors said the company had paid doctors and manipulated medical research to promote the drug.

GlaxoSmithKline had already set aside cash for the settlement, which analysts said would remove legal uncertainty. The company’s stock rose 2.96 percent Thursday to $44.55 a share, near its 52-week high, amid a broader market advance of about 2 percent.

“This is a significant step toward resolving difficult, long-standing matters which do not reflect the company that we are today,” Andrew Witty, chief executive of GlaxoSmithKline, said in a statement. “In recent years, we have fundamentally changed our procedures for compliance, marketing and selling in the U.S. to ensure that we operate with high standards of integrity and that we conduct our business openly and transparently.”

The agreement to settle its biggest federal cases should be completed next year, the company added in the statement. It said $3 billion would settle not only the Avandia case, but also a Justice Department investigation of its Medicaid pricing practices and a nationwide investigation led by the United States attorneys in Colorado and Massachusetts into the sales and marketing of nine of its drugs from 1997 to 2004.

GlaxoSmithKline did not specify how much money would resolve each case, nor the possibility of criminal findings and fines, saying the final settlement remained under negotiation. A Justice Department spokesman declined to comment.

GlaxoSmithKline, with a market value of more than $110 billion, had net profit of about $5 billion on $43 billion sales in the year ending Sept. 30.

The company set aside $3.4 billion in January — eliminating its fourth quarter profit — and $2.3 billion in July 2010 to resolve a variety of civil and criminal cases.

Critics of the settlements made with drug companies argued for stiffer penalties, including prison sentences for corporate officials.

Frances H. Miller, a Boston University law professor and health policy expert, said, “Although $3 billion is a very big number in terms of drug industry settlements, it’s not a very big number in relation to almost $50 billion in annual revenue for the world’s fourth-largest pharmaceutical company.”

Patrick Burns, spokesman for Taxpayers Against Fraud, an advocacy group for whistle-blowers, said, “Who at Glaxo is going to jail as a part of this settlement? Who in management is being excluded from doing future business with the U.S. government?”

Last year, the Justice Department accused a former vice president and associate general counsel of GlaxoSmithKline, Lauren C. Stevens, of charges obstruction of justice and making false statements. But she was acquitted of all six charges in May by a United States District Court judge, Roger W. Titus, in Maryland, who ruled that she had been advising the company in good faith.

Mr. Burns said the health care sector accounted for more than 80 percent of the $4 billion in overpayments recovered by the government in 2010 as a result of whistle-blower lawsuits and resulting fraud investigations by federal and state agencies.

“This is a well-worn path for big pharma,” said Les Funtleyder, health care strategist with the New York brokerage firm Miller Tabak.

“I know $3 billion sounds like an astronomical number,” he added, “but when you live in the world of worst-case scenarios, like investors do, $3 billion is a welcome relief. At least you have certainty.”

Brian Bourdot, an analyst at the investment bank Barclays Capital, called the settlement an important step but also noted that GlaxoSmithKline “remains involved in other legal disputes, including alleged violations of the Foreign Corrupt Practices Act.”

“We regard such disputes as an innate risk for large multinational pharmaceutical companies,” he wrote in a note to investors.

In a separate case last year, GlaxoSmithKline agreed to pay $750 million, including a $150 million criminal penalty, to resolve federal complaints about manufacturing quality at a plant in Cidra, P.R., since closed.

Mary Anne Rhyne, a spokeswoman for the company, said Thursday that it was still negotiating with the government over whether to include a corporate integrity agreement in that deal. The agreement could provide further penalties for other violations, though in manufacturing.

This article has been revised to reflect the following correction:

Correction: November 3, 2011

An earlier version of this article described the drug Avandia incorrectly. It is a diabetes drug, not a painkiller.

Article source: http://feeds.nytimes.com/click.phdo?i=ebfcf4f1d44379d0a67f527c3837a300

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