Thursday, July 18, 2013

Pharma Corporate Crime—A Perennial Topic, Apparently

When I started doing research for HOOKED, one of the first books I came across was by the Australian business sociologist John Braithwaite, whose 1984 volume bore the catchy title Corporate Crime in the Pharmaceutical Industry. Recently, I recommended this book to a colleague interested in the international pharmaceutical trade, but apologized for suggesting such an old and possibly out-of-date source. While Braithwaite focused a lot on the bribes Western drug companies paid in developing nations to push their products and evade regulation, I figured a lot must have changed since 1984 and that the situation must be a lot better.

Turns out I should not have worried about being out of date.

According to Katie Thomas in the New York Times:
--some of the same drug companies whose illegal activities have landed them in hot water in the U.S. are up to similar tricks internationally, and the Chinese government, in particular, is trying to rein them in.

Thomas tells us that as the Chinese pharmaceutical market blooms (with 95% of Chinese now having health insurance, probably a better percentage than in the US) and as China tries to position its own companies to compete more effectively with transnational Pharma, “selling pharmaceuticals and other health care products in China is increasingly fraught with peril, as shown by accusations in China this week that GlaxoSmithKline funneled payments through travel agents to doctors, hospitals and government officials to bolster drug sales in the country.

“Chinese officials have compared the company’s operations to organized crime…”

Is it strange that GSK, in particular, should have been caught doing these questionable things? “GlaxoSmithKline has been struggling to rebuild its image after a $3 billion fine in the United States last year, in which the company admitted to improperly promoting its antidepressants and failing to report safety data about the diabetes drug Avandia. Andrew Witty, who took over as chief executive in 2008, has repeatedly pitched the company as a global leader in ethical practices and said it had moved on from its previous lapses.”

As part of “rebuilding its image,” GSK issued a contrite statement in response to these recent charges: “In a statement, Glaxo said it was ‘deeply concerned and disappointed’ by the accusations. ‘GSK shares the desire of the Chinese authorities to root out corruption,’ the company said, adding that it had stopped its relationships with the travel agencies identified in the investigation and was reviewing past transactions with them. ‘These allegations are shameful and we regret this has occurred.’”

Following the superb precedent set by the Claude Rains character in Casablanca, I think the correct term that one is “shocked, shocked” to discover these corrupt practices going on in a morally pristine operation.

But the claim to have been caught by surprise by these revelations—that apparently a few loose cannon were free-lancing without the knowledge of any company higher-ups—starts to ring hollow according to observers quoted by Thomas such as attorney Richard L. Cassin: “[T]he accusation by Chinese authorities that Glaxo channeled as much as 3 billion renminbi (about $489 million) through more than 700 travel agencies makes this case more egregious than most. ‘The question of 700 travel agencies, it’s an astounding number,’ he said.”

Thomas also tells us that despite the strong growth of the Chinese national pharmaceutical industry, “some believe Western companies will have an edge because consumers may be willing to pay more for brands that are known for high-quality ingredients.

“‘There are so many drugs that are poor quality in China, so the ability to differentiate yourself is important,’ said Craig A. Wheeler, the chief executive of the American generic drug maker Momenta Pharmaceuticals. His company is developing complex drugs known as biosimilars through a business deal with Baxter, which has an established presence in China.”

Now, let me get this straight—as we posted a while back:
--when 21 Americans died in 2007 after taking contaminated heparin made with sub-par Chinese ingredients from uninspected factories, wasn’t it Baxter that sold the product? And these are now the people who claim to have the superior-quality drugs that the Chinese ought to buy instead of their own home-made products?

So I guess I won’t toss my copy of Braithwaite’s book on the recycle pile just yet.


Michael S. Altus, PhD, ELS said...

"Turns out I should not have
worried about being out of date."

Another reason for not worrying about being out-of-date:

Braithwaite on Corporate Crime in the Pharmaceutical Industry

John Braithwaite is back.

The famed Australian corporate criminologist is teaming up with a former European pharmaceutical executive – Graham Dukes – and together they are completing a new book on corporate crime in the pharmaceutical industry.

The working title – Corporations, Crime and Medicines.

It’s due out early next year.


By the way, Braithwaite's 1984 book, Corporate Crime in the Pharmaceutical Industry, is avaiable for free in PDF format at


World Innovation Foundation Blog said...

Corruption will always be prevalent for humankind.

But due to their economic and financial power the global pharmaceutical industry knows no bounds or depths that they will go too to preserve the bottom-line and the wealth of those at the top of these vast global institutions.
Unfortunately the global pharmaceutical groups will have to learn that governments and people in general are becoming increasingly aware that they operate very close to the wind and at times not within national or international law. Indeed over the past four to five years alone the largest drug groups have paid out nearly $14 billion in out-of-court settlements. But these settlements have not been a deterrent as in the case of GSK when they settled with the US authorities prior to action with $3 billion+, they had sold the offending drugs through fraud to the value of $28 billion over many years. For in this respect it is a well known fact that there is at least a 50% mark-up after R&D and all corporate costs and where in this case a $14 billion profit.
Therefore you take $3 billion out-of-court payments off $14 billion and there is still an $11 billion profit. Therefore one could say that crime pays.

But this way of operating is not a strange way when the roots of the giant pharmaceuticals are shrouded in times when profit was put before human suffering -

But also these groups work on the prevention of global mechanisms that will save future humanity and again on the alter of the bottom-line. In this respect in 2008 a global strategy was squashed that could prevent the deaths of literally hundreds of millions of lives (some statisticians say up to 1 billion lives) when the equivalent of the Spanish Flu revisits humankind and where WHO Director-General Dr. Margaret Chan has said many times that it is only a matter of time, not when. The reason for this was that this strategy was based upon the prevention is better than cure dictum and where there was not the tens of billions in drug sales as the strategy was a source strategy – the strategy that would never let it happen in the first place without drugs. That global field strategy that would never allow the world’s greatest future killer to emerge and was destroyed was -

Dr David Hill
Chief Executive
World Innovation Foundation