Skokie, Illinois -- Pharma Corruption Central!

The DOJ has described for the first time in real detail how the feds believe Pharmacia’s Genotropin/formulary kickback scheme worked, according to a memo in Massachussetts federal court (see download below). The scheme—planned at a meeting in Skokie—increased Pharmacia’s sales of painkillers at the cost of lowered standards of care for the sick kids who needed Genotropin, in the view of Pharmacia executives described in the memo.

Pfizer—or rather, “Pharmacia & Upjohn,” the now-defunct company that Pfizer acquired a couple of years ago—formally pled guilty on Wednesday in the Genotropin marketing kickback case.

The plea makes concrete what Brandweek reported a few weeks ago.

However, on Tuesday the DOJ filed its sentencing memorandum, which contained the most detailed description yet of how Pharmacia conspired with an unnamed “Company Q” in a kickback scheme that would increase sales of Pharmacia drugs by short-changing kids with genetic conditions that needed Genotropin, Pharmacia's (and now Pfizer’s) human growth hormone brand.

Among the tantalizing details:

• The word “Celebrex” has been mentioned for the first time in the government’s documents on the case. On page 3 of the memo, the government describes the business background: “During the relevant time frame, namely the year 2000, Pharmacia developed, manufactured, distributed and sold pharmaceutical products nationwide and in the District of Massachusetts. Among those pharmaceutical products were Celebrex, Detrol, Genotropin and Xalatan.”

Brandweek reported in 2006 that Pharmacia’s relationship with PBM Express Scripts and its formulary position for Celebrex were the subject of grand jury hearings in Boston (scroll down for details). The allegation, by ex-Pfizer vp Peter Rost and ex-Pharmacia marketing exec Carl Worrell, was that Pharmacia would deliberately overpay Express Scripts to manage the Genotropin Bridge Program, a patient support program for sick children. In return, Express would place Celebrex in an advantageous position on its formulary, thus boosting its sales. Express has consistently declined to comment on the issue.

• The documents give a timeline for how the kickback plan occurred. In July 2000, Pharmacia picked “Company P” as the best bidder to run its “Bridge Program,” a Genotropin patient support program for sick children. Company P was both cheapest—“$20 million less expensive over the life of the 3 year Bridge Program contract than another bidder,” and “even if one ignored the ‘cost competitiveness’ criterion, Company P would still have prevailed because its quality of services was determined by Pharmacia to be highest.”

• But Company P was about to be screwed out of the Pharmacia contract, the government goes on to say: “Others within Pharmacia were working at cross purposes. In mid-July 2000, certain employees of Pharmacia were engaged in a dialogue with certain employees of Company Q, one of the largest and most influential pharmacy benefit managers or ‘PBMs’ in the country. In terms of influence, this PBM claimed through its contracts with a large number of health plans that it had tens of millions of American 'lives under management.'”

Needless to say, if you’re reading this blog and the phrase “lives under management” sounds familiar to you, please drop me a line at jedwards@brandweek.com. I’d love to know the identity of Company Q (although only Express Scripts’ name has been connected to this affair so far).

• “One week later, on July 20, 2000, a group of the PBM employees and Pharmacia employees met at Pharmacia’s Skokie, Illinois offices. At this meeting, the PBM employees reiterated their interest in seeing the Bridge Program contract awarded to the PBM’s subsidiary. Pharmacia informed them that their bid was $20 million more expensive than that of another bidder. The PBM employees again discussed assistance that the PBM could provide in generating sales of Pharmacia’s drug products, though this time with more specificity. In addition, a high level employee of the PBM provided the Pharmacia employees with a private tutorial on the PBM’s formulary bidding process.”

• Pharmacia later agreed to overpay for the Bridge Program by $12.3 million, the government says. But, “There were a number of different voices within Pharmacia which did not want to offer the Bridge Program contract to the subsidiary of Company Q, let alone at a cost of $12.3 million more than Company P’s bid. There were people who objected on the basis that Company P was a higher quality service provider (and significantly less costly). There were people who worried that the subsidiary of Company Q would be difficult to manage because the Bridge Program contract would pale in significance to the extra drug sales that could be generated by Company Q’s formulary decisions.”

• Then, “in an effort to assuage the Endocrine Care Business Unit’s concern that it would have to incur $12.3 million in excess costs over 3 years if Pharmacia awarded Company Q’s subsidiary the Bridge Program contract, Pharmacia promised the Endocrine Care Business Unit that another business unit within Pharmacia that expected to benefit from the improved formulary positioning and formulary ancillary benefits would reimburse the Endocrine Care Business Unit for these excess costs. This promise was made with the knowledge and approval of Pharmacia’s senior business executives.” This sounds similar to the scenario outlined here, low down in the story.

• “On or about August 1, 2000, Pharmacia retracted the award of the Bridge Program contract to Company P, despite believing that Company P’s bid price for the contract was millions of dollars lower, and that Company P’s ability to deliver quality service was higher, than the bid presented by Company Q’s subsidiary. Company P’s Vice-President asked the reason for Pharmacia’s about-face, and was told by a Pharmacia employee that Company P was losing out because Company Q (the PBM) had formularies and Company P did not. Instead, on or about August 1, 2000, Pharmacia offered the Bridge Program contract to Company Q’s subsidiary, at an inflated price of $12.3 million more than Company P”.

And that is how children with dwarfism—the main beneficiaries of the Genotropin treatments under the Bridge Program—were screwed out of top-notch care by Pharmacia as it pursued prime positioning for Celebrex et al.

What is interesting here is that the government is still declining to reveal the identities of many of the key players, including the companies, the “senior business executives” and the vice president from Company P who complained about the whole bum deal.

Could it be that this probe isn’t over yet? What this space …

Download sent_memo_4_24_07.pdf

Comments

[Andrew]

My guess on the identity of "Company Q" would be Medco, if only for the recent, ahem, "rebates" they've been getting from manufacturers lately (though the same could be said for Aetna.) This is only a guess though.

[Kim Johnson]

Is there an update to this story? I'd like to know who the PBM is if it ever came out.
Thanks,
Kim

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