WASHINGTON ( TheStreet) -- Pfizer ( PFE - Get Report) recently made headlines when it was slapped with the largest criminal/civil fine in history and had to pay $2.3 billion for improperly marketing its drugs. Pfizer's primary alleged misdeed was promoting its drugs for off-label use, i.e., uses that were not approved by the Food and Drug Administration. Off-label uses are not without risk; anyone who reads the fine print in pharmaceutical advertisements knows that prescription drugs can have serious, even fatal, side effects. However, the more ways there are to use a drug the more money its manufacturer can expect to make, so off-label uses offer pharmaceutical companies opportunities for profit that they wouldn't have if they restricted their sales to what the FDA permits. Why was the fine levied against Pfizer so large? Because the company has been down this road before. According to Business Week, this is the fourth settlement that Pfizer or one of its subsidiaries has entered into with the government since 2002. The fines in the previous cases totaled only about $513 million -- a drop in the bucket compared with the profits that Pfizer rakes in from off-label sales. Business Week quoted Assistant Attorney General Tony West as saying that this most recent fine "represents yet another example of what penalties will be faced when a pharmaceutical company puts profits ahead of patient health." West apparently hopes that this latest settlement, coupled with the five-year integrity agreement that Pfizer signed with the Health and Human Services Department, will be enough to keep the company on the straight and narrow going forward.
It would be terrific if West was right, but he's probably wrong to think that fines, even of record-breaking magnitude, will be enough to keep most for-profit companies from taking calculated legal risks if their potential profits are big enough. (Interestingly, Yahoo! reported last month that Pfizer was fined $17 million by the Venezuelan government for alleged tax irregularities. It seems questionable whether Pfizer has really learned its lesson.) It's one of the dirty little secrets of the business world that many industries -- not just pharmaceuticals -- involve a certain expected level of human suffering and even death. Construction workers, longshoremen, coal miners and deep sea fishermen are among the hosts of workers routinely injured and killed in the line of duty. In many industries, workers' loss of life and limb is carefully projected, a dollar value is reckoned for the overall anticipated cost of their losses, and that dollar value is included in project budgets or quietly covered by insurance. Expected fines can be, and frequently are, accounted for in the same way. Unless a fine is big enough to shut a company down, it can too easily become just another cost of doing business that gets baked into the prices consumers pay. A better way to prevent illegal conduct may be not to fine producers, but to trust informed customers to reject illegal behavior. Using the pharmaceutical industry as an example, it's been widely reported that doctors are allowed to prescribe medications for off-label use even though pharmaceutical companies are prohibited from marketing them that way. That puts physicians in an ideal position to carefully limit patients' exposure to off-label uses of prescription drugs. Unfortunately, it also creates a tremendous incentive for pharmaceutical companies to entice physicians with gifts, trips and goodies. Doctors may think they remain objective, but one blog commentator said it all when he described a visit he made to his physician seeking relief from chronic pain. His doctor prescribed a particular medication for off-label use, and the commentator noticed that the doctor's notepad, coffee mug and pen all bore the medication's logo. He never filled the prescription and, one hopes, found a physician who would give him more objective care.
But if conflict of interest in doctors' offices is an issue, it pales in comparison to conflicts that can arise when pharmaceutical companies pay physician researchers in high-flight medical schools to identify possible healing uses of their products. Harvard Medical School suffered considerable embarrassment earlier this year when the American Medical Students Association gave the prestigious institution an "F" on its conflict-of-interest policy because it allows the university to be too cozy with the pharmaceutical industry. The students were right to be concerned. The researcher who gets paid by a pharmaceutical company to develop medical uses for one of its drugs, then turns around and teaches those uses to future doctors, is creating a market for that drug. The underlying research may be entirely legitimate, but it's hard to believe that most pharmaceutical companies would indefinitely pay a researching physician who failed to identify alternative uses for their products. Harvard's medical students are to be commended for recognizing and challenging the weakness of their school's conflict-of-interest policy. Their outspoken response suggests that public disclosure of questionable business practices can be an effective first step toward bringing them to an end. If more patients knew how their medications are researched and marketed, they'd be in a better position to ask their doctors hard questions about the drugs they prescribe. If doctors expected patients to actively inquire about their relationships with pharmaceutical companies, they might think twice about allowing those relationships to influence their professional judgment. And if the medical profession were to require full disclosure of all sources of income that doctors and researching physicians receive, it would make it far more difficult for conflicts of interest to go unrecognized and unresolved.
It's important not to pick on the pharmaceutical industry exclusively. As long as money is the sole motivator, many industries will continue to jeopardize human health and life in the name of the bottom line. But if consumers were more aware of the real cost in human misery of the goods they purchase, they might well refuse to pay it. Yes, fine companies who break the law -- but then make sure their customers understand the consequences of what they've done. -- Written by Lauren Bloom in Washington.