Economy, Crime and Wrong in a Neoliberal Era

James G. Carrier

• Publisher: Berghahn Books
• Year: 2018
• Print ISBN:
  9781785339974
• Edition: 1
• eBook ISBN:
  9781789200454
• Topic: Social Sciences
• Subtopic: Economic Theory
• Index: Social Sciences

Corporate scandals since the 1990s have made it clear that economic wrongdoing is more common in Western societies than might be expected. This volume examines the relationship between such wrong-doing and the neoliberal orientations, policies, and practices that have been influential since around 1980, considering whether neoliberalism has affected the likelihood that people and firms will act in ways that many people would consider wrong. It furthermore asks whether ideas of economic right and wrong have become so fragmented and localized that collective judgement has become almost impossible.

1

Marketing Clientelism vs Corruption

Pharmaceutical Off-label Promotion on Trial

Kalman Applbaum

In 2011, in the midst of working on a project aimed at countering the unresponsiveness of industry, regulators and physicians to adverse drug events (see www.rxrisk.org), I received a phone call from a New York law firm representing those seeking damages for the sudden decline in the value of their shares in Medtronic Corporation. Medtronic, a Minneapolis-based manufacturer of medical devices ranging from mechanical heart valves and heart-lung machines to surgical supplies, produced Infuse Bone Graft (hereafter Infuse), the brand name for bone morphogenetic protein-2, or BMP-2. They had been implicated in a scam to expand the sale of that product beyond the uses approved for it by the US Food and Drug Administration (FDA).

To gain approval by the FDA, new drugs must be demonstrated as safe and effective for each of their intended uses. Intended uses are the ‘indications’ for which a drug is tested, and if the drug is licensed, they are described on the label. Off-label prescribing means prescribing for uses other than those approved by the FDA. Physicians are permitted to prescribe for unapproved or off-label uses but, given the commercial motivation of manufacturers to encourage ever-expanding sales of their products, it is illegal for firms to promote such use.

Following reports of injured patients, unlawful kickbacks to doctors and allegations of falsified data published in scientific journals, Medtronic’s share price fell. Inquiry into the matter revealed that in 2006–07 an astounding 85 per cent of Infuse sales were for off-label uses, a rate that experts felt could hardly be achieved without off-label promotion.

Licensed for use in 2002, Infuse had revolutionary potential for application in spinal fusion surgery. That surgery is performed to reduce back pain by eliminating or reducing friction between vertebrae, and about 450,000 spinal fusions are performed in the United States annually, despite evidence that, for most patients, physical therapy works just as well (Resnick and Bozic 2013). Surgery has conventionally entailed harvesting bone from the hip and grafting it between vertebrae in the back, a procedure that is time consuming and painful. BMP-2, the bone growth agent in Infuse, was designed to help bypass the conventional grafting procedure. Unfortunately, proteins like BMP-2 can easily stimulate dangerous bone growth outside of the fusion area.

When Infuse was licensed, the FDA limited its use to a narrow range of spinal surgeries performed under specified conditions: it could be applied only in a ‘single-level infusion’ in the L4-S1 region of the lumbar spine in surgery intended to remedy disc collapse; the spine could only be approached through an incision in the abdomen, rather than from the back; it had to be used in conjunction with a device called an LT-Cage. These restrictions were imposed after clinical trial data revealed frequent adverse events when Infuse was used in other ways. The causes of the adverse events remain undetermined, but their consequences could be dire because Infuse is inserted near the spinal cord.

The restrictions and precautions indicated on a drug’s label, if heeded, clearly limit its market potential. It may be difficult to estimate what the sales potential of Infuse might have been without off-label promotion, but assuredly it was only a small fraction of the $800 million reported for several years in the mid-2000s.

In June 2011, in an unprecedented move, The Spine Journal devoted an entire issue to repudiating the company-sponsored studies that had encouraged extensive off-label use of Infuse. The issue revealed that doctors who appeared to be co-authors of studies supporting off-label use of Infuse frequently had only put their names to articles written by a publication firm hired by Medtronic, and had been paid to do so. The Spine Journal authors linked use of the product to a number of adverse consequences: ‘Uncontrolled bone formation and the need for additional surgery; life-threatening inflammation; infections; implant movement; cancer risk; and effects on nerves leading to radiating leg pain, bladder retention and a complication that causes sterility in men’ (Fauber 2011). Two years later, Annals of Internal Medicine published a comprehensive study that found no advantage from using BMP-2, and many risks (Resnick and Bozic 2013).

The New York law firm that telephoned me in 2011 was involved in what turned out to be a consolidated class-action suit against Medtronic. The complaint in that suit stated:

Although undisclosed to investors, the first-hand accounts from over a dozen former Medtronic employees demonstrate that this extraordinarily high off-label use was driven by the Company sales force, which would direct doctors to Medtronic-compensated consultants or ‘Key Opinion Leaders’ in the medical field who were surgeons paid by Medtronic to promote off-label use of INFUSE Bone Graft . . . [Medtronic] materially misled investors . . . [because it did not inform them] that INFUSE Bone Graft sales were primarily dependent on higher risk off-label use of [the] product. (US District Court 2009: 3–4)

In other words, Medtronic had deployed physicians who were not formally their employees as part of their off-label promotion scheme to expand the use of the product. In language I have developed elsewhere to describe this procedure (K. Applbaum 2006a, 2009a), Medtronic had incorporated physicians into the company’s distribution channel for the drug (i.e. as sales staff), even though they were not overtly part of it.

In part due to the pressure exerted by the public rebuke, and in light of Medtronic having recently been censured by the FDA for making false claims about another product (FDA 2012) in March 2012, the company agreed to settle for $85 million (I was not involved in the suit) (Stempel 2012). The company continues to deny any wrongdoing.

The situation I have described concerning Infuse points to a state of affairs in the pharmaceutical industry that helps to illuminate the concern of this volume, which is the relationship between neoliberalism, economic activities and the perspectives from which those activities are seen as deviant and perhaps wrong. One of the central elements of neoliberalism is its stress on the free market. The Infuse case indicates that in the pharmaceutical industry this stress has a corollary that is touted less widely – namely, pressure to market freely, a pressure that can lead to questionable practices. The incorporation of influential physicians, with their advocacy of off-label use of Infuse, into the marketing activities intended to increase the sale of the drug is a sign of such pressure. The result, the apparent widespread use of Infuse in ways and for conditions that the FDA had not approved, would strike many people as the consequence of economic wrongdoing.

In this chapter I pursue the ways that pharmaceutical firms market their wares freely, not simply by catering to demand for their drugs, but by doing what they can to create that demand. I do so not only because it is revealing in its own right, but also because it helps to point to the difficulties we can confront when we try to distinguish routine practice from the deviant, the wrong and the criminal. I approach pharmaceutical marketing in terms of the difference between what I call ‘marketing clientelism’ and corruption.

Separating Clientelism from Corruption

The Medtronic case is but one among a spate of suits prosecuted since the early 2000s under the False Claims Act, a whistle-blower statute permitting private citizens to file suits on behalf of the federal government (see Lansdale 2006). These suits have alleged that the defendants have made false claims about drugs to promote off-label use, and have resulted in the recovery of over $15 billion from the world’s most reputable drug companies (Herman 2014). Despite harsh penalties and the imposition of rigorous compliance stipulations, called ‘corporate integrity agreements’, which are expensive and laborious to implement, malfeasance in the industry appears to continue. A multidisciplinary subfield of the social science of medicine called critical pharmaceutical studies has emerged to report on the myriad manifestations and mechanisms of corruption in the industry, from rigging clinical trials and the ghostwriting of scientific publications to the outright purchase of influence. One of my purposes here is to consider how and why wrongdoing in the industry continues at such a pace despite the manifestly credible threats of prosecution and increased government vigilance.

In earlier research, I observed that there appears to be a misalignment, conflict and even competition between the values of medicine and public health on the one hand, and those of pharmaceutical marketing on the other.

Medical, scientific value consists in a discovery’s capacity to explain phenomena verifiably and then be applied to reduce human suffering from disease. Marketing value, by contrast, is fluid, relative, and contingent on perceived utility. Marketing value is measured in accordance with its ability to achieve product differentiation, which refers to the process of making one’s product offering appear unique in the marketplace and superior to those of one’s competitors. . . . Pharmaceutical value has increasingly become a marketing proposition, not a scientific one. What is valuable to marketers can be meaningless, dangerous, and costly to everyone else. (K. Applbaum 2009b: 15–16)

Among the criticisms I received for that line of thinking, one reader questioned my contrast between private (drug company) and public (medicine) spheres, pointing out that the distinction was in actuality difficult to draw because the boundary between them is porous and because in its everyday practice there is no such thing as disinterested science. The interests are not always commercial, but they are always there (Robert Rosenheck, pers. comm., 2009–10).

Without quite abandoning the original duality of brand and medical value, which echoes the familiar duality of exchange and use value, one could propose a more inclusive approach by framing the discussion in terms of the normative social exchange mechanisms by which pharmaceutical companies seek to advance their interests. One could ask under what circumstances these might be seen as working for and against the public health interest, with that interest being seen as served by drugs and devices that do more good than harm in the population, as per FDA guidelines, and that do so in keeping with legal marketing practices. If a firm’s activities fail these two criteria, most people would classify them as corrupt.

However, to say of an activity that most people would see it as corrupt is not the same as saying that it is illegal. For instance, what if that activity were so widespread that the industry could not function normally without it? In such a case, the activity that most people would condemn would not be deviant, but would be the norm within the industry, and it would be difficult to challenge legally. It is this ambiguity that I will explore below in the suit against the makers of the drug Risperdal for illegally promoting it. Risperdal was developed by Janssen Pharmaceutica, a division of Johnson & Johnson. For convenience sake, in what follows I shall refer to the defendants in the suit as J&J.

The type of activity that the suit illustrates, and that is perceived as normal by industry actors, is the system of social exchange that I call marketing clientelism. I offer a hypothetical example of this sort of clientelism, though it involves the editorial rather than the marketing sort. Some years back, a colleague of mine teaching at a prestigious university was appointed editor of a well-known academic journal. Like many others, I felt that, under his direction, the quality of the journal began to improve. It also came to be remarked that a disproportionate number of his friends and colleagues were showing up in the table of contents. Critics grumbled that the editor’s apparent favouritism was a form of corruption and should be condemned. Fairness, they said, is imperative because junior faculty rely upon publications in leading journals, like the one he edited, for promotion and tenure. Others countered that the appropriate aspiration of every journal editor is to publish high-quality papers, and that the editor had mobilized his personal networks to solicit an improved pool of submissions. In my terms, this was editorial clientelism, and therefore its benefits might be tolerated or even encouraged.

The border between clientelism and corruption is fuzzy, and in academic journals efforts to police it include having editors hold the post for a limited time and having an editorial board that is strongly involved with editorial decisions. There is, however, no absolute solution to the problem of the messy overlap of the two. (In the end, people in my ken concluded that the only accusation that could properly be laid against the editor was that he was too obvious in his partialities.)

Among the academic disciplines, political scientists and development theorists often seem to see little difference between the two. They regard clientelism as a near synonym for corruption, in which formal institutional rules are bypassed in favour of a resort to ‘personal, particularistic ties to obtain preferential access to goods and services’ (Torsello 2012: 271). It is suggested that this is more observable in non-Western societies, either because corruption is held to be concomitant with ‘poverty, ignorance, repression of women, fundamentalism, fanaticism and irrationality’ or, conversely, because clientelism ‘has a positive function in development because it “fills the gap” left by partial bureaucratization and the incomplete penetration by the state’ (Halle and Shore 2005: 3).

On the other hand, sociologists and anthropologists have been more prone to treat clientelism as a thing on its own, rather than as a cousin of corruption. So, they have looked for characteristic features of clientelism, including dyadism, unequal power relations or verticality among transactors, informalism and conditions of scarcity (Scott 1972; Gellner 1977; Eisenstadt and Roniger 1984). A similar approach has been taken by many seeking to understand marketization in places like China, with scholars linking clientelism with markers of stability in investment, information flows, social trust and other lubricants of market transaction (Wank 1996).

In this chapter, I straddle these different approaches. Marketing clientelism may, as I show, be associated with corruption. However, I also want to emphasize its strategic use by corporations to further their goal of having stable distribution channels for the sale of their products (K. Applbaum 2009b). There is also a more specific reason to stress the difference between clientelism and corruption. The case that I describe centres on a court proceeding, where an absolute rather than relative judgement had to be made as to whether the company in question was guilty of off-label promotion (corruption) or rather was engaged in just the normal dissemination of information about their product through expert channels (marketing clientelism).

That case was brought by Texas Medicaid, the state health insurer, against J&J over the marketing of the antipsychotic drug Risperdal. I had the opportunity to attend the trial in its entirety in January 2012, in Austin, Texas. All quotes in the text concerning the trial are taken from my notes.

Case Study in Real Time: Risperdal on Trial in Texas

Between 2009 and 2011, Johnson & Johnson and Janssen were sued successfully for fraudulent marketing practices. They had to pay $257.7 million in Louisiana, $327 million in South Carolina and $1.1 billion in Arkansas (an additional $2.2 billion was levied in criminal and civil fines in 2013) (Herman 2014). On 10 January 2012, Texas launched its suit against J&J, claiming that the company defrauded the state of $579 million.

The case involved the marketing of ‘atypical’ or second-generation antipsychotic (SGA) medicines, of which Risperdal is one. As I explain below, these were introduced in the 1990s and were said to be better than the older, first generation antipsychotic medicines (FGAs), which appeared in the 1950s. There is no easy synopsis of the combined commercial and medical history of this class of drugs, but as will become clear, it is reasonable to conclude that their success lies far more in the commercial than the medical realm. Apart from the body of medical research now testifying to this, common sense resists the idea that antipsychotic drugs merited becoming the best-selling class of pharmaceuticals in America. In 2010, a small number of SGAs (including principally Risperdal, Zyprexa, Seroquel, Abilify and Geodon) had sales of $14.6 billion in the United States alone; to put that in perspective, it is equivalent to 1.5 times the public expenditure for all healthcare in India.

Risperdal earned J&J $34 billion during its 17-year patent period. Those with no first-hand knowledge of how large corporations work cannot easily comprehend the size and complexity of the machinery necessary to generate revenues on that scale. Explaining this to a jury was the challenge facing the Texas Attorney General’s office, which had gathered a massive amount of information but had only a handful of hours to make their case.

In the plaintiff’s opening statement, their attorney, Tom Melsheimer, accused J&J of implementing a ‘systematic scheme . . . not a one-time event, not an accident’. The purpose of that scheme was to turn a drug designated for narrow use in the treatment of schizophrenia into a $34 billion pill with a 97 per cent profit margin, thereby defrauding Texas taxpayers of $579 million.

How could the company have accomplished this feat? Melsheimer alleged that the company did so in four ways: they influenced usage guidelines by bribing T...

Table of contents

• Cover
• Title Page
• Copyright Page
• Contents
• Introduction. Economy, Crime and Wrong in a Neoliberal Era
• Chapter 1. Marketing Clientelism vs Corruption: Pharmaceutical Off-label Promotion on Trial
• Chapter 2. The Measure of Sociality: Quantification, Control and Economic Deviance
• Chapter 3. Under Pressure: Financial Supervision in the Post-2008 European Union
• Chapter 4. Of Taxation, Instability, Fraud and Calculation
• Chapter 5. Marketing Marijuana: Prohibition, Medicalization and the Commodity
• Chapter 6. Neoliberal Citizenship and the Politics of Corruption: Redefining Informal Exchange in Romanian Healthcare
• Chapter 7. Neoliberalism, Violent Crime and the Moral Economy of Migrants
• Chapter 8. How Does Neoliberalism Relate to Unauthorized Migration? The US–Mexico Case
• Conclusion. All That Is Normal Melts into Air: Rethinking Neoliberal Rules and Deviance
• Index