Senator Warren's Bell Jar

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  • 02/13/2015

Will expanded government extortion result in fewer settlements? Will the NIH have to admit to its true role in drug development?

From today’s Wall Street Journal:

A “Swear Jar” for Drug Makers

By: Ed Silverman

Should drug makers that break the law be required to pay an extra penalty that would be used to fund the National Institutes of Health?

Sen. Elizabeth Warren (D-Ma.) believes this idea would not only provide needed money for medical research, but would help persuade drug makers to curtail bad behavior. Last month she introduced a bill, the Medical Innovation Act, that she has described as the equivalent of a swear jar.

Basically, drug makers that reach settlements with the federal government for paying kickbacks to doctors, defrauding Medicare or Medicaid, or illegally marketing medicines would have to pay 1% of annual net profits for each blockbuster medicine that originated with government-funded research. However, the law would only apply to drug makers with more than $1 billion in net profit.

The U.S. Department of Health and Human Services would be chartered with calculating payments, which would actually run for five years. Why? This is the same amount of time covering most settlements reached between drug makers and the Department of Justice.

No estimates were given on how much money might be raised for the NIH, but if the law had been in place five years ago, Sen. Warren claims the NIH would have gained an extra 20% in annual funding, or roughly $6 billion, on average, each year. This is real money.

 “We should make it easier for the biggest drug companies to help develop the next generation of cures, and harder for them to profit from breaking the law and defrauding taxpayers,” she told a conference last month. The payments, she noted, would be in addition to any settlement paid by a drug maker.

Not surprisingly, the pharmaceutical industry is having none of it. The trade group representing large drug makers slammed the proposal, calling it “misguided” and suggesting that needed money would be “siphoned” from research that develops new medicines.

Some also argue that Sen. Warren wrongly inflates the NIH’s role in creating drugs. She “should acknowledge the reality rather than trying to score political points that don’t match up with the facts,” says industry consultant Peter Pitts, a former FDA associate commissioner for external affairs.

Meanwhile, the amount of money the bill may generate is a question mark, since this depends on the number of settlements. Pat Burns of Taxpayers Against Fraud, a nonprofit funded by attorneys, says numerous cases are under way.

Drug makers are already grumbling that device makers are exempt, because the bill focuses on companies that sell blockbuster drugs. But any company that sells both products could be subject to a penalty. The real issue, though, is that the pharmaceutical industry is expected to fight back.

“This is a very powerful lobby,” says Paul Thacker, a former aide to U.S. Sen. Chuck Grassley (R-Iowa), who led investigations of drug and device makers. “We need more medical research funding, but I think she needs to make a case that these violations lead to poor outcomes that increase health costs. A swear jar sounds great, but this is going to be a tough.”

For more on this, see this story in The Hill.


Center for Medicine in the Public Interest is a nonprofit, non-partisan organization promoting innovative solutions that advance medical progress, reduce health disparities, extend life and make health care more affordable, preventive and patient-centered. CMPI also provides the public, policymakers and the media a reliable source of independent scientific analysis on issues ranging from personalized medicine, food and drug safety, health care reform and comparative effectiveness.

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