Doctors administer chemotherapy in their offices, buy the drugs at a lower cost than what insurance companies and public health care programs pay and pocket the difference.
This system provides an incentive to overuse chemotherapy and the most expensive medications.
A 2001 study by the National Institute of Health found that about a third of Medicare beneficiaries received chemotherapy in the last six months of their lives, even through their cancer was unresponsive to chemotherapy, which "strongly suggests overuse of chemotherapy at the end of life," the report said.
A 2006 study in the Health Affairs journal entitled, "Does Reimbursement Influence Chemotherapy Treatment for Cancer Patients," determined that reimbursement had a direct effect on which drugs doctors prescribed for cancer patients. For instance, the study found that a $1 increase in reimbursement resulted in the use of chemotherapy drugs that cost $23 more.
A survey by Dr Neil Love, entitled, "Patterns of Care," found that for first-line chemotherapy of metastatic breast cancer, 84-88% of the academic center oncologists who did not derive profits from infusion chemotherapy prescribed an oral drug, only 13% prescribed infusion drugs and none prescribed the expensive, highly-remunerative drug docetaxel.
In contrast, community-based oncologists who did profit from infusion chemotherapy, prescribed an oral dose of a drug only 18% of the time. Seventy-five percent of these oncologists prescribed infusion drugs and 29% prescribed the expensive, highly-remunerative drug docetaxel.
On October 1, 2006, Alex Berenson reported in the New York Time that worldwide spending on cancer drugs was $24 billion in 2004 and was expected to rise to $55 billion in 2009, "making oncology treatments the biggest drug category," citing data provided by IMS Health.
In 2005, the government reduced Medicare reimbursement rates for cancer drugs and medications used to counter the side effects of chemotherapy administered in doctors' offices and cited reports that showed oncologists made $700 million in 2002 from Medicare profits.
"Marketing the Spread" occurs when a drug maker uses the difference between the price paid for a drug by public health care programs like Medicaid and Medicare and the actual cost of the drug charged to doctors or pharmacists as a tool for selling products.
A September 2001 report by the Government Accountability Office cites the list price for one drug used to treat some types of colon cancer at $18.44, with Medicare paying 95% of that cost, while oncologists could purchase it for $2.77.
The GAO also reported that the 86% spread for the cancer drug leucovorin calcium meant that, "Medicare beneficiary's co-pay alone was actually more than the physician or supplier paid for the drug."
Before 2005, Medicare paid a markup of 20% to 100% on many injectable drugs, and doctors kept the difference as profit, after certain expenses. The amounts that doctors billed Medicare for injectable drugs rose from $2.9 billion in 1997 to $10.9 billion in 2004.
The Times report shows that doctors were made aware of the amount of money that could be made. Citing documents from a lawsuit filed against Schering-Plough, Johnson & Johnson, AstraZeneca and Bristol-Myers, Mr Berenson reported that the drug companies sometimes "calculated to the penny" how much profit doctors could make and that "sales representatives shared those profit estimates with doctors and their staffs."
As an example, he quotes a document from 1998 in which Schering-Plough told sales representatives that using the drug Intron-A, for the treatment of bladder cancer, could produce a profit per patient of "$2,373.84 for our physicians just on the drug alone."
On August 29, 2006, the US attorney for the District of Massachusetts announced that the Schering-Plough Sales Corporation, a subsidiary of Schering-Plough, would pay $435 million to settle criminal and civil allegations relating in part to off-label marketing of drugs, including the oncology drugs, Temodar and Intron A.
Intron A was FDA approved for conditions including chronic hepatitis B, chronic hepatitis C and malignant melanoma. and allegations were made that the Sales Corporation promoted Intron A for treatment of superficial bladder cancer.
Temodar was approved for three specific types of brain cancers, and the Sales Corporation was alleged to have promoted Temodar for treating other types of brain tumors and metastases.
According to the government, pre-tax profits that resulted from the off-label marketing of Temodar and Intron A amounted to $124.2 million. The Sales Corporation agreed to pay a criminal fine of $180 million and was permanently excluded from participation in Medicaid, Medicare and other federal health care programs.
Schering-Plough settled the civil liabilities for losses to public health care programs for a total of $255 million.
In June 2003, AstraZeneca paid $355 million to settle allegations that it marketed the spread and concealed the best price for the prostate cancer drug Zoladex. AstraZeneca pleaded guilty to conspiring to violate the Prescription Drug Marketing Act by supplying free samples of Zoladex to physicians, knowing they would bill Medicare and Medicare beneficiaries a 20% co-pay for the drug.
As part of the plea deal, AstraZeneca agreed to pay a criminal fine of $63.9 million, more than $279 million to settle False Claim liabilities to the US and $11.2 million to the states.
In October 2001, TAP Pharmaceuticals, a joint venture between Abbott Laboratories and Takeda Chemical Industries, paid $875 million to settle charges that it marketed the spread and concealed the best price for the prostate cancer drug Lupron.
TAP pleaded guilty to conspiring to violate the Prescription Drug Marketing Act by giving free samples of Lupron to doctors and allowing them to bill Medicare and Medicare beneficiaries a 20% co-pay for the drug.
TAP paid a $290 million fine to settle the criminal charges, paid the federal government $559.5 million to settle civil liabilities under the FCA and $25.5 million to the 50 states and the District of Columbia to settle the Medicaid fraud liabilities.
On September 20, 2005, the Justice Department announced that GlaxoSmithKline would pay over $150 million to resolve allegations that the company violated the False Claims Act through fraudulent drug pricing and marketing of two anti-emetic drugs, Zofran and Kytril, used primarily in conjunction with oncology and radiation treatment to control nausea and vomiting.
The government also alleged that Glaxo engaged in a "double-dipping" billing scheme by encouraging customers to pool leftover vials of Kytril to create an extra dose, which would then be administered to a patient and re-billed to Medicare and other federal healthcare programs.
Of the $150 million settlement, the federal recovery is approximately $140 million and the states' recovery for their share of Medicaid is $10 million.
"The Justice Department will continue to pursue these types of fraud schemes vigorously to make clear that we will not tolerate fraudulent pricing practices designed to reap profits for drug companies and doctors at the expense of healthcare programs for the poor and the elderly," said Assistant Attorney General Peter Keisler of the Justice Department's Civil Division in the press release.
"As our nation struggles to contain healthcare costs, we must ensure that drug manufacturers do not take advantage of the poor, the elderly or the sick by illegally inflating the price of prescription drugs. That a manufacturer would fraudulently inflate the cost of a drug used primarily to reduce the side effects of cancer treatments is unconscionable," said US Attorney R Alexander Acosta.
In August 2006, Glaxo paid another $70 million to settle a class action brought on behalf of Medicare beneficiaries who paid some or all of the costs of Zofran and Kytril, along with private insurers and union benefit funds which pay for drugs on behalf of their members, and state Medicaid programs which paid cost-sharing amounts for Medicare beneficiaries.
The 2007 third quarter SEC report filed on November 9, 2007, by Amgen, the maker of Aranesp and Epogen, Erythropoiesis Stimulating Agents, or ESA's, drugs that were FDA approved to treat anemia caused by chemotherapy and in patients undergoing kidney dialysis, shows that the company is facing massive litigation and government investigations over charges that the company engaged in illegal marketing and promotion in the sale of the ESA's for uses that were not approved that have now been shown to cause death and serious injuries in patients.
On August 8, 2007, Ironworkers v Amgen, on August 15, 2007, Watters (State of Michigan) v Amgen and on August 28, 2007, Sheet Metal v Amgen, third-party-payor class action lawsuits were filed in the Central District of California.
According to the SEC filing, similar to previously filed third-party-payor class actions, in each action, the plaintiff alleges that Amgen marketed its anemia medicines for "off-label" uses, or uses that are not approved by the FDA, and as a result, the plaintiffs paid for unwarranted prescriptions.
Specifically, the complaints allege that Amgen promoted the drugs for: treating cancer patients who are not on chemotherapy; treating quality of life symptoms associated with anemia, such as fatigue, and reaching Hb targets above the FDA-approved level.
Each plaintiff asserts claims under California's consumer protection statutes and for breach of implied warranty and unjust enrichment, and plaintiffs seek to represent a nationwide class of individuals and entities.
In Sheet Metal v Amgen, the plaintiff also name privately-owned dialysis centers DaVita and Fresenius as co-defendants and includes a RICO claim. These two dialysis chains reportedly each account for about a third of the market
The SEC filing also notes that two previously disclosed state derivate lawsuits, Larson v Sharer and Anderson v Sharer, were consolidated into one action captioned Larson v. Sharer et al before the Ventura County Superior Court and that a third state derivate lawsuit, Weil v Sharer, was filed on August 13, 2007, in Ventura County Superior Court and was also consolidated with the Larson action.
On August 20, 2007, the class action Harris v Amgen was filed against Amgen and certain of its Board of Directors in the California Central District Court, with claims that the defendants breached their fiduciary duties by failing to inform current and former employees who participated in the Amgen Retirement and Savings Manufacturing Plan and the Amgen Savings Plan of the alleged off-label promotion of both Aranesp and Epogen, "while a number of studies allegedly demonstrated safety concerns in patients using ESA's."
On November 2, 2007, the Sheet Metal Workers National Health Fund filed suit in the US District Court for the District of New Jersey against Amgen alleging both federal and state antitrust violations, as well as violations of California's Unfair Competition Law.
The complaint alleges that Amgen engaged in an "anti-competitive tying arrangement and pricing scheme" involving the sale of three products, Neupogen, Neulasta and Aranesp, and seeks injunctive and compensatory relief for this alleged anticompetitive behavior.
According to the lawsuit, Amgen requires oncology clinics to buy Aranesp, a red blood cell stimulant, if they want better prices for the company's two white blood cell stimulants, Neulasta and Neupogen, which are both used to combat the side effects of chemotherapy.
The two drugs hold 98% of the market in sales to oncology clinics, Maria Vogel-Short reported in the November 9, 2007, New Jersey Law Journal.
The Sheet Metal Workers Fund is a third-party payer of the costs of Aranesp and the putative class is identified as including anyone who paid all or a portion of the cost for Aranesp at an oncology clinic since April 2004.
The plaintiffs' attorney, David Cohen, of Saltz Mongeluzzi Barrett & Bendesky in Philadelphia and Voorhees in New Jersey, told Ms Vogel-Short that due to Amgen's pricing arrangement, clinics are forced to pay higher prices for Aranesp. According to Mr Cohen, Procrit costs $80 to $100 per dose, and Aranesp costs $100 to $300.
The SEC filing also notes that securities class actions, Mendall v Amgen, Jaffe v Amgen, Eldon v Amgen, Rosenfield v Amgen and Public Employees' Retirement Association of Colorado v Amgen, were consolidated into one action captioned, Connecticut Retirement Plans & Trust Funds v Amgen Inc et al before the US District Court for the Central District of California and that the amended complaint was filed on October 2, 2007.
The filing also lists three third-party-payor class actions including the United Food & Commercial Workers Central Pennsylvania and Regional Health & Welfare Fund v Amgen, the Vista Healthplan Inc v Amgen and the Painters District Council No. 30 Health & Welfare Fund v Amgen, pending in the California Central District Court.
According to the SEC report, Amgen has received a subpoena from the United States Attorney's Office, Eastern District of New York, for production of documents relating to its products on October 25, 2007, and on November 1, 2007, the company received a subpoena from the United States Attorney's Office, Western District of Washington, for production of documents relating to its products.
Amgen has also received letters from both the House Subcommittee on Oversight and Investigation, Committee on Energy and Commerce and the United States Senate Committee on Finance, with inquiries related to Amgen's ESA studies, promotions of ESA and the company's pharmacovigilance program.
Although Amgen manufactures Epoetin, the company granted a license to a subsidiary of Johnson & Johnson to sell the drug in the US under the trade name Procrit, for treatment of cancer patients but not dialysis patients.
J&J is also facing several class-action lawsuits filed by shareholders, and the company has received a subpoena from New York's attorney general requesting information on the sales and promotional activities related to Procrit.
A May 10, 2007, article in the Wall Street Journal entitled, "Suit Details How J&J Pushed Sales of Procrit," by Heather Wontesoriero and Avery Johnson, discusses a lawsuit filed against J&J by Dean McClellan and Mark Duxbury, two former Procrit salesmen turned whistleblowers.
The article sites documents on the marketing of Procrit which show that in 2004, after Amgen's competing drug Aranesp, billed as a longer acting version of Epoetin, was approved, J&J made offers that would allow buyers of Procrit to receive discounts off an already-reduced price, as well as rebates.
For example, one company memo calculates that a physician who bought nearly $1 million of Procrit over 15 months would get a check for $237,885 back, or 24%.
Another program offered hospitals discounts on purchases from across J&J's product line "-- including some huge-selling drugs and medical devices sold by different subsidiaries -- if the hospital used Procrit at least 75% of the time when prescribing anti-anemia drugs."
Mr McClellan also told the Journal that J&J pushed doctors to administer a higher dose of Procrit for cancer patients beginning in the mid-90's, many years before a higher dose was approved by the FDA.
Initially, he said in the interview, "doctors weren't buying into it," in some cases because doctors were worried that Medicare would not reimburse for the cost of an unapproved dose.
Mr McClellan says he was then told to pitch the regimen as more convenient for patients,to pass out free samples, and that at one time he was given roughly 600 cards for free "trial" samples, worth $720,000 in Procrit, to persuade doctors to try the higher dose.
When an Arizona Cancer Center ran into resistance from Medicare over reimbursing $1 million for the unapproved dose, Mr McClellan told the Journal that a company official drafted a letter, under the name of the center director, to Medicare arguing that the dose was appropriate, and he delivered the letter to the Center for the director to sign.
In 2004, the Center announced that J&J's Ortho Biotech unit had donated $40,000 to the Center to "provide salary support" for a Hematology/Oncology fellow in a newsletter, the Journal reports.
The article points out that Mr McClellan's allegations are similar to some of those in other lawsuits and investigations into pricing and marketing practices of top-selling products at other J&J subsidiaries and lists Risperdal, an antipsychotic, Topamax, an anti-seizure drug, and the heart medication Natrecor.
The Journal also notes that in June 2006, the Justice Department issued a subpoena to J&J asking for documents on the marketing of orthopedic devices, the US attorney for the District of New Jersey is leading a probe into kickbacks paid to doctors who use implants sold by J&J subsidiary DePuy Orthopedics, and a congressional committee is looking into marketing practices involving the sale of stents by the Cordis subsidiary.
In November 2007, federal Judge Patti Saris, of the United States District Court in Boston, ordered AstraZeneca to pay double damages totaling $12.9 million and Bristol-Myers Squibb to pay $696,000 for overcharging on cancer drugs, in what legal analysts are calling a test case for a nationwide class action seeking hundreds of millions of dollars from Amgen, Abbot Labs and ten other drug companies.
"I conclude," she wrote in the order, "that defendants' conduct was both knowing and willful because they knew that Medicare beneficiaries, and thus their insurers, were locked by statute into paying 20 percent of grossly inflated AWP's, which bore no relation to any average of wholesale prices in the marketplace."
Judge Patti Saris found AstraZeneca, Bristol-Myers and Schering-Plough liable for damages in June 2007 for selling drugs to doctors at discounts below the published average wholesale prices and encouraging doctors to bill the government and private insurers full price.
In a June 21, 2007, opinion, Judge Saris wrote: "The Medicare statute itself created a perverse incentive by pegging the nationwide reimbursement for billions of drug transactions a year to a price reported by the pharmaceutical industry, thus putting the proverbial pharmaceutical fox in charge of the reimbursement chicken coop. The different pharmaceutical companies unfairly took advantage of the system by setting sky-high prices with no relation to the marketplace."
The judge said that AstraZeneca acted "unfairly and deceptively" by causing the publication of false and inflated average wholesale prices for the prostate cancer drug Zoladex, which exceeded doctors' costs by as much as 169%.
Bristol-Myers caused the publication of false and inflated average wholesale prices for five drugs, including Vepesid, Cytoxan, Blenoxane, Rubex and Taxol, which had spreads as high as 500%, and Schering-Plough inflated average wholesale prices for its generic asthma drug albuterol sulfate in a range of 100% to 800%, Judge Saris said.
A most despicable example of how far the chemotherapy industry will go to protect profits, involves an elaborate plot to stop a new class of immunotherapies from entering the market. These new products stimulate the body's own immune system to attack only cancer cells.
The profiteering chemo gang's fear of immunotherapies is not without cause. "One day current treatment approaches such as surgery, radiation and chemotherapy, which often kill most but not all of a cancer, could be made obsolete by a potent immune response that eradicates the cancer cells and provides subsequent protection against return and relapse," according to former FDA official, Dr Mark Thornton in commentary in the May 14, 2007 Wall Street Journal.
Dendreon was the first company to seek approval for a vaccine called Provenge, for the treatment of men in the final stages of prostate cancer whose only other treatment option is chemotherapy with the drug Taxotere, manufactured by Sanofi-Aventis. In clinical trials, the vaccine was shown to extend the lives of men with prostate cancer for nearly twice as long as chemotherapy.
This particularly egregious act of placing profits over the lives of dying cancer patients has resulted in a lawsuit being filed by outraged members of the prostate cancer community against officials within the Bush Administration who orchestrated a plot to block FDA approval of the vaccine, after an FDA advisory panel voted overwhelmingly to recommend approval.
The main industry insiders listed in this plot include FDA Commissioner Andrew von Eschenbach, the director of the FDA's Office of Oncology Drug Products, Dr Richard Pazdur, along with Dr Howard Scher from the Memorial Sloan-Kettering Cancer Center, and Dr Maha Hussain from Michigan University.
These four people have made millions of dollars off the chemotherapy industry over the past 2 decades and they will undoubtedly make many more millions once their "public service" ends when the Bush administration finally leaves Washington next year, providing that chemotherapy is not replaced with immunotherapies that is.
The conflicts of interest of these doctors could not be more obvious. The top recipients of public and private cancer research funding in the US include Dr Pazdur's previous employer of 11 years, the MD Anderson Cancer Center at the University of Texas, Dr Scher's current employer, the Memorial Sloan-Kettering Cancer Center, and Dr Hussain's Cancer Center at the University of Michigan.
Prior to his appointment to head the National Cancer Institute in 2001, Dr von Eschenbach, was the executive vice president, chief academic officer and the director of prostate cancer research at the MD Anderson Cancer Center.
A huge number of current clinical trials for late stage prostate cancer patients are lead by Dr Scher and Dr Hussain and involve chemotherapy. Many terminally ill men do not want to risk spending their last days on earth experiencing the debilitating side effects of chemotherapy and if Provenge had been approved finding patients to participate in their clinical trials would have been next to impossible.
Because as noted above by Dr Thornton, these new immunotherapies could potentially end the need for chemotherapy, their approval would also mean the end to the obscene profits made from all the drugs administered to combat the side effects of chemotherapy because the new therapies have no serious side effects.
On the same day that the FDA announced the non-approval of Provenge, the agency also denied the approval of Junovan, to treat children and young adults with non-metastatic osteosarcoma, a rare and often fatal bone tumor. The current treatment is tumor resection with combination chemotherapy before and after surgery. There has not been a new treatment option for this disease in more than 20 years
Junovan stimulates the immune system to kill tumor cells and the clinical trial data showed a significantly increased disease-free survival rate. The probability of surviving without a relapse at 6 years, was 66% for patients who received the drug compared to 57% for patients who did not receive the drug.
According to Dr Thornton, "the FDA succeeded in killing not one but two safe, promising therapies designed and developed to act by stimulating a patient's immune system against cancer."
"The FDA's hubris," he wrote, "will affect the lives and possibly the life spans of cancer patients from nearly every demographic, from elderly men with prostate cancer to young children with the rarest of bone cancers."
He also noted that the Junovan advisory panel meeting "was chaired by the very physician who launched the PR campaign against Provenge."
The clinical trials on Provenge were conducted on patients in the last stage of the cancer whose immune systems had already been damaged by radiation and chemotherapy and experts predict that the drugs will work much better with patients in the earlier stages of the disease with healthier immune systems.
The effi¬cacy of the vaccine was shown in men who had already failed all conventional therapies. "These advanced stages of cancer are dif¬ficult to treat, because the cancer cells have already developed sur¬vival mechanisms that make them extremely difficult to eradicate," according to Dr William Faloon in the article "FDA Rejects Promising Prostate Cancer Drug," in a special 2007 edition of Life Extension magazine.
"The fact that Provenge® demonstrated such impressive survival benefits in men with these advanced forms of prostate cancer," he writes, "hints that it could be even more effective if administered in earlier stages of the disease—perhaps at the first sign of metas¬tasis or in those men with highly adverse risk factors associated with short survival times."
Thomas Farrington, president of the Prostate Health Education Network, testified at the FDA advisory committee hearing in March 2007 and recently wrote an editorial on the web site of the Network and stated in part: "I along with all the other survivors and advocates who presented, urged this committee to recommend approval based upon treatment needs and the scientific data from the Provenge clinical trials."
"We were elated," he wrote, "when the committee voted 17 to 0 that Provenge was safe and 13 to 4 that it met the FDA's efficacy standards - an overwhelming recommendation to the FDA for approval."
"Finally," he said, "we thought, there would be a treatment for terminally-ill prostate cancer patients without the severe side effects brought on by chemotherapy - the only existing treatment for late stage disease."
Mr Farrington also noted that Provenge would provide a treatment for the thousands of terminally ill prostate cancer patients unable to endure toxic chemotherapy, like his father who died with no available treatment option.
"In addition," he wrote, "we envisioned the potential for Provenge to open doors for a whole new class of immunotherapy treatments that could possibly be effective at earlier disease stages while maintaining a better quality of life for patients than today's treatments."
"All of these hopes were put on hold when the FDA rejected the recommendation of its own advisory committee," Mr Farrington pointed out.
Prostate cancer patients say woman should also be demanding an investigation into the corruption within the FDA because due to the non-approval of Provenge, Dendreon has been forced to stop the development of Neuvenge, which uses the same technology platform as Provenge, to treat breast, ovarian and colorectal solid tumors.
According to Mr Thornton, it will be years before the full impact of the FDA's decisions is known and how many lives of cancer patients are cut short.
"For now, however," he writes, "one thing is clear: While our lawmakers obsess over FDA "safety reforms," no one is holding this government agency accountable for its complicity in stalling therapies for life-threatening diseases."
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That day of reckoning may be right around the corner because on December 12, 2007, Congressmen Mike Michaud (D-ME), Dan Burton (R-IN) and Tim Ryan (D-OH) sent a letter to the House Energy and Commerce Committee calling for an examination of the conflict of interests governing the FDA and its failure to approve Provenge, referred to as "a potentially life-saving prostate cancer drug."
The letter notes that, "there is reason to believe that serious ethics rules were violated," and "that these violations played a role in the subsequent FDA decision to not approve Provenge at this time."
"We request your committee conduct a hearing to discuss the FDA's role in this recent decision and the conflicts of interests in the agency," the Congressmen wrote.