How to Make a Billion Dollars in the Pharmaceutical Industry

Drugs

This article was written by James Young, a ClassAction.com attorney who is nationally known in the areas of pharmaceutical litigation, health fraud, and consumer protection. Along with John Yanchunis, Mr. Young is now in the process of filing lawsuits against opioid distributors, doctors, and state Boards of Pharmacy on behalf of several counties in West Virginia, as well as the state of Kentucky.

James Young presented a version of the following in a live video for ClassAction.com’s Facebook page.

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Pharmaceutical companies approach new drugs with one question in mind: How do we make $1 billion?

Big Pharma’s push to create the next blockbuster drug is a highly sophisticated campaign that relies on numerous tried-and true tactics—some aboveboard and some fraudulent.

Big Pharma’s focus on profits often comes at the expense of patient safety.

Given the attention to detail that goes into developing and selling pharmaceuticals, when a drug produces serious, unwarned against side effects, it’s hard to believe manufacturers when they claim ignorance. And as drug lawsuits are often able to show, burying unfavorable safety data is in many cases part of Big Pharma’s marketing calculus.

A compound’s path from initial approval to blockbuster drug typically follows the eleven steps outlined below.

1. Take an existing drug or patent-protected medication and expand its use. Or, create a disease.

Pharmaceutical companies have intellectual property in the form of drug formulations. But they can’t make any money off a formulation until it is approved by the FDA to treat certain symptoms of a disease. So the first step is to approach the FDA and seek permission to use a drug for a particular treatment. The general timeline to complete research and approvals for a new drug is four-to-six years.

If there is no disease criteria consistent with the symptoms that a company’s drug treats, then the company creates a disease.

If there is no disease criteria consistent with the symptoms that a company’s drug treats, then the company simply creates a disease. They pay for physicians and research institutions and universities to come up with different disease criteria that are consistent with the symptoms that the drug treats. At the same time, they’re building grassroots support with patient support organizations they either created or funded that demand more medication options.

2. Hide data and obtain broader approvals.

In addition to clinical trials, drug companies also conduct their own tests called “surveillance” of the existing use of these drugs in the population. Drug surveillance produces very robust data sets that reveal to manufacturers the harmful side effects of drugs. Manufacturers are supposed to warn the public about the harmful side effects of drugs in the drug’s label.

But they don’t always do that. When they don’t, it leads to product liability litigation against the pharmaceutical company.

By hiding data—including safety data—companies are able to obtain broader approvals or indications for the use of their drugs. A company can’t make a billion dollars on a drug if they can’t sell it to a broad market.

Purdue Pharma’s OxyContin, for example, was initially approved to treat end stage cancer pain, or “breakthrough” pain. But because the market for breakthrough pain was too small to create a billion-dollar drug, Purdue got the FDA to sign off on using OxyContin for chronic pain, which is very different than breakthrough pain and has a much larger patient pool.

3. Broaden the market by creating false front or support groups.

Let’s say you’re an American pharmaceutical company and you want a patient advocacy group to promote the approval and use of your product. If an advocacy group won’t do that or doesn’t exist for the disease or symptoms your drug targets, you just create it. You fund the group through various non-transparent sources and create grassroots support, such as people demanding more pain medications for veterans coming back from Iraq.

The reality is, many of the support groups and patient advocacy groups are funded by Big Pharma itself. Many are not legitimate.

4. When in doubt, just pay kickbacks.

Since it’s a crime in this country to pay a physician a kickback for writing a prescription, drug companies use various workarounds.

Physicians make a lot of money doing these events.

For example, a drug company approaches a doctor and says, “We would really like you and your team of physicians at your clinic or hospital to use our product. In exchange, we’re going to allow you to conduct a clinical trial at your facility. And we’re going to pay you on a per-patient basis to do that. And we’re going to give you free products to use in the offices, so your patients won’t pay out of pocket at all.”

That’s a form of kickbacks. It is sometimes allowable when done openly and transparently, but quite often it’s not.

Another form of kickbacks is recruiting physicians to be speakers for your pharmaceutical company at conferences and events. Physicians are paid to travel to and speak in luxurious resorts in places like Maui, South Beach, and Las Vegas. They also have “lunch and learns” and CME (continuing medical education) events in their own locations.

Physicians make a lot of money doing these events.

5. Conduct stealth or guerrilla marketing using key opinion leaders.

When a drug company pays kickbacks to a physician, they’re only trying to get that physician’s patients to use a product. Using something called “key opinion leaders” allows a drug company to buy much broader influence.

By using stealth and guerilla marketing to target key opinion leaders—to figure out who they are, track their movements through social media and sales representatives that call on them in the office, by paying them kickbacks and paying them to speak—you develop a key opinion leader that everyone else will follow.

For example, “Dr. Smith” is the number one physician in New York City for a particular disease. If a drug company can get Dr. Smith to start using and recommending their product, all the other doctors that listen to Dr. Smith will follow suit.

Big Pharma finds a key opinion leader not just in one city, but in every city across the United States.

6. Enter into collusive agreements with pharmacy benefit management companies (PBMs) or the competition.

Pharmaceutical companies enter into antitrust or collusive agreements with insurers or PBMs (Pharmacy Benefit Management Companies, the insurance component of your pharmacy benefit) and pay rebates or kickbacks to them in order to lower their price and become number one on the formulary.

Drug companies rig the system by paying the competition to keep their products off shelves.

They’ll also do collusive agreements with the competition. These are sometimes called “co-marketing” or “co-branding” agreements. Maybe Company A is first to market with a particular product, but the competition is right behind them. If they come into market they might make $100 million in the first year. Company A can pay the competition not to market their drug and to instead co-market with Company A. They still get the $100 million but their product doesn’t hit the market.

There’s another variation of this involving generic drugs. When generic drugs come on the market, there’s no need (assuming that they’re the equivalent) for the branded version of that drug to continue to be on a PBM’s formulary. But quite often it remains. You can be sure that, behind the scenes, some type of co-marketing or co-branding has taken place.

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