Will Big Pharma Continue to Fleece Taxpayers?

Tensions are mounting between the Biden Administration, which wants to implement legislation passed in 2022 allowing Medicare to negotiate drug prices, and the pharmaceutical industry, which would like to nullify the law and maintain the highly profitable status quo.

Big Pharma has little support from the American public, which pays much more for its meds than residents of other countries. The industry is ultimately counting on being rescued by the business-friendly majority on the Supreme Court.

Being able to dictate prices to Medicare is not the only way drugmakers fleece government agencies and the public. In Violation Tracker we document more than 150 major cases of drug price cheating by large producers.

Some of these cases are old-fashioned price-fixing, in which supposedly competing producers conspire to set prices. Last year, for example, criminal charges were brought against Teva Pharmaceuticals and Glenmark Pharmaceuticals for scheming to fix prices of several generic drugs. Teva paid a $225 million criminal penalty and Glenmark paid $30 million. The companies were also ordered to divest their operations relating to the cholesterol drug pravastatin.

Generic producers are supposed to help reduce drug prices, but they often do the opposite. Along with price-fixing, they often engage in schemes called pay for delay. These are illegal deals in which they receive payments from producers of brand-name drugs whose patent protection is ending to look the other way as those producers use tricks to extend their exclusivity. Pay for delay arrangements are frequently challenged via class action lawsuits, and both brand-name and generic drugmakers have paid billions in settlements.

Earlier this year, for instance, Gilead Sciences agreed to pay over $246 million to settle litigation alleging it entered into an improper deal to delay the introduction of a generic version of its HIV medications. Pay for delay is apparently so profitable that nine-figure settlements have not put a dent in it.

Another form of cheating involves manipulation of the wholesale price levels drug companies are required to report to state Medicaid agencies and which are used in determining how much they receive for their products. This reporting is supposed to ensure that the prices being paid by Medicaid are not out of line with those charged to other parties.

Drugmakers have repeatedly been accused of reporting inflated prices to Medicaid, and have paid out large amounts in settlements. In 2016 Pfizer and its subsidiary Wyeth paid $784 million to resolve allegations that Wyeth knowingly reported to the government false and fraudulent prices on two of its proton pump inhibitor drugs.

Then there is the issue of rebates. Pharmaceutical companies often offer them to private-sector customers to promote their products, but they frequently fail to provide the same benefit to government health programs. Violation Tracker contains numerous cases in which drugmakers were accused shortchanging government agencies on rebates. In 2021 Bristol-Myers Squibb paid $75 million to settle one such case.

The Pharma giants have also driven up costs indirectly through practices such as paying kickbacks to healthcare providers to prescribe expensive medications and engaging in improper marketing to encourage off-label use of those over-priced meds.

There seems to be no end to the ways pharmaceutical companies pick the pockets of taxpayers and consumers. The Inflation Reduction Act could begin to tip the scales in the other direction—unless the courts decide to keep us at the mercy of the industry.

The Junk Food Industry’s Drug Problem

There’s a crisis related to junk food in America, but unlike in the past, the problem is not that people are eating too much of it and harming their health. Instead, consumption levels are declining, darkening the prospects for companies that depend on selling products filled with saturated fat and sugar.

The reason for this is the arrival of Ozempic and other weight-control medications that are highly effective in controlling the urge to overeat. From a public health perspective, this is great news. These drugs have the potential to substantially reduce obesity and related medical problems such as diabetes. Use of the drugs is soaring, and analysts expect millions more to follow suit.

While pharmaceutical companies are making a killing from these high-priced drugs, the food industry is faced with reduced demand. Most vulnerable are those companies that profit from binge eating, especially the snack food sector. According to the Wall Street Journal, executives at these firms are being barraged with questions from investors about the impact on profitability and stock prices. Wall Street analysts are pointing to vulnerability for manufacturers such as Hershey, Mondelez International (which makes Oreos, among other things) and Hostess Brands (Twinkies, etc.).

Not long ago, companies such as these were riding high as Americans boosted their junk food consumption during the pandemic. Kellogg was pressed by Wall Street to split into two so that its faster growing snack business (Pringles, Cheez-It, etc.) would not be held back by the less dynamic breakfast cereal operation. The separation was recently completed, but now the new Kellanova snack company may be less appetizing for investors.

A recent report by Barclays also sees negative consequences for fast food chains, soft drink producers and even cigarette companies, given anecdotal evidence that the drugs may also suppress the urge to consume other addictive substances.

These financial warnings serve as a stark reminder of how much American packaged food producers and fast-food chains have profited from unhealthy consumption patterns that they themselves helped to bring about.

It is unclear how these industries will respond to the Ozempic revolution. In the short term, they may root for the health insurance companies currently doing whatever they can do to avoid coverage for drugs that have a list price of up to $16,000 a year. Those refusals are already being met with legal challenges.

If they continue to cater to those who cannot gain access to the drugs or choose not to use them, the snack food makers will in effect follow the lead of the tobacco industry, which continued to profit from the addicted while overall smoking levels declined.

It is also possible they will choose the higher-road approach of modifying their product lines to include more nutritious offerings. Many food companies have already taken this approach. The problem is that these foods are often not significantly healthier. For example, Kellogg’s (and now Kellanova’s) Nutri-Grain bars are widely criticized for being high in sugar and low in fiber. Packaged food companies have paid out millions of dollars in class action lawsuits accusing them of making unsubstantiated health claims for their products.

The best outcome would be if large numbers of people freed of their addictions by the new drugs choose to focus their diet on fresh foods, and the worst packaged brands wither away from lack of demand.

Negotiating with Crooks

The pharmaceutical industry is indignant that the Biden Administration is actually moving ahead with plans to implement the provision of the Inflation Reduction Act that allows Medicare to negotiate drug prices. Responding to an announcement of the first ten medications that will be targeted, the trade association PhRMA complained about a “rushed process,” even though the law was passed a year ago and the negotiated prices will not become effective until 2026.

The industry is not just complaining—it is fighting the law in court and doing everything possible to retain its longstanding power to set prices at astronomical levels. The price-gouging is just part of the problem. Drugmakers also have an abysmal compliance record in their dealings with government healthcare programs.

Take the eleven companies which produce the medications included in the first round of negotiations: AbbVie, Amgen, AstraZeneca, Boehringer Ingelheim, Bristol-Myers Squibb, Eli Lilly, Johnson & Johnson, Merck, Novartis, Novo Nordisk and Pfizer.

Over the past two decades, these companies and their subsidiaries have been penalized in more than 100 cases brought under the False Claims Act (FCA) or related laws relating to government contracting. As shown in Violation Tracker, they have paid a total of more than $5 billion in fines and settlements for overcharging federal agencies and others forms of fraud.

Six of the companies—AbbVie, AstraZeneca, Johnson & Johnson, Merck, Novartis and Pfizer–have each been involved in ten or more FCA cases, paying out enormous sums in penalties.

Pfizer, for example, has paid $1.15 billion in fines and settlements linked to 16 different FCA cases. The biggest of these was a $784 million payment by Pfizer and its subsidiary Wyeth to resolve allegations that Wyeth knowingly reported to the government false and fraudulent prices on two of its proton pump inhibitor drugs.

Novartis has paid $926 million to resolve a dozen different FCA cases. Among these is a $642 million settlement of allegations that included the payment of illegal kickbacks to doctors to get them to prescribe its products.

Merck has also been involved in a dozen FCA cases, paying total penalties of $796 million. The bulk of the total came from a $650 million settlement of allegations that included both illegal kickbacks and failure to offer Medicaid the same rebates it was offering hospital systems.

Johnson & Johnson’s $556 million FCA penalty total comes from four kickback cases as well as several involving the submission of inflated wholesale prices used in setting the rates for Medicaid reimbursements.

Among AstraZeneca’s FCA cases is a $354 million settlement of civil and criminal charges that the company provided large quantities of free samples of a prostate cancer drug to urologists, knowing that many of them were giving the medication to patients as free samples and then billing Medicare and Medicaid.

Seventeen of the 21 FCA cases involving AbbVie and its subsidiaries concerned allegations of falsified drug price reporting to federal and state agencies.

What all this shows is that when federal negotiators sit down at the bargaining table, they will be facing a group of companies that for years have not only been charging high prices but have allegedly also used a variety of illegal means to extract even more revenue from taxpayer-financed healthcare programs.

Rather than expressing indignation, Big Pharma should be displaying penitence for its fleecing of the public for so long.

Pharma Fights to Preserve the Gravy Train

Big Pharma has been fleecing its U.S. customers for so long, the industry came to regard it as a right. That arrangement started to come to an end last year, at least as far as one large customer, the federal government, is concerned. The Inflation Reduction Act included a provision empowering Medicare to begin negotiating some drug prices in 2026.

One pharmaceutical giant has decided to fight to preserve the gravy train. Merck just filed a lawsuit challenging the law, claiming that the obligation to negotiate is an infringement of its constitutional rights. The company argues that its Fifth Amendment protection against government seizure of private property would be violated. It also says that having to sign an agreement reached after negotiation would trample its First Amendment free speech rights.

The Fifth Amendment takings argument is a favorite position of conservatives in opposing all manner of government regulation, but the obligation to negotiate prices is not regulation. It is actually a free market correction to the absurd restrictions that have long existed on the ability of Medicare to bring drug prices back down to earth. The First Amendment argument is laughable.

It is not surprising that Merck would try its chances in court once its lobbying efforts against the law failed. The company has a lot at stake. It rakes in several billion dollars of revenue each year from the sale of diabetes and cancer medications through Medicare plans. Even if its lawsuit initially fails, Merck presumably hopes it will receive a more sympathetic hearing if the case reaches the corporate-friendly Supreme Court.

Freedom from having to negotiate with Medicare is not the only way in which Big Pharma has managed to evade competition. As I described in a report on antitrust cases published in April, drug companies have repeatedly been caught engaging in illegal schemes to block the introduction of lower-cost generic alternatives to their brand-name medications. Since 2000 the industry has paid a total of $10 billion in fines and settlements in these pay-to-delay cases.

Merck is one of those firms implicated in this practice. For example, in 2017 it agreed to pay $60 million to settle class action litigation alleging that its subsidiary Schering-Plough had taken improper actions to block the introduction of a generic version of K- Dur, which is used to treat potassium deficiencies.

Along with anti-competitive behavior, the pharmaceutical industry has a record of questionable practices in its dealings with the federal government. Merck alone has paid nearly $800 million in fines and settlements relating to alleged violations of the False Claims Act. For example, in 2008 it agreed to pay $650 million to resolve allegations that it failed to pay proper rebates to Medicaid and other government health care programs and paid illegal remuneration to health care providers to induce them to prescribe the company’s products.

These forms of misconduct, along with the immunity from having to negotiate prices with Medicare, have for too long given the drug companies the upper hand in their dealings with the federal government. The Inflation Reduction Act takes an important first step toward correcting that situation. It would be a shame if the courts turn back the clock.

Note: Corporate Crime Reporter reports that the Justice Department has quietly introduced a search engine covering its actions against business entities and individuals. As of this writing, the Corporate Crime Case Database contains only 11 entries but more is promised.

Pay for Delay

Forty years ago, federal policymakers thought they had found a solution to the problem of escalating prescription drug prices. The Hatch-Waxman Act of 1984 made it easier for generic manufacturers to bring to market lower-cost alternatives to brand-name medicines whose patent protection was expiring.

Fast forward to 2023. Recently, a federal judge in New York approved a $54 million class action settlement between plaintiffs led by a police union health plan and two drug companies accused of participating in an improper agreement to delay the introduction of a generic version of the Alzheimer’s drug Namenda. In 2020 another group of plaintiffs in a related case received a settlement of $750 million.

Once hailed as heroes that would restore consumer-friendly competition to the pharmaceutical industry, many generic producers instead became conspirators in what are known as “pay for delay” schemes to extend the market domination of costly brand-name products.

The extent of this degeneration is documented in data I have been collecting for an expansion of Violation Tracker and that will be analyzed in a report to be published next week. That expansion covers class action lawsuits designed to combat illegal price-fixing by large companies in a wide range of industries. This private litigation often follows actions brought by federal and state prosecutors.

Cases involving pay for delay, which amounts to an indirect form of price-fixing, make up a substantial portion of the litigation challenging anti-competitive practices. I was able to identify more than 100 settlements over the past two decades in which generic and brand-name producers paid out nearly $8 billion. Cases brought by federal agencies or state attorneys general resulted in another $2 billion in fines and settlements.

The company that has paid out the most is generics giant Teva Pharmaceuticals, whose 19 settlements (including those involving subsidiaries) total $2.5 billion. AbbVie’s total is $1.5 billion in 21 cases. Five other companies—GlaxoSmithKline, Sun Pharmaceuticals, Pfizer, Novartis and Bristol-Myers Squibb each have totals between $500 million and $800 million.

The largest single penalty came in 2015 in an action brought by the Federal Trade Commission accusing Cephalon Inc. of illegally blocking generic competition to its blockbuster sleep-disorder drug Provigil. The settlement required Teva Pharmaceuticals, which had acquired Cephalon in 2012, to make a total of $1.2 billion available to compensate purchasers, including drug wholesalers, pharmacies, and insurers, which overpaid because of Cephalon’s illegal conduct.

High drug costs are one of the factors contributing to inflation in the United States. Unlike energy prices, which are highly susceptible to swings in international markets, drug prices are largely under the control of manufacturers, due to patents and the unwillingness (until recently) of the federal government to allow Medicare to negotiate with the industry.

Big Pharma, not satisfied with those benefits, has frequently crossed the line into illegality through these pay-for-delay schemes. The $10 billion in penalties paid by the industry is in all likelihood far less than the economic gains it has reaped by artificially prolonging the market life of overpriced medications. It’s something to keep in mind during the next expensive visit to the pharmacy.

The report, Conspiring Against Competition, will be published on April 18.

Malignant Marketing

Large corporations are fond of saying that they are all about giving customers what they want. But what happens when the product, though legal, is harmful or addictive? Should companies be allowed to satisfy consumer demand, no matter what the consequences?

Some high-profile settlements announced in recent weeks show that, as far as state attorneys general are concerned, there should be much stricter controls on the marketing of dangerous products and that corporations should be heavily penalized for abuses.

The most recent case involves JUUL Labs, which just agreed to pay $438 million to resolve multistate litigation accusing it of improperly marketing vaping products to minors. The announcement of the settlement, reach with a bipartisan group of 34 states and territories, alleged that JUUL “relentlessly marketed to underage users with launch parties, advertisements using young and trendy-looking models, social media posts and free samples. It marketed a technology-focused, sleek design that could be easily concealed and sold its product in flavors known to be attractive to underage users. JUUL also manipulated the chemical composition of its product to make the vapor less harsh on the throats of the young and inexperienced users. To preserve its young customer base, JUUL relied on age verification techniques that it knew were ineffective.”

Earlier this summer, groups of state AGs announced several massive settlements with companies involved in the production and marketing of opioids. Teva Pharmaceuticals agreed to pay up to $4.25 billion to state and localities to settle allegations that it promoted two powerful fentanyl products designed for cancer patients to others while downplaying the risks of addiction. According to the AGs’ press release, Teva’s actions included “encouraging the myth that signs of addiction are actually ‘pseudoaddiction’ treated by prescribing more opioids.”

Several days later, Allergan agreed to pay up to $2.4 billion to settle a similar multistate case alleging the company had “deceptively marketed opioids by downplaying the risk of addiction, overstating their benefits, and encouraging doctors to treat patients showing signs of addiction by prescribing them more opioids.” Allergan was also accused of failing to maintain effective controls to prevent the diversion of opioids into improper channels.

And a couple of weeks after that, Endo International agreed to pay $450 million in yet another multistate lawsuit stemming from accusations of deceptive marketing. In Endo’s case, this involved allegations that it “falsely peddled its opioids as abuse-deterrent with deadly consequences.” Under the weight of this and other litigation, Endo has filed for bankruptcy.

The theme running through all these cases is the tendency of corporations, obsessed with the desire to increase sales, to engage in shockingly unethical behavior. Both the slick techniques of JUUL to lure young vapers and the seemingly scientific claims of the opioid producers to reassure pain patients demonstrate an apparent willingness to use deceit and manipulation to push dangerous products on vulnerable populations. The monetary penalties, however large, and promises to end the abuses hardly seem a sufficient penalty for the harm caused by this behavior.

The Pill Mills of the Fortune 500

The downfall of Purdue Pharma illustrated the role played by drugmakers in the opioid crisis. Large settlements paid by the likes of McKesson and AmerisourceBergen highlighted the culpability of the major drug wholesalers. Now more attention is being paid to the other players in the corrupt supply chain: pharmacies.

The assumption used to be that the main retail culprits were small pharmacies in places such as West Virginia that readily filled far more oxycontin prescriptions than would be expected to arise from legitimate use in their communities. Those businesses, like the unscrupulous clinics that wrote the prescriptions, are often called pill mills.

A decision just handed down by a federal court in San Francisco indicates that our understanding of that phrase needs to be revised. Following a bench trial, U.S. District Judge Charles Breyer ruled that the giant pharmacy chain Walgreens improperly dispensed hundreds of thousands of suspicious prescriptions for narcotic painkillers in the Bay Area over more than a decade.

“In exchange for the privilege of distributing and dispensing prescription opioids,” Judge Breyer wrote, “Walgreens has regulatory obligations to take reasonable steps to prevent the drugs from being diverted and harming the public. The evidence at trial established that Walgreens breached these obligations.”

Those regulatory obligations come from the Controlled Substances Act (CSA), a federal law which regulates the distribution of drugs ranging from Xanax to fentanyl. As shown in Violation Tracker, the U.S. Justice Department and the Drug Enforcement Administration have brought about two dozen successful CSA actions against large pharmacy chains, including those operated by the big supermarket companies.

In 2013 Walgreens had to pay $80 million to resolve a DEA case involving what the agency called “an unprecedented number of record-keeping and dispensing violations.” CVS, another pharmacy goliath, has paid out over $130 million in a dozen CSA cases.

These amounts are likely to be dwarfed by the damages against Walgreens in the San Francisco case, which have yet to be determined. Walgreens and CVS, along with Walmart, are also embroiled in an opioid test case brought by two counties in Ohio. The plaintiffs are seeking a payout of several billion dollars to help pay for addiction services.

If those Ohio counties are successful, it would give a green light to several thousand other cases that have been filed around the country and are being treated as a multidistrict action. On top of that, Walgreens, CVS and Walmart are facing a slew of opioid cases brought by the Cherokee Nation and other tribes.

It is unlikely that Walgreens or CVS will suffer the same fate as Purdue Pharma, which had to file for bankruptcy and agree to turn itself into a public benefit company while its owners, the Sackler Family, had to promise to pay out billions. CVS, which generated nearly $8 billion in profits last year, is particularly well positioned to handle the massive settlements to come.

The real question is whether it and Walgreens will own up to their misconduct and get serious about complying with their obligations to prevent opioid abuse.

Holding Corporations Accountable for Defective Products

A federal judge in Michigan just shot down a motion by Fiat Chrysler to derail litigation alleging it sold 800,00 vehicles with faulty gearshifts. The company could end up paying many millions in damages. At about the same time, a federal judge in New York gave final approval to a $5.2 million settlement of class action litigation claiming that DevaCurl products caused hair loss and scalp damage.

These are two recent examples of actions in an arena in which corporations are held accountable for causing harm to their customers: product liability lawsuits. These kinds of court cases are the latest category of class-action and multi-district litigation to be added to Violation Tracker.

The database now contains entries covering 120 of the most significant product lawsuits of the past two decades in which corporations paid substantial damages or a monetary settlement to large groups of plaintiffs.  The total paid out by the companies in these cases is more than $54 billion.

Fourteen of the cases involved payouts of $1 billion or more, the largest of which was the $9.6 billion Bayer agreed to pay to resolve tens of thousands of suits alleging that the weedkiller Roundup, produced by its subsidiary Monsanto, causes cancer. Bayer, which produces pharmaceuticals as well as chemicals, was involved in five other cases on the list, bringing its aggregate payout to more than $12 billion, the most for any corporation.

Next in line are Pfizer and Johnson & Johnson, each with payout totals of about $5.5 billion for cases involving harm caused by products ranging from hip implants and diabetes drugs to heartburn medication and talcum powder. These two companies and other pharmaceutical and medical equipment producers account for one-third of the cases on the list and half of the payout total. The giant settlements involving opioid producers and distributors are not included here, since they are treated as matters of illegal marketing rather than defective products—and because those cases are most often brought by state attorneys general rather than as private litigation.

The motor vehicle industry also features prominently, with 32 cases and total payouts of $9 billion. The largest portion of that is linked to Toyota, with $5.3 billion in payouts in cases involving issues such as unintended acceleration, defective airbags and premature corrosion. Volkswagen has actually paid out much more in class action settlements due to its emissions cheating scandal, but Violation Tracker categorizes those as environmental rather than product liability cases.

Among the remaining cases are a $1 billion settlement by the German company Knauf involving drywall that emitted noxious odors and a $500 million settlement by Sears Roebuck of allegations that it sold stoves that had a tendency to tip over.

Yet perhaps the most surprising of the cases were two involving the Brazilian company Taurus, which paid a total of $277 million to resolve allegations that it produced firearms with a defect that caused them to go off when dropped. The irony is that gunmakers are shielded from liability when their weapons are used in criminal activities.

Product liability class action and multi-district cases—like similar litigation involving issues such as toxic chemicals, wage theft and privacy violations—are reminders that the courts are an important complement to the regulatory system in addressing corporate misconduct.

States vs. Big Business

Twenty twenty-one is turning out to be a banner year for state government prosecution of corporate crime and misconduct. The biggest events are, of course, the settlements with pharmaceutical companies Purdue Pharma and Johnson & Johnson along with the three big drug distributors—Cardinal Health, AmerisourceBergen and McKesson—for their role in creating and prolonging the opioid epidemic.

While some argue that the amounts are not sufficient, those cases will result in billions of dollars in payments to state governments from the corporations and the family, the Sacklers, who controlled the now bankrupt Purdue and grew enormously wealthy from its operations.

In all, the states will rack up more than $30 billion in 2021, which would be the largest amount since 2008, when the states received about $53 billion in payments, largely as the result of a series of billion-dollar-plus settlements with the likes of Merrill Lynch, Morgan Stanley and Goldman Sachs to resolve allegations that the Wall Street banks misled investors in the marketing of auction-rate securities.

This year’s total is not entirely the result of the opioid litigation. There have also been numerous other cases resolved by state attorneys general that may not involve billions but are still quite significant. Here are some examples.

In July, the New York AG announced that TIAA-CREF, a subsidiary of retirement-services giant TIAA, had agreed to pay $97 million to resolve allegations that it fraudulently misled tens of thousands of customers into moving their retirement investments into higher-fee accounts offered by the company.

Also in July, the Oregon AG announced that L Brands, the owner of Victoria’s Secret and other retail chains, had agreed to commit $90 million of company funds to protect employees from sexual harassment and discrimination and require accountability from executives when misconduct occurs. The settlement came in the wake of allegations by the Oregon Public Employees Retirement Fund and other shareholders that the company’s board of directors failed to investigate former CEO and Chairman Emeritus Leslie Wexner’s close personal ties with convicted sex offender Jeffrey Epstein, and ignored a widespread and pervasive culture of sexual harassment at the company.

In June, the Ohio AG announced that Centene Corp. agreed to pay $88 million to resolve allegations of overcharging Medicaid by charging more than the capped industry-standard prices for drugs while acting as a pharmacy benefit manager. Centene paid $55 million to settle a similar case with the state of Mississippi, while Bristol Myers Squibb paid $75 million in an overcharging settlement with a group of states.

Also in June, the North Carolina AG announced that JUUL Labs would pay $40 million and change its practices to resolve allegations that it was responsible for misleading teenagers into becoming addicted to nicotine-based vaping products.  

Last month, the Pennsylvania AG announced that Glenn O. Hawbaker, Inc. would pay more than $20 million to resolve criminal charges that it misdirected retirement contributions meant specifically for employees working on prevailing-wage projects into a company-wide plan that covered executives and owners of the firm.

Also in August, the Georgia AG announced that Turtle Creek Assets, Ltd would pay more than $19 million to resolve allegations that the company committed multiple violations of the federal Fair Debt Collection Practices Act and the Georgia Fair Business Practices Act.

What this sampling of cases shows is that amid all the controversy over their policies on issues such as voting rights and abortion, many states of varying ideological orientation continue to carry out their responsibility to protect citizens from irresponsible corporate behavior.

Note: These cases will appear in an update of Violation Tracker that will be posted later this month.

Public Money and Public Health

When a company is the subject of front-page stories about serious misconduct, the firm would normally have a track record of regulatory infractions documented in Violation Tracker. Yet Emergent BioSolutions, which has had to throw out millions of doses of Covid-19 vaccine because of serious production flaws, does not have a single entry in the database.

This is not because Emergent has had a perfect track record until the present. On the contrary, investigations by the New York Times, the Washington Post and the Associated Press have reported that probes by two federal agencies and by Johnson & Johnson, which contracted with Emergent to manufacture the vaccine, had found serious deficiencies, especially with regard to its efforts to prevent contamination.

If you read those articles carefully, you will see that the findings come from unpublished documents obtained through Freedom of Information Act requests or that were leaked to reporters. In other words, the public was unaware of the deficiencies being found by inspectors from the Food and Drug Administration and J&J auditors. There were no public enforcement actions against the company that would have shown up in the regulatory data collected for Violation Tracker. There are also no substantive references to regulatory issues in the publicly traded company’s 10-K filing.

I also searched the Nexis news archive for articles or press releases about Emergent. Prior to the recent revelations, almost all the coverage about the company focused on the numerous government contracts it has received. Two decades ago, it was the nation’s sole producer of the anthrax vaccine, as a result of which it received many millions of dollars in federal contracts. It also received funding to work on drugs for Ebola and Zika prior to getting on the Covid-19 gravy train.

Among the agencies providing this backing has been the Biomedical Advanced Research and Development Authority, an office within the Department of Health and Human Services. BARDA was apparently aware of shortcomings at Emergent but did little about them. The Times investigation found that in dealing with the company the agency “acted more as a partner than a policeman.”

Along with the federal largesse, Emergent has received millions of dollars in state economic development incentives. In 2004, Maryland provided up to $10 million in assistance for the facility that was producing the anthrax vaccine. The state provided a $2 million loan when Emergent built a new headquarters in 2013, with Montgomery County and the city of Gaithersburg kicking in another $1 million. More public money was provided to the company’s Baltimore operations, where the Covid-19 work has been performed pursuant to an estimated $1.5 billion in manufacturing contracts.

While the production problems were kept quiet, Emergent was able to pretend that all was well at the company. Its CEO Robert Kramer’s total compensation jumped to $5.6 million last year. The company’s stock price at one point last summer soared to $135.

Now all that is over. The stock price is at less than half that level. The company is facing multiple investigations whose results are likely to be made public. Kramer should not expect a big boost in pay.

It is unclear how much Emergent’s practices have set back the country’s campaign to defeat the coronavirus. Yet it seems clear this was an egregious case of a corporation living high on public money without paying adequate attention to public health.