Pharmaceutical industry

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.

AstraZeneca’s Vaccine Stumbles

It’s difficult to decide whether to be more suspicious of the Trump Administration or the major drugmakers when evaluating the coming covid vaccine rollout.

The administration, eager to take credit for the unusually quick development of at least two products, is now revealed to have passed up the opportunity to lock in larger supplies of the Pfizer offering, prompting the company to make deals with other countries. Trump tried to cover up the error with an America First executive order, but that action is said to be unenforceable. Unless some of the other vaccines in development come to fruition soon, it may take a lot longer than promised to inoculate the U.S. population. The situation is worsened by the decision of the administration to leave states to work out distribution plans on their own.

Pfizer, meanwhile, was getting showered with praise as its vaccine began to be administered in the United Kingdom, yet it soon had to contend with reports of several serious allergic reactions. The company, it turns out, had excluded people with a history of significant adverse reaction to vaccines from late-stage trials. UK officials are now telling those with serious allergies to put off getting the shot.

Then there is AstraZeneca, whose vaccine developed with the University of Oxford appears to be effective, but exactly how effective is in doubt given that researchers initially screwed up the doses given during the clinical trial and had to improvise.

Back in September, AstraZeneca had to halt the clinical trial after a participant fell ill. The company apparently infuriated the Food and Drug Administration by failing to warn it about the problem before the story became public. The New York Times called the incident “part of a pattern of communication blunders by AstraZeneca that has damaged the company’s relationship with regulators, [and] raised doubts about whether its vaccine will stand up to intense public and scientific scrutiny.”

AstraZeneca’s shortcomings did not start with its covid project. Like Pfizer, AstraZeneca has been accused of engaging in illegal marketing. In 2010 it paid $520 million to the U.S. Justice Department to resolve allegations that it promoted its anti-psychotic drug Seroquel for uses not approved as safe and effective by the FDA. Among other things, the company was accused of having paid doctors to give speeches and publish articles (ghostwritten by the company) promoting those unapproved uses.

The company has also been embroiled in controversies over pricing. In 2007 a federal judge ruled in a national class action case that AstraZeneca and two other companies had to pay damages in connection with overcharging Medicare and private insurance companies. The judge singled out AstraZeneca for acting “unfairly and deceptively” in its pricing of the prostate cancer drug Zoladex. The company was later hit with a $12.9 million judgment.

The combination of Trump Administration incompetence and the questionable track record of companies like AstraZeneca and Pfizer is giving ammunition to vaccine skeptics. We can only hope that the FDA review process makes a convincing case for the safety of the vaccines and that the new Biden Administration shows greater skill in working out the details for their distribution.

In Pfizer We Trust?

The world is in love with Pfizer and Moderna. The two pharmaceutical companies have each announced amazing results in their separate efforts to develop a coronavirus vaccine. Pfizer first announced that its product appeared to be 90 percent effective, only to be upstaged days later by Moderna and its claim of 94.5 percent. Pfizer then revised its efficacy rate to 95 percent.

Like everyone else, I am eager to see progress made in the fight against covid, but there is a part of me that wonders whether these announcements, coming in record-breaking time, are a bit too good to be true. Don’t get me wrong—I am not a vaccine skeptic. I recently got my flu shot and previously was inoculated against shingles and pneumonia.

Yet I am a wary when it comes to grand pronouncements by large corporations about advances that will generate vast amounts of profit. This is particularly the case with large drug companies, which have a long history of deception and malfeasance.

Pfizer is a prime example. Its track record is filled with cases in which it was accused of misleading regulators and the public about the safety of its products.

In the early 1990s, for example, Pfizer was embroiled in a controversy about scores of fatalities linked to heart valves produced by its Shiley division. In 1992 it agreed to pay up to $205 million to settle thousands of lawsuits. In 1994 the company agreed to pay $10.75 million to settle Justice Department charges that it lied to regulators in seeking approval for the valves.

In 2005 Pfizer had to stop advertising its arthritis medication Celebrex after a study showed that high doses were associated with an increased risk of heart attacks. Pfizer’s claims about the safety of the drug were further undermined when it came to light that the company had conducted a clinical trial back in 1999 that also pointed to the cardiac risk but which Pfizer kept secret.

Pfizer, which was a pioneer in the once controversial practice of advertising pharmaceuticals, has frequently been accused of making false or misleading claims about its products. It has paid millions of dollars to resolve state and federal allegations about these practices.

It has paid even larger amounts in cases involving allegations that the company promoted its drugs for uses not approved by the Food and Drug Administration. These include a $2.3 billion settlement in 2009 that covered criminal as well as civil allegations. Pfizer’s subsidiary Wyeth settled its own criminal-civil illegal marketing case for $490 million four years later. In 2016 Wyeth paid another $784 million to settle allegations that it reported false pricing information to the federal government.

Moderna has not been around long enough to get into much trouble, but other companies working on vaccines have track records similar to Pfizer’s. These include Johnson & Johnson, whose penalty total on Violation Tracker is $4.2 billion, AstraZeneca ($1.1 billion), GlaxoSmithKline ($4.4 billion) and Sanofi ($641 million).

We may have no choice but to depend on companies such as these to develop and produce the vaccines we need to overcome covid. Fortunately, their efficacy and safety claims will be subject to review by presumably independent experts before the vaccines are put into general distribution. I will continue to have my doubts about Pfizer, but I’m willing to trust Fauci.

The $8 Billion Slap on the Wrist

In the normal course of events, an $8 billion penalty and a guilty plea would represent a landmark event in the history of corporate crime enforcement. The newly announced resolution of charges against Purdue Pharma is, however, a disappointment and a missed opportunity to mete out appropriate punishment to one of the most egregious rogue companies this country has ever seen.

Let’s start with the monetary penalty. The $8 billion amount ranks 11^th among all the fines and settlements collected in Violation Tracker. It is surpassed by penalties paid by companies such as BP, Volkswagen, Bank of America and JPMorgan Chase.

As bad as the environmental and financial conduct of those corporations may have been, it is likely that Purdue Pharma has caused much greater harm. It bears a significant amount of responsibility for the hundreds of thousands of people who have died from overdoses after becoming addicted to opioids the company recklessly promoted.

There is also the issue of the economic costs to society. The Society of Actuaries has estimated those costs to be as high as $214 billion a year. Looked at in comparison to the human and economic costs, the $8 billion penalty seems woefully inadequate—all the more so because it is unclear how much of that amount the bankrupt company will actually pay.

It is good that the Justice Department extracted a guilty plea from Purdue rather than its frequent practice of allowing large companies to sign deferred prosecution or non-prosecution agreements. Yet this is a case which called out for individual as well as corporate criminal charges. DOJ got the Sackler Family, which controls Purdue, to pay out $225 million—yet that is a pittance in relation to the billions the family has taken from the company.

One unusual feature of the case resolution is the provision that will require Purdue to emerge from bankruptcy as a benefit company supposedly dedicated to serving the public rather than maximizing profits. It remains to be seen how that would work, but it is already troubling that the creation of the trust would allow Purdue to reduce its criminal penalty substantially.

The good news is that the DOJ settlement is not the end of the story. The statement that the Sackler family has not been released from potential federal criminal liability is not expected to mean much, especially under a Trump Administration.

The possibility of more aggressive action can be found at the state level. Numerous state attorneys general have sharply criticized the deal and have vowed to pursue their own cases. “I am not done with Purdue and the Sacklers,” warned Massachusetts AG Maura Healey.

Let’s hope that state prosecutors do their job, because their federal counterparts have failed to adequately crack down on the worst corporate violators and the individuals behind them.

Relying on Drug Companies With Flawed Safety Records to Save Us from Covid-19

Among the many things that have changed drastically in the past few months is the public perception of the pharmaceutical industry. At the beginning of the year, the main news about Big Pharma was the possibility of a multi-billion-dollar opioid settlement with the states.

Now, rather than being held accountable for tens of thousands of overdose deaths, the industry is being hailed as our savior from Covid-19. The news is filled with laudatory stories about the efforts of the drug companies to come up with a treatment for those currently suffering from the virus and a vaccine that may be the only way for society to return to something approximating normal.

Of course, everyone wants these efforts to succeed, but we shouldn’t ignore the very checkered track record of the industry. The safety portion of that record suggests that pushing for extremely rapid results may be risky.

The pharmaceutical industry’s safety problems date back at least to the 1930s, when a company called S.E. Massengill introduced a liquid antibiotic without testing and the drug turned out to cause fatal kidney damage. In the 1950s Parke-Davis heavily promoted a typhoid drug for less serious ailments until it emerged that users were developing severe and irreversible anemia. During the same period, thousands of children around the world were born with birth defects after their mothers took the morning-sickness drug thalidomide during pregnancy.

Sometimes these scandals involved vaccines. In the mid-1950s a California company called Cutter Laboratories produced large stocks of the new polio vaccine that mistakenly contained the live virus. Scores of children who received the vaccine developed polio.

Defenders of the pharmaceutical industry will claim that safety practices are much more stringent these days. But consider the recent history of Johnson & Johnson, which is one of the companies actively pursuing a coronavirus vaccine.

J&J, whose baby products long enjoyed a reputation for purity, has in the past two decades been implicated in a seemingly endless series of controversies about product safety and the illegal marketing of drugs for uses not approved as safe by the Food and Drug Administration.

Some of the company’s problems stemmed from faulty production practices. During 2009 and 2010 J&J had to announce around a dozen recalls of medications, contact lenses and hip implants. The most serious of these was the massive recall of liquid Tylenol and Motrin for infants and children after batches of the medications were found to be contaminated with metal particles.

in 2013 Advanced Sterilization Products, a division of J&J subsidiary Ethicon Inc., had to pay $1.2 million to settle FDA allegations that it had produced and distributed adulterated and misbranded sterilization monitoring products.

Other major companies in the coronavirus vaccine race have been involved in their own controversies. In 2012 GlaxoSmithKline, which is partnering with Sanofi in its vaccine effort, had to pay $3 billion to settle various criminal and civil charges, among which were allegations that the company withheld data on safety problems with its diabetes drug Avandia from the FDA.

Pfizer, which is working with a smaller company called BioNTech, has had safety problems dating back to the 1980s, when defective heart valves made by its Shiley division caused the death of more than 100 people. An FDA task force concluded that the company had withheld crucial safety information.

We are all desperate for drugs to treat and prevent coronavirus, but we should make sure that the urgency of the situation does not lead to safety shortcuts that can have disastrous consequences.

Trump’s Risky Covid-19 Infomercials

Donald Trump has declared himself a wartime president, but in many of his briefings these days he comes across more as one of those hucksters of late-night television touting miracle cures. He relentlessly promotes the anti-malaria drug hydroxychloroquine as a treatment for Covid-19, even though it has not been proven safe or effective for that purpose. “What do you have to lose?” Trump keeps saying, ignoring evidence that the drug can have serious cardiac side effects.

It is understandable that those suffering from coronavirus disease may be willing to try anything to survive, and some doctors are treating seriously ill patients with hydroxychloroquine as a last-ditch measure. There are also clinical trials under way to see if the drug really does work against Covid-19. But all that is entirely different from the president’s using the White House podium to suggest that everyone should try the medication as if it were a new brand of mouthwash.

Not only is that dangerous – Trump’s comments have caused a run on the drug that has affected those who need it to treat diseases such as lupus and rheumatoid arthritis – but it also stands in contradiction to several decades of efforts to discourage widespread promotion of prescription drugs for uses not approved by the Food and Drug Administration.

Data in Violation Tracker show that over the past two decades pharmaceutical companies have paid out more than $20 billion in fines and settlements to resolve Justice Department, FDA and state attorneys general cases involving the improper marketing of drugs. These include three dozen cases in which the penalty amount exceeded $100 million and five in which the amount was more than $1 billion.

The largest single penalty of this kind was the $3 billion paid by GlaxoSmithKline in 2012 for off-label promotion of drugs such as the anti-depressant Paxil as well as its failure to report certain safety data. In 2009 Pfizer and its subsidiary Pharmacia & Upjohn agreed to pay $2.3 billion to resolve allegations that they illegally promoted drugs such as the anti-inflammatory Bextra.

In 2013 Johnson & Johnson and several subsidiaries paid $2.2 billion in criminal fines and civil settlements to resolve allegations they had marketed the anti-psychotic medication Risperdal and other drugs for unapproved uses as well as allegations that they had paid kickbacks to physicians and pharmacists to encourage off-label usage. At a press conference announcing the resolution of the case, U.S. Attorney General Eric Holder said the company’s practices ”recklessly put at risk the health of some of the most vulnerable members of our society — including young children, the elderly and the disabled.”

In the current situation, it is an elected leader rather than a drug maker doing the improper promotion, but a corporation — the French firm Sanofi, which produces hydroxychloroquine under the brand name Plaquenil – stands to benefit. As a result of Trump’s hype, a sleepy product dating back to the 1950s, is now the most sought-after pharmaceutical on the planet.

Sanofi is being cautious, stating on its website that Plaquenil “can cause serious adverse reactions and should not be taken without medical prescription or advice,” adding that it has not been approved for use in Covid-19 patients. Yet the site goes right on to state: “According to some preliminary results from independent pilot studies, hydroxychloroquine was reported as having a potential anti-viral effect on the virus that causes COVID-19.”

Other companies such as Amneal Pharmaceuticals, which produces a generic version of hydroxychloroquine, may have their own pot of gold. The company has ramped up production of the drug and has generated good p.r. by donating a quantity of the medication to the state of Texas.

The risk here is that Trump’s unbridled advocacy for the drug will steamroll the FDA into opening the floodgates and making it available not just to the desperately ill, but also to millions of others who have a mild form of the disease or are not infected at all. And we may never know for sure if those millions benefited from the medication or were needlessly exposed to cardiac and other risks.

A Boom Decade for Corporate Misconduct

Business journalists are looking back with amazement at the stock market’s track record over the past decade. Yet the 2010s were also a boom period for corporate crime and misconduct.

In Violation Tracker my colleagues and I have documented more than 240,000 cases for that period representing $442 billion in fines and settlements—more than twice the $161 billion total for the previous decade. (The numbers are not adjusted for inflation.)

The cases from the 2010s include 574 with a penalty of $100 million or more, 147 with a penalty of $500 million or more, and 67 with a penalty of $1 billion or more.

The top tier of these mega-cases is dominated by four corporations. BP is linked to the largest single case on the list—the $20.8 billion settlement with the federal government and five states to resolve civil claims stemming from the massive 2010 Deepwater Horizon oil spill in the Gulf of Mexico. BP paid out numerous other mega-penalties and smaller ones to put its total for the decade at nearly $28 billion.

The second biggest single penalty during the decade was Bank of America’s $16.65 billion settlement with the Justice Department in 2014 to resolve claims relating to fraud in the period leading up to the financial crisis, including such behavior on the part of Merrill Lynch and Countrywide Financial, which BofA acquired during that crisis. BofA also had plenty of other penalties during the decade—including two in excess of $10 billion—bringing its total for that period to an eye-popping $62 billion.

The third of the penalty leaders is Volkswagen, which in 2016 reached a $14.7 billion settlement with the federal government and the state of California to resolve allegations relating to systematic cheating on diesel pollution emission testing through the use of defeat devices. VW paid out several other multi-billion penalties related to the cheating and racked up a penalty total of more than $23 billion for the decade.

Rounding out the list of companies with individual penalties in excess of $10 billion is JPMorgan Chase, which in 2013 reached a $13 billion settlement to resolve federal and state claims relating to the sale of toxic mortgage-backed securities by the bank itself and by its acquisitions Bear Stearns and Washington Mutual. JPMorgan also had several other penalties of $1 billion or more, along with smaller ones, that pushed its penalty total for the decade to more than $29 billion.

Other big domestic banks had a substantial share of mega-penalties. These include Citigroup, with a $7 billion toxic securities settlement in 2014 (and a penalty total of $16 billion for the decade) and Wells Fargo, with a similar $5.3 billion settlement in 2012 (and a penalty total of $15 billion stemming from issues such as the creation of bogus accounts to generate illicit fees).

The decade also saw a slew of mega-cases involving foreign banks such as BNP Paribas, Deutsche Bank, Royal Bank of Scotland and Credit Suisse for offense such as violations of economic sanctions and their own toxic securities abuses.

Financial services companies of all kinds dominated the mega-penalty list, accounting for 41 of the 67 billion-dollar cases. Also worthy of mention are the pharmaceutical companies, including settlements by GlaxoSmithKline for $3 billion and Johnson & Johnson for $2.2 billion, both for marketing drugs for purposes not approved as safe by the Food and Drug Administration. That industry will end up paying much more when the pending multistate opioid litigation is resolved.

The list could continue. Suffice it to say that the decade’s major cases made it clear that corporate misconduct perseveres through good times and bad.

The 2019 Corporate Rap Sheet

While the news has lately focused on political high crimes and misdemeanors, 2019 has also seen plenty of corporate crimes and violations. Continuing the pattern of the past few years, diligent prosecutors and career agency officials have pursued their mission to combat business misconduct even as the Trump Administration tries to erode the regulatory system. The following is a selection of significant cases resolved during the year.

Online Privacy Violations: Facebook agreed to pay $5 billion and to modify its corporate governance to resolve a Federal Trade Commission case alleging that the company violated a 2012 FTC order by deceiving users about their ability to control the privacy of their personal information.

Opioid Marketing Abuses: The British company Reckitt Benckiser agreed to pay more than $1.3 billion to resolve criminal and civil allegations that it engaged in an illicit scheme to increase prescriptions for an opioid addiction treatment called Suboxone.

Wildfire Complicity: Pacific Gas & Electric reached a $1 billion settlement with a group of localities in California to resolve a lawsuit concerning the company’s responsibility for damage caused by major wildfires in 2015, 2017 and 2018. PG&E later agreed to a related $1.7 billion settlement with state regulators.

International Economic Sanctions: Britain’s Standard Chartered Bank agreed to pay a total of more than $900 million in settlements with the U.S. Justice Department, the Treasury Department, the Federal Reserve, the New York Department of Financial Services and the Manhattan District Attorney’s Office concerning alleged violations of economic sanctions in its dealing with Iranian entities.

Emissions Cheating: Fiat Chrysler agreed to pay a civil penalty of $305 million and spend around $200 million more on recalls and repairs to resolve allegations that it installed software on more than 100,000 vehicles to facilitate cheating on emissions control testing.

Foreign Bribery: Walmart agreed to pay $137 million to the Justice Department and $144 million to the Securities and Exchange Commission to resolve alleged violations of the Foreign Corrupt Practices Act in Brazil, China, India and Mexico.

False Claims Act Violations: Walgreens agreed to pay the federal government and the states $269 million to resolve allegations that it improperly billed Medicare, Medicaid, and other federal healthcare programs for hundreds of thousands of insulin pens it knowingly dispensed to program beneficiaries who did not need them.

Price-fixing: StarKist Co. was sentenced to pay a criminal fine of $100 million, the statutory maximum, for its role in a conspiracy to fix prices for canned tuna sold in the United States. StarKist was also sentenced to a 13-month term of probation.

Employment Discrimination: Google’s parent company Alphabet agreed to pay $11 million to settle a class action lawsuit alleging that it engaged in age discrimination in its hiring process.

Investor Protection Violation: State Street Bank and Trust Company agreed to pay over $88 million to the SEC to settle allegations of overcharging mutual funds and other registered investment company clients for expenses related to the firm’s custody of client assets.

Illegal Kickbacks: Mallinckrodt agreed to pay $15 million to resolve claims that Questcor Pharmaceuticals, which it acquired, paid illegal kickbacks to doctors, in the form of lavish dinners and entertainment, to induce them to write prescriptions for the company’s drug H.P. Acthar Gel.

Worker Misclassification: Uber Technologies agreed to pay $20 million to settle a lawsuit alleging that it misclassified drivers as independent contractors to avoid complying with labor protection standards.

Accounting Fraud: KPMG agreed to pay $50 million to the SEC to settle allegations of altering past audit work after receiving stolen information about inspections of the firm that would be conducted by the Public Company Accounting Oversight Board. The SEC also found that numerous KPMG audit professionals cheated on internal training exams by improperly sharing answers and manipulating test results.

Trade Violations: A subsidiary of Univar Inc. agreed to pay the United States $62 million to settle allegations that it violated customs regulations when it imported saccharin that was manufactured in China and transshipped through Taiwan to evade a 329 percent antidumping duty.

Consumer Protection Violation: As part of the settlement of allegations that it engaged in unfair and deceptive practices in connection with a 2017 data breach, Equifax agreed to provide $425 million in consumer relief and pay a $100 million civil penalty to the Consumer Financial Protection Bureau. It also paid $175 million to the states.

Ocean Dumping: Princess Cruise Lines and its parent Carnival Cruises were ordered to pay a $20 million criminal penalty after admitting to violating the terms of their probation in connection with a previous case relating to illegal ocean dumping of oil-contaminated waste.

Additional details on these cases can be found in Violation Tracker, which now contains 397,000 civil and criminal cases with total penalties of $604 billion.

Note: I have just completed a thorough update of the Dirt Diggers Digest Guide to Strategic Corporate Research. I’ve added dozens of new sources (and fixed many outdated links) in all four of the guide’s parts: Key Sources of Company Information; Exploring A Company’s Essential Relationships; Analyzing A Company’s Accountability Record; and Industry-Specific Sources.

Another Type of Quid Pro Quo

As the political news is dominated by discussion of quid pro quo and bribery, there has been another ongoing series of allegations about improper payments for things of value. The other quid pro quo relates to the pharmaceutical industry, which has been the subject of a seemingly never-ending scandals about financial inducements given to healthcare professionals.

The most significant recent case involves a company called Avanir Pharmaceuticals, which had to pay more than $115 million to resolve allegations that it paid kickbacks to physicians to get them to prescribe its drug Nuedexta for uses not approved as safe by the Food and Drug Administration.

Among those uses were the treatment of behaviors associated with dementia among residents of long-term care facilities. Nuedexta was tested and approved for patients exhibiting what is known as pseudobulbar affect (PBA) — involuntary, sudden, and frequent episodes of laughing or crying that occur secondary to a neurologic disease or brain injury.

The case against Avanir included allegations that physicians receiving its payments ended up putting large numbers of patients on Nuedexta who showed no symptoms of PBA, exposing them to unknown risks.

The Justice Department regarded Avanir’s behavior to be serious enough to warrant criminal charges, but like in so many other cases, the company was offered a deferred prosecution agreement that allowed it to buy its way out of full legal jeopardy by paying criminal penalties of nearly $13 million. The company agreed to cooperate in the prosecution of several individuals who received the kickbacks and whose liability may end up being more than financial in nature.

In addition to the criminal matter, Avanir agreed to pay $103 million to settle a related civil False Claims Act case based on the fact that federal and state healthcare programs ended up paying claims stemming from the improper prescribing of Nuedexta.

Avanir’s alleged behavior is especially troublesome because of the involvement of elderly dementia patients, but the use of kickbacks is far from unknown in the pharmaceutical industry. In Violation Tracker we document about 50 drug industry cases in which kickbacks were the primary or secondary offense.

These cases, which have resulted in more than $7 billion in fines and settlements, have implicated pretty much every large pharmaceutical producer and numerous smaller ones as well. Some companies show up on the list several times. These include Abbott Laboratories, which along with its subsidiaries has been involved in six cases between 2003 and 2017 that resulted in $630 million in penalties, and Pfizer, which together with its subsidiaries has paid $531 million in five cases between 2004 and 2018.

The extent of the recidivism in drug industry kickback cases suggests that the industry is not taking the problem very seriously and that the Justice Department’s approach has not had the necessary deterrent effect. Perhaps there is a lesson here for the political world as well.