Multinational Monitor

JUL/AUG 2004
VOL 25 No. 7


Monopoly Medicine: The Built-In Inefficiencies of a Patent-Based Pharmaceutical R&D System
by James Love

It’s in the Genes: Patent Barriers to Genetic Research
by Lee Drutman

Buy the Numbers: Publishers Seeks Special Database Monopoly Protections
by Robin Gross

The Great Global R&D Divide
by Gunnar Westholm, Bertrand Tchatchoua and Peter Tindemans


The Rise of the Free Software Movement: Freedom from Proprietary Control
an interview with Richard Stallman

A Conspiracy of Silence: The Suppressed Evidence About Anti-Depressants
an interview with Charles Medawar


Behind the Lines

A Healthcare R&D Treaty

The Front
Rigging the System - Lay Does Perp Walk - Remembering Paul Klebnikov - "The Shame of Humanity" - Grief for the Reefs

The Lawrence Summers Memorial Award


Names In the News


Names In the News

ABB's Bribery

Two subsidiaries of the Swiss giant ABB Ltd. pled guilty in July to criminal violations of the Foreign Corrupt Practices Act. Each company was fined $5.25 million.

A French judge investigating a parallel bribery scandal in Nigeria involving a unit of the Houston-based Halliburton has drawn international media attention to the failure of the U.S. officials to aggressively enforce the Foreign Corrupt Practices Act.

The charges against ABB might be the opening shot in a new round of criminal prosecutions under the law.

Federal officials charged that ABB subsidiaries based in Houston and Aberdeen, Scotland paid bribes to officials of NAPIMS, a Nigerian government agency that evaluates and approves potential bidders for contract work on oil exploration projects in Nigeria.

Federal officials alleged that the companies paid more than $1 million in exchange for obtaining confidential bid information and favorable recommendations from Nigerian government agencies in connection with seven oil and gas construction contracts in Nigeria from which the companies expected to realize profits of almost $12 million.

In a separate action, the Securities and Exchange Commission sued the parent company, ABB Ltd, alleging violations of anti-bribery, books and records, and internal control provisions of the Foreign Corrupt Practices Act, arising from suspected illegal payments in Nigeria, Kazakhstan and Angola.

Big Pharma's Scams

Big Pharma dug deep into its pockets in July and August, with major pharmaceutical companies cutting deals to settle charges of an array of illegal activities and wrongdoing, and paying tens and hundreds of millions of dollars in settlements and fines.

In July, GlaxoSmithKline agreed to pay $29 million to settle charges that it used illegal tactics to maintain its patent on Augmentin, a popular antibiotic used in the treatment of a variety of common infections.

The settlement resolves claims brought by individual consumers and "third party payors," a class of purchasers that includes health insurers, union health and welfare funds and others. The lawsuit against Glaxo was brought by the Boston-based Prescription Access Litigation Project.

The lawsuit alleged that GlaxoSmithKline filed illegal double patents on Augmentin in order to lock generic competitors out of the Augmentin market, depriving consumers of cheaper generic versions of the drug.

"Doctors prescribe antibiotics like Augmentin only when patients are fighting an infection," says Alex Sugerman-Brozan of the Prescription Access Litigation Project. "Drug companies unfairly take advantage of consumers when they charge an outrageous and inflated price to patients who have no choice but to pay whatever price is being charged."

In August, Schering Sales Corp., Schering-Plough Corporation's sales and marketing subsidiary, agreed to plea guilty and pay a $52.5 million fine for paying a kickback to a customer in exchange for preferred treatment for its blockbuster drug Claritin.

Schering-Plough also agreed to pay more than $290 million to resolve its civil liabilities in connection with its illegal and fraudulent pricing of Claritin. The civil settlement resolves a False Claims Act claim that the company overcharged the federal government and state Medicaid programs for Claritin by failing to report its true best price for the drug.

When one of Schering Sales' best customers demanded a price reduction in Claritin because it cost the HMO millions of additional dollars a year to purchase Claritin rather than Allegra, Schering Sales refused to lower the price in part because it knew that by doing so it would have to lower the Claritin price for the Medicaid programs.

Instead, Schering Sales offered to make up the difference between the price of Claritin and Allegra by offering the HMO a $10 million package of added value, in lieu of an actual price reduction on Claritin.

"This wasn't a mistake," says U.S. Attorney Patrick Meehan. "It was a marketing strategy."

Also in August, Bristol-Myers Squibb Company agreed to pay $150 million to settle Securities and Exchange Commission charges that it had cooked its books. The SEC charged that Bristol-Myers inflated its sales and earnings numbers by selling excessive amounts of pharmaceutical products to its wholesalers ahead of demand, improperly recognizing revenue from $1.5 billion of such sales to its two largest wholesalers.

Equity and The Street

Morgan Stanley agreed in July to pay $54 million to settle a sex discrimination lawsuit brought by the U.S. Equal Employment Opportunity Commission on behalf of a class of female officers and women eligible for officer promotion in the firm's Institutional Equity Division (IED).

As part of the settlement, Morgan Stanley will provide at least $2 million for diversity programs designed to enhance compensation and promotional opportunities for women employees.

EEOC's lawsuit, filed on September 10, 2001, alleged that Morgan Stanley discriminated against women in its IED with respect to promotion, compensation and the terms, conditions and privileges of employment.

Morgan Stanley denies the allegations and any liability and contends that it has, at all times, treated its women employees fairly and equitably.

No Sparkle at De Beers

De Beers Centenary AG pled guilty in July and was sentenced to pay a $10 million criminal fine to resolve a longstanding indictment for conspiring to fix the price of industrial diamonds in the United States and elsewhere.

In 1994, a federal grand jury in Columbus, Ohio indicted De Beers Centenary for conspiring to raise list prices of various industrial diamond products worldwide.

De Beers' alleged co-conspirator, General Electric, was tried and acquitted by the district court on this charge.

De Beers Centenary, headquartered in Lucerne, Switzerland, was not tried on the charge because the court lacked jurisdiction over the company. For a decade, the company chose not to do business in the United States rather than face the charges.

As a result of the plea agreement filed last week, De Beers Centenary consented to the jurisdiction of the court to resolve this case.

De Beers Centenary admitted that it reached agreements with its co-conspirator to raise list prices for certain industrial diamond products sold worldwide, as charged in the indictment.

Philip Morris: "Reckless"

U.S. District Judge Gladys Kessler in July fined Philip Morris and its parent company Altria $2.75 million for destroying e-mail over a period of at least two years in violation of the judge's 1999 order to preserve e-mail and other records relevant to the federal government's lawsuit against the tobacco companies.

According to the order, the e-mails involved 11 employees who "hold some of the highest, most responsible positions in the company" including "officers and supervisors who worked on scientific, marketing, corporate and public affairs issues that are of central relevance to this lawsuit."

According to the government, many of the e-mails concerned Philip Morris' marketing practices, especially for Marlboro, which is the most popular cigarette brand by far among youth. Judge Kessler found that Philip Morris and Altria showed "reckless disregard" and "gross indifference" toward their legal discovery and document preservation obligations.

In addition to the fine, the judge's order prohibits Philip Morris from calling the employees in question as witnesses during the trial.

The e-mails in question go to the heart of a key government claim, which is that the tobacco companies have marketed and continue to market their deadly products to children.

The federal government's tobacco lawsuit, which was filed in September 1999, is scheduled for trial beginning in September.

The Justice Department is seeking to hold the tobacco industry legally accountable for decades of illegal and harmful practices, including marketing to children and concealing the health risks and addictiveness of its products. The Department is seeking the recovery of more than $280 billion in illegal industry profits, and funding of tobacco prevention, cessation and research programs.

DuPont's Teflon Trouble

The Environmental Protection Agency (EPA) in July announced the threat of an unspecified action against DuPont for withholding for decades critically important health studies on a toxic ingredient of Teflon, known as C-8 or PFOA.

DuPont denies the agency's allegations.

EPA charges that DuPont's failure to disclose critical data allowed the company to pollute the blood of virtually every person in the United States with a Teflon chemical that the company knew was toxic.

EPA said in its complaint that its ongoing actions to assess environmental pollution and human contamination from the chemical "might have been more expeditious had the data Ö been submitted by DuPont ... in 1981."

Agency officials avoided any details of the consequences for DuPont, though they said they would "likely" not seek the maximum possible fine of $300 million.

Agency officials did say that they would consider the option of "negotiating" an unspecified "resolution" with the company, and that the fine could be just a few million dollars.

Teflon and related C-8 sales now net DuPont $200 million in annual profit.

The Washington, D.C.-based Environmental Working Group (EWG) unearthed company documents showing DuPont's deliberate withholding of the health and toxicity studies as well as evidence of widespread drinking water contamination. The group filed a petition in April 2003 that prompted the Agency's investigation and action.

"This is shaping up as another in a long series of industry-friendly environmental ëenforcement' actions by the Bush EPA," says EWG President Ken Cook. "This time DuPont was caught in three serious violations of federal pollution laws. In the Bush administration, that automatically triggers the ëthree strikes and we'll talk' policy."

The EWG complaint alleged -- and EPA found -- that DuPont illegally withheld knowledge of drinking water contamination with the Teflon chemical, C-8, for 17 years, from 1984 through 2001.

EWG recently posted e-mails from DuPont attorney Bernard Reilly showing that the company continued through the spring of 2004 to withhold critical drinking water contamination data from the affected communities.

-- Russell Mokhiber

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