Are Big Fiscal Penalties Enough to Punish Large Drug Companies?

July 2, 2012 will go down as a notable day in the history books for pharmaceutical drug company Glaxo Smith Kline (GSK). Yesterday after ongoing disputes with the federal government over some of their popular drug products, GSK announced a three billion dollar settlement. Three billion dollars has nine zeros after it. To many people that is a lot of money, but in the wake of the announcement, industry critics are asking the question, how many zeros are enough.

Like industry critics, our drug recall attorneys at Pintas & Mullins Law Firm are concerned that drug companies just are not responding diligently enough to lump sum fiscal punishments. According to a New York Times article on the three billion dollar penalty, some industry critics think that nothing short of individualized punishments on industry chief executives will do the job. American consumers may need to take a more active role in voicing their displeasure to government or industry leaders.

Despite the weak economy it seems that large fiscal penalties probably do not make much of a dent in the wallet of drug producers. To give an example, the Times article released some numbers on profits of the drugs GSK are currently paying out for. A lump total of the profits from the drugs in question for the time period GSK will pay out for rings in at about $28 billion dollars. Avandia, Paxil, and Wellbutrin alone generated the profit for the lump sum over roughly a ten-year period from the early 90’s to early 2000.

When the three billion dollar penalty is compared to the handsome profits it does not seem like such a large amount of money after all. This discrepancy between profitability and the punishments received for poor pharmaceutical company behavior is the exact reason critics worry that the companies will continue to spiral out of control.

A closer look at the legal underpinnings of fiscal penalties may be useful to illustrate the problem at hand. Fines like the one from the federal government at issue in this article stem from federal government initiatives to assist consumers. Penalty money from a government action like this could end up landing in the hands of people who use Medicare or Medicaid healthcare resources.

Federal suits like this are somewhat the analogue to private legal actions for product liability against drug manufacturers. Product liability is really where the theory driving punishments against drug companies comes from. The basic theory behind product liability is that a company must be held responsible for harm done by its products. It is generally assumed that all products will have some unforeseen outlier issues, which companies can account for through insurance and budgeting. However, product liability kicks in when a company’s product is so harmful that the harm it causes is more damaging to society than it is beneficial. It is at this threshold where large damages and other penalties start to take action to disincentivize companies from continuing the dangerous behavior.

The problem at hand with the modern pharmaceutical companies is that large financial damages might not be enough to stop their poor behaviors. The companies are making so much money, that perhaps from a business standpoint a large fiscal penalty here or there is equivalent to no harm done. Media reports such as the New York Times article have suggested that personal penalties against company executives may be the only option on the horizon. In recent years, this avenue of jailing executives or forcing them to step down has been used very sparingly in the pharmaceutical industry. But as injuries resulting from drugs go farther and farther, the industry will have to recognize the injuries it is inflicting.

If a drug, such as Avandia, has injured you or a loved one you should contact an experienced drug recall attorney to help you secure just compensation. No one deserves to be unsuspectingly injured by a drug that was prescribed to help alleviate symptoms. By engaging as your own best advocate with this heinous industry problem you might be able to help prevent poor behavior by drug companies down the road.

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