Government’s Pharmaceutical Permit Fee

I recently read an article written by an author who thinks the government correctly dealt harshly with Johnson & Johnson over the illegal promotion of the drug Risperdal. As a background, this drug was promoted and used for treatments that it wasn’t approved for (this is called “off-label” use – don’t get me started on that… in this post) while downplaying the severe side effects (Hmm, sounds familiar. *Cough* CHEMO *cough*). This resulted in some people dying from taking the drug (another cough). The FDA fined Johnson & Johnson $2.2 billion for doing this.

This article is a mockery of logical thinking. It’s a slap in the face of “real people” thinking. You ask, what is “real people” thinking? To me, it’s a common sense that those who are outside of a certain situation can recognize, when those who are ingrained and buried deep inside a situation are unable and/or unwilling to recognize. In this case, those on the inside of the situation are the government and the pharmaceutical companies.

First, a $2.2 billion fine is literally a slap on the hand to Johnson & Johnson. The article calls the action that the government took regarding Johnson & Johnson’s violations “dead serious”.

Go To Jail. Go Directly To Jail. Do Not Pass Go.

The government can’t be “dead serious” about pharmas doing wrong things. If the government was dead serious about not letting these extremely large corporations break the law – in this case, killing people – they would do what the government usually does to individuals who kill people: put them away. The individual lawbreakers, those that commit crimes on the street, get put in prison. A prisoner is in a state of confinement or captivity. Confined from what? They are confined from their normal life in society. They are removed from society and enter into a state of captivity. Captivity is a state of being kept in one place and not being able to leave. Putting a company away would mean dissolving them. Making them go to a place where they no longer are allowed to be a part of society, where they no longer get to partake of the things that a non-captive corporation has the freedom to do – make money. A prisoner is not allowed to do business with society. If a big company kills someone, then that company should be held to the same standard.

But wait, there’s a slight problem. The government is waiting to collect the corporate taxes from these companies who kill people; currently around 35%. In 2012, Johnson & Johnson’s taxable earnings were $10.8 billion dollars. 35% of that is $3.8 billion dollars. So if the “dead serious” government decided not to have a double standard and actually removed companies who killed people from society, that means the government would lose $3.8 billion every year and even more as the companies grow. Not including the taxes the government gets from the all the employees and stockholders of that company (remember, most large corporations are double taxed in this way). No, no… putting these law breaking companies away is not what the government wants to do. It’s not in the best interest of the government. To put the fine into perspective, $2.2 billion is just one’s years worth of growth to a company like Johnson & Johnson.

Let’s Bring it Down to the Real World

I bet you a drunk driver who accidentally killed another person with their car and ended up in prison would like to have the same leniency from the government as the big pharmas get. For some reason, when a pharmaceutical company kills someone with a drug because they were too greedy and promoting a drug for a health condition it was never going help, this is less of a crime. This is, in fact, even worse since some of these crimes are premeditated by the pharmaceutical companies. It’s done on purpose. A drunk driving killing is an accident (most of the time). The equivalent scenario of the pharmaceutical company’s behavior is someone who purposely burns down a house because they are getting paid to do it, knowing there are people inside but not really concerned about that part. Can the people get out? Maybe or maybe not. Will the patients die from the drug? Maybe or maybe not. What’s the difference? One could say the pharmaceuticals actions are merely reckless. Reckless with what? Well, with the drug of course. The fallacy to that argument, in this scenario, is that the arsonist was just being reckless with their tool: fire. But when the arsonist gets caught, they are removed from society.

At the very least, a real “person” within that law breaking corporation should be put into a state of captivity. After all, a piece of paper displayed in a frame on the wall of a corporate headquarter buiding didn’t actually kill the person. A human made the decision that “accidentally” killed someone – much like the arsonist or drunk driver. Sometimes its a committee made up of humans that direct events that lead to the reckless behavior that ends up in death(s). Regardless, behaviors, actions and directives can be traced back to a human being. A $2.2 billion fine is not holding everyone to the same law. Otherwise, the government should fine the arsonist 20% of their adjusted gross annual income. Let’s say that reckless arsonist made $50,000 after deductions. If that arsonist was treated exactly the same as the corporations who killed people, they would only have to pay $10,000 and continue to be free… and possibly commit the same crime a little bit down the road. Argue what you want, it’s the same 20% slap on the hand ratio that Johnson & Johnson received (using their 2006 net income of $11.1 billion). It’s also a slap in the face to those surviving family and friends of those who were murdered.

Actually, it’s a pretty good business decision if the goal is to make as much money as possible from a product. The drug in the article, Risperdal, made $1.7 billion in illegal off-label sales in ONE YEAR alone: that was August 2005 through August 2006. That was 15% of Johnson & Johnson’s $11.1 billion net income for 2006. Taking a 3 year window as a sample means the drug, promoted and sold for non-approved purposes (which is illegal), made an estimated $5.1 billion (if each year the drug made $1.7 billion). I am estimating because of the lack of data to show exactly how much money Risperdal earned from being illegally promoted. How does this equate with an “individual criminal” scenario with an arsonist being treated the same as a large corporation? As the table below shows, this means if the arsonist was paid for what he did – the equivalent amount of what Risperdal generated, he would net $13,000 over the same 3 year period – and NOT have to go to prison! Now, we all know Risperdal was marketed and sold illegally (which again, resulted in DEATHS) for more than 3 years, so the payoff is actually is higher. This is just used as an example – and a sad one at that. It actually shows that the $2.2 billion fine isn’t even a slap on the hand – since they were caught committing a crime, they could just chalk it up to an expense needed to generate a higher revenue stream.

* $5.1 billion is 46% of $11.1 billion. 46% of $50,000 is $23,000.

The New Permit Fee

Back to the main point about the mockery of the article and the mockery of the fine. The government is not willing to forego the tax revenues generated from Johnson & Johnson and the indirect taxes generated mentioned earlier. This crime will continue because it’s essentially unpunished. Sorry, a $2.2 billion fine might seem like a staggering “what the?!?!”  amount to real people, but its just a line item on a cost-of-goods spreadsheet to the criminals. It’s essentially a “permit fee”. Pay the “fee”, after the action, and you are permitted to do this. The pharmaceutical company wins (from the extra revenue the crime generated) and the government wins (not only from the extra $2.2 billion check but the continued collection of the annual taxes that corporation provides). But the real people suffer.

It’s a double standard that is the result of the love of money. The fruits are there: the love of money is a root of evil. It’s evident in every form of government in this world – this is just one example. Makes this place (world) pretty scary. Conspiracies usually are.