Healthy Skepticism Library item: 18546

Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.

Publication type: Electronic Source

Edwards J
AstraZeneca's Marketing Strategy: Sue Us, Please!
BNet 2010 Aug 15
http://www.bnet.com/blog/drug-business/astrazeneca-8217s-marketing-strategy-sue-us-please/5298

Full text:

At first glance, it seems insane that AstraZeneca (AZN) would pay $55 million to settle 5,500 Seroquel lawsuits even while it pumps out promotional material that could generate more lawsuits on the same issue: Whether the antipsychotic drug carries a risk of diabetes in those who use it.

The company has already paid $656 million for its own legal expenses on Seroquel cases and $520 million to resolve similar allegations from the U.S. Department of Justice. Despite that, AZ’s sales force continues to hand out leaflets that don’t contain the legally required warning that Seroquel may cause diabetes, according to this FDA “untitled” letter from July 29.

Why is AZ engaging in what appears to be death by a thousand legal cuts? It turns out that when you run the numbers, there’s a case to be made that it’s actually cheaper for AZ to lift its Seroquel revenues with unlawful promotions (and then settle the cases that ensue) than it is to either market the drug within the law or litigate the cases at trial. An AZ spokesman, of course, denies this:

We categorically reject any insinuation that it is in any way acceptable to cut corners when it comes to ethical or legal behavior. We take our regulatory responsibilities very seriously, and we invest significant resources in ensuring that our conduct is appropriate. We are committed to meeting the expectations and obligations of a leading biopharmaceutical company, and to continue providing medicines to millions of patients in the United States and around the world.

I first discussed whether this might be happening in March:

Take, for instance, AstraZeneca (AZN)’s settlement with the DOJ over its marketing of Seroquel. The settlement was for $520 million. Seroquel makes $1.2 billion per quarter for AZ. For AZ to limit its financial damage, it must now make sure that Seroquel absolutely maximizes its revenues before its patent expires – and the way to do that, frankly, is to walk right up to the legal line in promoting the drug. Or to step over it entirely.

I’m not suggesting AZ is actually doing that of course. But you can see that the incentives are perverse.

Let’s put some more numbers on that. Bloomberg reports that Seroquel generated $4.87 billion for AZ last year, or 15 percent its total revenue. It’s been on the market since 1998. And it’s made more than $1 billion every year since 2002. Therefore, the total legal expenses of $1.2 billion ($55 million plus $656 million plus $520 million) are just a tiny fraction of AZ’s total Seroquel revenues.

The 5,500 settlements reported today make those deals even cheaper. AZ’s previous strategy was to fight each case. By January of this year it had dismissed 2,664 of 10,399 cases against it at a rough cost of $246,000 in total legal expenses per case. Given the speed with which a team of litigation lawyers can rack up a$10,00 bill (a few days), the new settlements will likely lower that $246,000-per-case average considerably.

You don’t need a complicated Excel spreadsheet to figure out this math: AZ’s sales people are still crossing the line when it comes to Seroquel marketing because it works – sales are up – and because the legal costs that result are marginal compared to the revenues earned.