Do We Need Stronger Sanctions to Ensure Legal Compliance by Pharmaceutical Firms?

Abstract

The increasing number of enforcement lawsuits against pharmaceutical firms and the large size of settlement payments suggest that misconduct is widespread and even risks slipping into the banalities of ordinary business practices. It also raises questions as to whether current sanctions are an effective means to ensure compliance. This article explores the causes of the frequent illegal conduct, why prosecutors rarely use the strongest sanctions in their arsenal — criminal penalties and debarment from participation in public programs — and asks whether the use of the strongest sanctions would be desirable. Prosecutors might not use the strongest penalties available because of divided enforcement authority or because they prefer to seek monetary penalties to support their budgets. Moreover, strong sanctions might be perceived as imposing steep collateral damages on the general public and being politically costly. If prosecutors are reluctant to impose the strongest possible sanctions, then policymakers need to develop alternative responses. One option is to create stronger economic penalties than the ones that currently exist. Corporations and their managers have incentives to increase their income, and their pursuit of profit sometimes leads these managers to violate the law. To deter illegal conduct, legislation typically allows courts to impose penalties — including fines and incarceration — on convicted individuals and firms. The increasing wide-scale illegal conduct by pharmaceutical firms and their employees over the last two decades prompts three questions. Are current sanctions sufficient? Are stronger sanctions and enforcement policy possible? If so, would they effectively deter harmful illegal conduct?