Drug Company Agrees to $60M to settle ADHD drug claims

Shire Pharmaceutical, the makers of the widely-prescribed ADD/ADHD drug Adderall, agreed to pay $59.4 million to several state agencies, in particular the State of Massachusetts that had brought a civil lawsuit against the drug giant, as punishment for making myriad unsupported claims about their drugs’ effectiveness in treating illnesses ranging from behavioral issues to ulcers. The federal Department of Justice and Massachusetts Attorney General were involved in bringing the cases, which alleged Shire had promoted results from its medications that were not backed by science, and also claims that their products were less likely to be abused than alternative, cheaper medications.

While government agencies are no doubt pleased to recover these funds from Shire, the company will be left none the worse for wear after the settlements; the amounts represent less than 3% of the companie’s U.S. revenue from the drugs affected by the claim. Critics believe that, while a start, such small settlement amounts relative to the profits that drug companies gain from misleading drug advertising do not serve as a deterrent to such behavior in the future. Shire likely views the settlement as simply a cost of doing business, rather than a punishment, and their CEO confirmed that viewpoint in a public statement after the settlement was announced. “We are pleased to have reached a resolution and to put this matter behind us.” said Shire’s Ireland-based CEO Flemming Ornskov.

Shire Pharmaceutical is no stranger to criticism of it’s business methods. Shire was already one of the companies coming under fire in the news this month. The company had recently come under scrutiny for an unrelated matter, it’s proposed “inversion” merger with U.S. pharma company Abbvie (makers of popular TRT drug Androgel) which is viewed by many as a deliberate tax evasion scheme, and which proposed merger was behind the recent Treasury Department move to make it harder for U.S companies to reduce taxes by merging with smaller offshore companies. The inversion scheme has become a popular tax avoidance move by large U.S drug companies, including Abbvie, Medtronic and Perrigo to exploit loopholes in the U.S. tax law governing drug companies recognition of profits in foreign, lower-tax jurisdictions. Failed bids by Pfizer to purchase U.K.-based AstraZenca and Mylan Inc to buy Swedish drug-maker Meda were also driven largely by tax considerations. Legislative changes expected to be signed by President Obama would remove some of the incentives for corporate inversions by changing the foreign ownership percentage required of companies like Abbvie and Shire before they qualified for the advantageous tax treatment.

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