Whistle while you Work? Sad Reality in American Business

November 2nd, 2010. By Hunter West

Anyone who is aghast at the recent $750 million GlaxoSmithKline (Glaxo) whistleblower judgment to settle manufacturing deficiencies at a former plant in Puerto Rico shouldn’t be surprised that such things are going on. Happens all the time, it seems. And not just to Glaxo, either. 

In actual fact, that $750 million—of which the whistleblower earns a share of the penalty totaling a whopping $96 million—pales in comparison to the $3.1 billion that the US Department of Justice has recovered under the federal False Claims Act so far in just this fiscal year alone. 

Last year the haul was almost twice that—$5.6 billion. 

Some will say that the whistleblower is an opportunist hoping for a big payday in the end, and will take any amount of criticism and crap en route to the pot at the end of the rainbow. Hell, I’d put up with a lot of grief to collect $96 million. 

I would even eat liver. 

But to those who view whistleblowers as ambulance chasers, consider the amount of fraud and wrongdoing that serves as a persistent blight on the business landscape. Somebody has to expose such misdeeds—and if the government can’t route out the evil-doers (sorry ‘W’…) on their own, then they have to provide incentive for those who can. 

We would all wish that whistleblowers were not necessary. In a perfect world every business and corporate entity would operate with integrity and play by the rules.

Sadly, that’s not the case. 

According to Taxpayers Against Fraud, a not-for-profit that supports whistleblower lawsuits, there were no fewer than 145 cases brought under the False Claims Act (FCA) so far this year. The biggest cases involved health care fraud ($2.7 billion in penalties from 10 cases). 

But there were also FCA cases involving defense, education, transportation, oil and gas. 

What does that say about business and commerce in America? And when did we clue in to the fact that legal fees, lawsuits and settlements are simply a cost of doing business? 

The number-one reason to go into business in the first place is to make money. Any business guru will tell you that lofty goals such as Designing and Marketing the Next Great Widget, Helping Your Fellow Man or Employing People in Your Home State doesn’t cut it. 

If you’re not in business to make money, then you’re in it for all the wrong reasons. 

Okay, fine. But when did we lose the integrity card in the business poker game? When did we stop running our businesses like we run our own lives? “That’s my name on the door,” the proprietor will say, “and my reputation is on the line.” 

Sadly, it seems that reputations hold little value, in the world of big business. 

Take Glaxo. The UK pharma giant is not alone in contracting work out to other parts of the world where a buck can be saved in labor costs. Everybody is doing it, and not just to survive, either. The buzz, these days, is to maximize return for shareholders. 

Thus, Glaxo was manufacturing Paxil at a plant in Cidra, Puerto Rico. But there were problems. A government investigation uncovered manufacturing deficiencies at the facility. Some tablets were found to be capable of splitting apart, or contained inappropriate amounts of active ingredient. 

The feds said there was no evidence of patient harm involving the deficiencies from products manufactured between 2001 and 2005. However, it was in 2003 that Canadian David Carmichael strangled his 11-year-old-son Ian, while on Paxil. 

Is there a link? We’ll never know. 

There was one rarity in the Glaxo case—the pharmaceutical giant that has been in the news so much lately over Avandia, will plead guilty to a criminal charge. That rarely happens. The norm seems to be that companies get away with paying a whopping fine or penalty, but admits to no wrongdoing. 

In this case, SB Pharmco—a subsidiary of GlaxoSmithKline—agreed to plead guilty to a criminal felony for releasing adulterated drugs into interstate commerce. And it wasn’t just Paxil, either. Kytril, an anti-nausea medication, Bactroban, anti-infective and Avandamet, a diabetes drug—were also cited in the settlement. 

Federal prosecutors said that it was important to send a message. In the Glaxo case, a former quality-assurance manager at the company filed a lawsuit against Glaxo in federal court in Boston, alleging that her former employer submitted false claims to government health programs because drugs manufactured at the Puerto Rican facility were not safe and effective. 

Cheryl Eckard is wealthier by $96 million today for her role in bringing the lawsuit six years ago. The whistleblower must be pleased with her good financial fortune. But looking at the larger picture, we’re sure that Eckard and those like her would rather they didn’t have to come forward. 

That’s because Americans were raised to put implicit trust into those entities that provide drugs for their health, military might for their protection, and education for their kids. 

The reality, it seems, is that today we can’t trust anybody. There is always an underlying agenda that increases the risk to many, for the benefit of the few. And so long as a company can make more in profits and revenue than it loses in lawsuits and settlements, then bending the rules is a simple case of doing good business. And that’s just plain wrong.

Tags: Avandia, Eckard, GlaxoSmithKline, GSK, paxil, Qui Tam, Whistleblower

This was posted on Tuesday, November 2nd, 2010 at 8:39 am and is filed under Whistleblower . Feel free to respond, or trackback. Read our comments policy.