The Front

White Collar Drug Pushers

An affiliate of Purdue Pharma and three of its executives in May pled guilty to charges of misbranding the addictive drug Oxycontin. Purdue Pharma will pay more than $600 million in connection with the guilty plea.

The plea deal aimed to disgorge 90 percent of the Stamford, Connecticut-based Purdue's profits from Oxycontin sales from 1996 to 2001. The deal did not, however, impose felony charges on company executives, and it enabled Purdue to escape from harsh federal government procurement sanctions.

Oxycontin (generic name: oxycodone) is a highly addictive painkiller with major benefits for cancer patients and others with chronic pain.

But it is also an easy high for thousands of down-and-out people. It is especially popular as an abusive drug in Appalachia, where it is called hillbilly heroin.

The federal case against Purdue claimed the company marketed the drug to doctors without disclosing its addictive properties, with the result that it was improperly and overly prescribed.

Despite numerous warnings about abuse of the product, "Purdue, under the leadership of its top executives, continued to push a fraudulent marketing campaign that promoted Oxycontin as less addictive, less subject to abuse, and less likely to cause withdrawal, " said United States Attorney John Brownlee.

"In the process," said Brownlee, "scores died as a result of OxyContin abuse and an even greater number of people became addicted to OxyContin; a drug that Purdue led many to believe was safer, less abusable, and less addictive than other pain medications on the market."

According to the Statement of Facts filed by federal prosecutors, beginning in January 1996 and continuing through June 30, 2001, Purdue's market research found that "[t]he biggest negative of [OxyContin] was the abuse potential." Nonetheless, federal prosecutors contend, Purdue sales representatives falsely told some healthcare providers that OxyContin had less euphoric effect and less abuse potential than short-acting opioids.

Purdue supervisors and employees also drafted an article about a study of the use of OxyContin in osteoarthritis patients that was published in a medical journal on March 27, 2000. Each company sales representative was provided a copy of the article, and sales representatives widely distributed copies of the article to healthcare providers to misleadingly claim that patients could abruptly discontinue taking the drug without withdrawal symptoms, according to federal prosecutors.

Said Assistant U.S. Attorney General Peter D. Keisler, "Purdue abused the drug approval process which relies on drug manufacturers to be forthright in reporting clinical data and, instead, misled physicians about the addiction and withdrawal issues involved with Oxycontin."

In a statement, Purdue stated, "Nearly six years and longer ago, some employees made, or told other employees to make, certain statements about OxyContin to some healthcare professionals that were inconsistent with the FDA-approved prescribing information for OxyContin and the express warnings it contained about risks associated with the medicine. The statements also violated written Company policies requiring adherence to the prescribing information." The company said that, since 2001, it has cured these problems.

It also insisted that "any attempt to connect the agreed to plea of misbranding by Purdue with abuse and diversion of OxyContin is completely false."

Public health advocates applauded the government prosecution. The fines and guilty pleas send "an important message to the drug industry that this kind of malicious, death-dealing behavior will not be tolerated," says Dr. Sidney Wolfe of Public Citizen's Health Research Group.

But Wolfe complains that federal prosecutors let the executives off with misdemeanor pleas and no jail time. He says he government could have come down much harder on "white-collar drug pushers." He also says "the government should have forced the company to disgorge far more of its ill-gotten profits," including from the period after 2001.

Another notable feature of the deal was the corporate party that pled guilty to felony charges: Purdue Frederick. The parent company is Purdue Pharma. It escaped with a non-prosecution agreement, by which the government agrees not to prosecute the company in exchange for an agreement to enter into a corporate integrity agreement to ensure it complies with the law in the future.

Why does it matter which company pled guilty to a felony?

Under federal law, a pharmaceutical company convicted of a felony is automatically excluded from federal insurance programs, like Medicare. The idea behind the law is to ensure the government does not do business with serious criminals.

Purdue's deal was brokered by Howard Shapiro, a partner at WilmerHale in Washington, D.C., Purdue Pharma's legal representative. Shapiro did not return calls seeking comment.

Asked by e-mail about the the difference between Purdue Frederick and Purdue Pharma, company spokesperson James Heims responds immediately. "They are independent, associated companies. Please let me know if you have further questions."

A further question is asked. Why did Purdue Frederick plead guilty and not Purdue Pharma? No answer. Called, Heims did not respond.

As a result of the plea, Purdue Frederick will be excluded from government programs. But it is likely that it has little if any government business to lose. Brownlee says he doesn't know. The company won't return calls.

In an interview, Brownlee acknowledged that Purdue Frederick was chosen to plead guilty because "we didn't want to ban the future sale of the drug."

Had Purdue Pharma been forced to plead guilty, Oxycontin would have been excluded from Medicare coverage, "and we didn't want that," Brownlee says.

- Russell Mokhiber

Snake Eyes for the U.S. at the WTO

After losing a World Trade Organization (WTO) case concerning online gambling, the United States in May said it will no longer agree to subject its Internet gambling rules to WTO jurisdiction. The move opens the United States to sanctions from any of the 149 member countries in the WTO that can show their businesses were harmed by U.S. actions.

"We did not intend and do not intend to have gambling as part of our services agreement," says Deputy U.S. Trade Representative John Veroneau. "What we are doing is just clarifying our commitments."

Under the WTO's General Agreement on Trade in Services (GATS), members are allowed to select which services to include for coverage. While some members only included a few services in their commitments, others listed more than 120. The United States originally included gambling on its service list, thereby subjecting it to WTO standards. By withdrawing gambling from its list of commitments, the United States in the future will not have an international obligation to allow foreign investors to provide gambling services and can regulate Internet gambling without fear of retaliation from other WTO countries.

The chain of events leading to the U.S. decision to pull its gambling regulations from WTO jurisdiction began in March 2003, when the twin Caribbean island nation of Antigua and Barbuda filed a suit against the United States challenging U.S. remote gambling laws as "barriers to trade" in "cross-border gambling services" under GATS.

"The law appeared to be solidly on our side, despite the fact that a number of WTO legal issues had not been considered before," says Mark Mendel, Antigua's lawyer in the matter. "We thought it was going to be very hard for the United States to defend the case with a straight face, given how pervasive legalized gambling is in America. We have since learned that having a straight face is not a prerequisite for a job at the" U.S. Trade Representative (USTR).

In November 2004, a WTO dispute settlement panel ruled for Antigua. The United States then appealed to the WTO Appellate Body, arguing that its laws were "necessary to protect public morals," and therefore were protected by a WTO exception. The United States argued that Internet gambling nurtures gambling addictions and makes it difficult to screen out minors and prosecute fraud. The Appellate Body accepted this reasoning for three of the challenged laws, but ruled that another law, the Interstate Horse Racing Act, still violated GATS because it allowed bets to be placed remotely across state lines, but not from Internet servers based in foreign nations.

The United States further argued that it should not be liable under WTO rules because no one had envisioned the availability of online gambling, when the Clinton administration signed the trade agreement in 1994. "It never occurred to us that our schedule could be interpreted as including gambling until Antigua-Barbuda brought this case," Veroneau says.

"What the United States is now claiming is 'mistake,'" Mendel says, "and arguing that as a 'mistake,' no other nation should have a claim based upon it. What a horrible thing to say to your trading partners, and what an awful precedent to set. However, I don't see it working on the rest of the world, because the rest of the world knows that 'mistake' is irrelevant under international law."

Several other countries specifically excluded gambling from their GATS obligations at the time of the signing, points out Mary Bottari of Public Citizen's Global Trade Watch. "I find it ironic that the United States is one of the primary backers of the WTO … and it has pretty much been thumbing its nose at the WTO rules," Bottari says. "They have done everything they could not to follow the rules." Bottari argues the ruling shows the dangers of the GATS - and that the United States should not demand others adhere to rules from which it seeks to escape.

WTO supporters agree that the United States is being hypocritical, but draw a different conclusion. If the United States is forced to absorb sanctions, it will solidify the role of the WTO, they believe. The decision to withdraw gambling "was unfortunate and will cut against U.S. interests in the years ahead," says Gary Hufbauer, senior fellow at the Washington, D.C.-based Peterson Institute for International Economics. "The United States has been at the forefront of efforts to liberalize services trade, both cross-border and through commercial presence. If the WTO allows the United States to walk away from its commitment in gambling, the precedent will badly erode the GATS." Hufbauer believes the best remedy is significant penalties against the United States.

WTO critics applauded the U.S. decision to withdraw gambling from GATS control, but say the agreement continues to endanger U.S. (as well as other countries') legitimate regulatory policies. "It's good news that the Bush administration finally is listening to the state attorneys general and others who have asked for the U.S. Trade Representative to remove gambling from the WTO jurisdiction and thus eliminating further attacks on U.S. gambling regulation," says Lori Wallach, director of Public Citizen's Global Trade Watch. "The WTO's ruling against the U.S. Internet gambling ban was not some fluke, but rather a preview of coming attractions given how extensively the WTO's service sector rules interfere with non-trade domestic policies regulating the conduct of services operating within our own country."

Antigua and Barbuda filed compensation claims of more than $3.4 billion, one of the largest amounts ever dealt with by WTO courts. In December 2007, the WTO awarded the country $21 million in damages, disappointing Antigua. WTO arbitrators did authorize Antigua to impose sanctions by suspending its obligations to respect U.S. patents and copyrights - a means to leverage the United States to change its laws by punishing an industry sector with no role in the gambling dispute.

"The main point would be to bring political pressure to bear on the administration to come to its senses," Mendel says. "The USTR has shown itself uninterested in finding a solution to our case at this point, so we need to mobilize whatever forces we can to get them to do so." Other WTO members including Japan, India, the European Union, Canada, Australia, Costa Rica, Macao and 15 Caribbean nations are also seeking compensation.

- Jennifer Wedekind

Taming the Giant Corporation

Starting from a premise that concentrated corporate power is undermining democracy and threatening the well-being of the planet, approximately 300 activists met in Washington, D.C. in May for a conference titled "Taming the Giant Corporation conference."

The key themes of the conference, according to consumer advocate Ralph Nader, were subordinating and displacing large corporations: subordinating corporations to democratic power; and installing new organizational structures to perform some of the deliveries now performed by giant corporations (e.g., through solar energy, conservation, consumer cooperatives, and national health insurance). Ralph Nader and the Washington, D.C.-based Center for Study of Responsive Law organized the conference.

Public interest advocates working on different specific issues offered proposals for new approaches and institutional arrangements to corral or displace corporations from the industries on which they focus.

Jeff Chester of the Center for Digital Democracy warned that although the Internet and new media technologies can facilitate progressive organizing, they are also vulnerable to corporate control. "New media mergers," he said, are "all about consolidating the mechanisms that collect our individual information - our 'data,' our likes, our dislikes." The new media companies aim to create "a system so they can track each and every one of us to deliver to us, basically for sale, advertiser-supported content and services." The personalized nature of this commercially driven and directed content, he warned, poses direct threats to democracy. "We need to be concerned how the new media system is going to affect elections," he said.

In addition to regulatory measures, Chester called for the creation of web-based "social networks owned and operated by real people, by real communities." These can be operated as viable for-profit enterprises, he suggested, but they must be community controlled.

Tyson Slocum of Public Citizen's Energy Program similarly explained the tightening corporate grip over U.S. energy policy - thanks especially to recent deregulatory legislation. He called for renewed regulation and antitrust enforcement, but also new initiatives for decentralized and locally controlled energy. Revenues from a windfall profits tax on Big Oil should be dedicated to financing clean energy, energy efficiency and mass transit. And major support should be given to municipally owned power.

Stephanie Woolhandler, a professor at Harvard University, detailed the enormous inefficiencies in the U.S. for-profit health insurance and healthcare markets. Two indicators: there has been a 2,500 percent growth in medical administrators since 1970, accounting for huge administrative waste; and U.S. public spending for healthcare is greater than total healthcare spending in most rich countries - but roughly 45 million people in the United States have no public or private insurance. The direct solution, she insisted, is to eliminate the private health insurance industry, and replace it with a Medicare-style single-payer system.

James Love of Knowledge Ecology International called for massively reorganizing the pharmaceutical industry. Rather than rewarding brand-name pharmaceutical companies with patents that enable them to charge monopoly prices, he recommended a prize system. The prize system would involve direct payments to firms or entities that develop valuable new healthcare technologies, but would make all new drugs available as generic products. Under such a system, he said, prices would fall by 80 percent or more, wasteful marketing would be eliminated, and firms that actually innovate new products could receive more compensation than they do now.

The conference also featured an animated conversation about organizing strategies. What matters in a society is not what is illegal, but what is permitted, argued Richard Grossman of the Community Environmental Legal Defense Fund. Grossman contended that this view suggests the central importance of focusing on the legal rules that determine how corporations can be formed and establish what powers they may claim. Challenges to grants of legal authority to corporations are best mounted in communities, he insisted.

Others countered that corporate power is too multifaceted to be countered in one way. "Most communities in the United States today do not keep people in them long enough to build democracy," argued historian Gar Alperovitz. "I do not think the law is the only way forward."

Kathy Mulvey of Corporate Accountability International argued that popular organizing can and should be undertaken in many forums. She pointed to success in adoption of a global anti-tobacco treaty which will, among other measures, impose a tobacco advertising ban in most countries (though not the United States), and said it is possible to imagine similar restraints on corporate power in future treaties related to the environment and human rights.

- Robert Weissman