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Johnson & Johnson $2.2 Billion Settlement Just a Slap on the Wrist

Fines are just another cost of doing business in an out-of-control pharmaceutical industry.

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A large portion of pharmaceutical profits come from public money via Medicare and Medicaid. So, while the companies are defrauding the government that grants them monopoly rights to distribute a drug, the taxpayers are stuck paying the bill—in some cases the very taxpayers who are harmed by the medications.

“The conduct at issue in this case jeopardized the health and safety of patients and damaged the public trust,” Attorney General Eric Holder said in a press release. “Through these alleged actions, these companies lined their pockets at the expense of American taxpayers, patients, and the private insurance industry. They drove up costs for everyone in the healthcare system and negatively impacted the long-term solvency of essential healthcare programs like Medicare.”

Such corporate bad behavior is systemic and ongoing. Big Pharma companies settled at least 239 cases for a total of $30.2 billion between 1991 and 2012, according to a report by citizen interest nonprofit Public Citizen, of which 74 settlements worth $10.2 billion came since November 2010. J&J was the third worst offender, with a total of $2.33 billion pried from company coffers since 1991—not including this week’s payout and trailing only Pfizer and GlaxoSmithKline (GSK).

The latest Risperdal settlement was also the third largest total individual settlement ever, following a $3 billion GSK agreement last year and a $2.3 billion payout by Pfizer in 2009.

While regulatory activity by the Department of Justice, as well as the size of the fines, has increased in recent years, it’s still far from sufficient to deter continued endangerment to the public as the company continues to pull in the big bucks.

“On a federal level, financial penalties still continue to pale in comparison to company profits,” the report stated. “Stronger legislation and more robust enforcement are needed on a federal and state level to deter future unlawful behavior.”

“If you’re an executive in this company, you’re just going to do the simple math and realize that crime does pay,” said Sammy Almashat, a Public Citizen research associate who was one of the authors of the report. “This case is sort of a microcosm of the types of fraud that we’re seeing on a very large scale across the industry.”

Almashat recommended legislation such as a bill proposed by Vermont Senator Bernie Sanders, which would cancel drug monopoly rights for manufacturers if they admit to criminal activity, resulting in dramatic cuts to potential profits. Predictably, the legislation has stalled.

Serious jail time for corporate executives might help, but there seems to be little political appetite to go after them. Executives can be held criminally responsible for their firms’ wrongdoings under what is known as the Park doctrine, even if there is no evidence that they directly knew about or sanctioned the acts. Nevertheless, enforcement is rare. As of the Public Citizen report’s publication, only four executives had been successfully prosecuted under the Park doctrine. Only one among those was sentenced to prison time—for a meager 30 days.

“The lack of prosecutions of executives who contributed to the fraud shows that the government still isn’t doing enough,” Almashat said. “Unless individual executives realize they are open to risk on a really personal level they will just look at these fines as a cost of doing business.”

All those ill-begotten profits come in handy to buy off lawmakers and regulators. In 2012, J&J spent nearly $6 million on lobbying and contributed over $1.1 million to the campaigns of Democrats and Republicans alike, according to OpenSecrets. In total Big Pharma made over $45 million in campaign donations and spent nearly $240 million on lobbying last year.