Attorney General Bilks Drug Producer

Tillie Fong reports:

Colorado will get $1.2 million from a national settlement with Cephalon Inc., after the pharmaceutical company was accused of marketing and promoting three drugs for “off-label” use.

The announcement by the Colorado attorney general’s office Monday said the money will be used to reimburse the state Medicaid system. …

While it is legal for doctors to prescribe Food and Drug Administration-approved drugs for off- label use, drug companies are not allowed to market or promote directly their drugs for such purposes.

Is there any claim that Cephalon’s advertisements were fraudulent? No. Is there claim that Cephalon has acted negligently? None that I’m aware of. (I checked the AG’s web page and found no media release on the matter.)

So this company has been punished for advertising its products and selling them to willing customers. Doing business is now often a crime in the United States.

These restrictions are a violation of the company’s rights of free speech, property, and association.

While often the attorney general’s office does important work protecting people’s rights, in this case it has helped violate people’s rights and undermined the proper purpose of government.

Let us say that a company does act fraudulently or negligently. Is there a proper government role in such cases? Yes! There is a role for both criminal fraud and criminal negligence. However, the more important role for government is to provide the legal context for tort. That is, people should be able to sue a company for fraud or negligence. Now, torts should be restricted such that companies may not be punished for unforeseeable harms or for transactions in which customers voluntarily accept risk.

But in no case would fraud or negligence justify the government transferring wealth from the company at fault to a welfare program! Instead, any damages should go directly to the victims. (Whether a state welfare agency decides to pay for certain drugs for certain purposes is a different issue, and not one that justifies legally punishing drug producers.)

In this case, though, there were no victims — except for the company itself and its customers.