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Case 3-2
Amgen Whistleblowing Case
Amgen, a Thousand Oaks, California–based company, has been dealing with lawsuits and whistle-blower
claims for years over its marketing tactics. The following describes the lawsuits, language from the legal
filings against Amgen, and a statement made by the company on October 24, 2012, about its settlements in
its earnings announcement for the third quarter of 2012.
Whistleblower Shawn O’Brien
In 2009, the company was embroiled in lawsuits filed by 15 states alleging a Medicaid kickback scheme.i
Two additional whistleblowing lawsuits were filed against the company in Ventura County. Former
employees who said they had uncovered wrongdoing at the biotech giant and were terminated after they
raised red flags to superiors brought the whistleblowing complaints, which don’t appear related to the fraud
alleged by the group of states. One employee alleged the company violated federal law by under-reporting
complaints and problems with the company’s drugs after they hit the market. The facts of that lawsuit are
described below.
Former Amgen employee Shawn O’Brien sued Amgen for wrongful termination on October 9, 2009,
alleging he was laid off in October 2007 in retaliation for raising concerns about how the company reported
complaints and problems with drugs already on the market. O’Brien worked as a senior project manager for
Amgen’s “Ongoing Change Program,” according to the lawsuit filed in Ventura County Superior Court. His
job was to improve Amgen’s “compliance processes with high inherent risk to public safety, major criminal
and civil liability, or both,” according to the lawsuit.
The lawsuit alleged that in April 2007, Amgen’s board of directors flagged the company’s process for
dealing with post-market complaints about drugs as a potential problem. Federal law requires drug
companies to track and report to the Food and Drug Administration any problems with their drugs after
they hit the market. In June 2007, O’Brien was put on the case. He soon uncovered facts that Amgen was
not adequately and consistently identifying phone calls or mail related to post-marketing adverse events of
product complaints. That year, O’Brien warned the company about the seriousness of the issues but, he
claims, the company would not take any action or offer any support. In August 2007, O’Brien took his
complaint to a senior executive/corporate officer (unnamed) and warned that Amgen’s process for dealing
with post-market problems wasn’t adequate.
In early September of 2007, O’Brien’s managers instructed him to stop all work and not discuss the
issues any further with anyone. Approximately four weeks later he was informed that he was being
terminated as part of Amgen’s October 12, 2007, reduction in the work force.
Whistleblower Kassie Westmoreland
On October 22, 2012, Amgen announced it had set aside $780 million to settle various federal and state
investigations and whistle-blower lawsuits accusing it of illegal sales and marketing tactics. Amgen said it
had reached an agreement in principle to settle criminal and civil investigations that had been under way for
several years by the United States attorney offices in Brooklyn and Seattle.
The company said a settlement, which it expected to be concluded in three to four months, would also
resolve state Medicaid investigations and 10 whistle-blower lawsuits. It was not clear at the time if the
company would plead guilty to any criminal charges. Most of the whistle-blower lawsuits remain under
seal, but Amgen has said in regulatory filings that the lawsuits “allege that Amgen engaged in a wide
variety of illegal marketing practices.”
The federal investigations, according to Amgen, seem to involve marketing, pricing and dosing of its
anemia drugs, Aranesp and Epogen, and its dissemination of information about clinical trials on the safety
and efficacy of those drugs. Numerous current and former executives have received civil and grand jury
subpoenas, the company has said.
One whistle-blower lawsuit that was unsealed accuses the company of overfilling vials of Aranesp,
essentially providing doctors with free amounts of the drug to give patients and then charge to Medicare,
Medicaid or private insurers. The lawsuit said that Amgen tried to persuade doctors to use Aranesp, rather
than Procrit, a rival drug sold by Johnson & Johnson, by pointing to the extra profits the doctors could
make by using the overfill and billing for it. The lawsuit was filed by Kassie Westmoreland, a former
Amgen sales representative and Aranesp product manager. The federal government declined to join the
lawsuit, but more than a dozen states did join, including New York and California. Westmoreland would be
entitled to part of any settlement under whistle-blower statutes. In the past, Amgen has said the accusations
were without merit.
During depositions in the case, five former Amgen executives invoked the Fifth Amendment against self-
incrimination, according to court documents. That case had been scheduled to go to trial in the U.S.
District Court in Boston on Oct. 17, 2012 but the trial was then called off, apparently because a settlement
was near. “We are very encouraged by the agreement in principle and will comment further at the
appropriate time,” lawyers for Westmoreland said.
Legal filings
The filing in the Kassie Moreland case includes the following statement by the court in response to how
Amgen dealt with warnings of the Federal Drug Administration about the safety of its products:
In addition to causing damage to programs such as Medicare, Defendants’ actions have also put patient
safety and health at risk. The population of patients for whom Aranesp is indicated is especially vulnerable.
Though Amgen was aware of issues earlier, beginning on or about March 9, 2007, the FDA issued a series
of black box warnings for Aranesp when used in kidney and cancer patients, the most serious warning
available on a drug’s label. The black box warned of increased risk of death, of serious cardiovascular or
thromboembolic events, and more rapid tumor progressions. The new warnings cautioned physicians to
administer the lowest dose possible in order to bring red blood cell counts to the lowest level necessary to
avoid blood transfusions. Concerns that, rather than helping patients, Aranesp can increase the risk of tumor
growth and shorten survival in patients with cancer, and increase the risk of heart attack, heart failure,
stroke, and blood clots in other patients, led the FDA to impose a Risk Evaluation and Mitigation Strategy
on Amgen for Aranesp in February 2010.
One of Amgen’s responses to the black box warnings appears to have been to treat them as humorous. A
script for a July 2007 meeting of Amgen’s Nephrology Business Unit from the files of Amgen Vice
President of Sales Leslie Mirani included a joke about “black box warnings,” following up on the FDA’s
February 2007 warning about potential harm from Aranesp.
Amgen Earnings Report for third quarter of 2012
Amgen revealed the agreement in its earnings announcement for the third quarter of 2012. It said the charge
for the settlement reduced its third-quarter earnings by 77 cents a share after taxes. What follows is and
extract from the actual earnings announcement.
“The Company has reached an agreement in principle to settle allegations relating to its sales and
marketing practices arising out of the previously disclosed federal civil and criminal investigations pending
in the U.S. Attorney's Offices for the Eastern District of New York and the Western District of Washington
(the Federal Investigations). In connection with the agreement in principle, the Company recorded a $780
million charge in the third quarter of 2011, which, after taxes, reduced the Company's EPS and net income
in accordance with U.S. generally accepted accounting principles (GAAP) for the third quarter of 2011 by
$0.77 per share and $705 million, respectively. If the ongoing settlement discussions are successfully
concluded, Amgen expects that the proposed settlement will resolve the Federal Investigations, the related
state Medicaid claims and the claims in U.S. ex rel. Westmoreland v. Amgen, et al. and the other nine qui
tam actions [under the U.S. False Claims Act] previously described in the Company's periodic filings with
the U.S. Securities & Exchange Commission. The proposed settlement remains subject to continuing
discussions regarding the components of the agreement and the completion and execution of all required
documentation; until the proposed settlement becomes final, there can be no guarantee that these matters
will be resolved by the agreement in principle.”
NOTES
This case deals with constitutes internal whistleblowing. There is the legal issue of
definitions and which are protected by the First Amendment. The moral issue is how to
deal with retaliation for telling the truth.
Ethical Issues
Does an employee have a right or duty to speak the truth? From a First Amendment
viewpoint, does an employee have the freedom to speak that truth? In an organization
such as Amgen, does an employee have a duty to fully disclose all the information she
believes the consuming public has a right to know, even if it violates the confidentiality
obligation?
Questions
1. The following is from Amgen’s values statement:
“Our Values form a deeply held belief system that guides our behavior, helps us make the right
decisions and builds the framework for our daily interactions with each other. We value people,
integrity and results. This combination is essential in accomplishing our primary purpose of
using science to dramatically improve people’s lives.”
(www.amgen.com/about/compliance_summary.html).
What is the role of a “values statement” in creating an ethical organization environment?
Comment on the lawsuits described above and whistleblowing with respect to Amgen’s values
statement. What message do you get about what drives Amgen’s operations when compared to a
company like Alcoa and its values statement discussed in the chapter?
Values are beliefs or convictions that guide behavior and support the overall organization vision. Values
help define or describe the desired culture; they communicate what is important to the organization, as well
as what key practices and behaviors will be recognized and rewarded. Values define the relationship
Shawn O’Brien identified concerns about how Amgen reported complaints and problems with drugs
already on the market. Kassie Westmoreland found that Amgen overfilled vials of Aranesp. The overfilling
of the drug provided doctors with free amounts of the drug which could be given to patients and charged to
Medicare, Medicaid, or private insurers. These two examples seem opposite of Amgen’s stated valuing of
2. Evaluate the actions of Amgen and the two whistleblowers from an ethical perspective including
motivation for action and ethical reasoning.
Amgen fired the two whistleblower, O’Brien and Westmoreland, rather than report problems to the FDA or
to lose sales to a rival company. Amgen acted out of egoism. It might rationalize the action using
utilitarianism with the greatest good being profit to Amgen and the means to that end are not important.
O’Brien was reasoning at the postconventional stages of 5, social contract, and, universal ethical principles.
He considered all stakeholders and acted with integrity. It is possible that he thought he was just doing his
job. It is also possible that he was motivated by concerns over the quality of the drugs manufactured and
Westmoreland, as a sales representative, used the overfilling of Aranesp vials as an enticement to make
sales to doctors. While being a sales representative, she was reasoning at stage 2, satisfying one’s own
needs to make sales and budget – and egoistic approach to decision making. Once she was fired and
3. The following statement appears in Amgen’s code of ethics with respect to “making ethical
decisions”: (http://www.ifpma.org/fileadmin/content/About
%20us/2%20Members/Companies/Code-Amgen/Amgen-EN-Code.pdf)
“No code of conduct can cover every situation. When you face ethical issue which are difficult to
resolve, ask yourself these questions to help you: Is it legal and ethical?; Is it consistent with
Amgen’s Code of Conduct and company policies?: Is it consistent with the Amgen Values?;
Would I be comfortable explaining it to my family and friends, and if it appeared on television or
in a newspaper?” The Code goes on to say if unsure about what to do, seek additional guidance
about the ethics and legality of a matter before proceeding and ‘Do the Right Thing.’
What are the similarities between steps 8 and 10 of the Comprehensive Ethical Decision-Making
Model discussed in chapter 2 and these statements in Amgen’s Code? How does organizational
dissonance relate to the actions taken by management of Amgen in light of these statements?
Step 8 of the Comprehensive Ethical Decision-Making Model from chapter 2 states that one should
compare and weigh the alternatives. Some of the questions to ask include “Is it legal?; It is consistent with
professional standards?; and Is it consistent with in-house rules?” Those are closed mirrored in the Amgen
Based upon the lawsuits and whistleblowing examples, Amgen seems to act with low organizational ethics.
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