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Posted on Tue, Feb. 17, 2004

State account draws ethics scrutiny

Mental health officials used money from drugmakers for a variety of expenses.

Inquirer Staff Writer

Two pharmaceutical companies paid nearly $14,000 into an unauthorized state bank account that was used by state mental health officials for travel, meals and other expenses at a time when the drugmakers were courting state business, records show.

Janssen Pharmaceutica and Pfizer Inc., also paid at least $10,000 to two state officials who helped win approval for a mental-health treatment plan that uses drugs manufactured by the companies, according to interviews and a review of documents from the state Office of Inspector General. Those payments - some of which went to charity and the general state fund - were for speaking engagements and attendance at company meetings.

State and federal officials are examining the connection between the payments and the state's program.

The state Inspector General's Office ended its investigation in January 2003. The case is being reviewed by the state Ethics Commission, officials of the Department of Public Welfare said.

The U.S. Department of Health and Human Services referred the case to the FBI and the Food and Drug Administration, which opened investigations, according to a Dec. 11 letter U.S. Rep. Tim Holden (D., Pa.) wrote to a state investigator.

The FBI and the FDA declined to comment. A spokesman for the Health and Human Services Office of Inspector General said the matter remained under review.

There is no indication the drug companies are the subject of the investigation.

Doug Arbesfeld, a Janssen spokesman, said the company received a request for information from the state in 2002.

"We complied and we have not heard anything since," he said. "We think it's appropriate for the industry to provide support for physician education on treatment guidelines."


In the mid-1990s, some of the largest drugmakers began selling the state on a new generation of drugs to treat schizophrenia and depression.

In 1996, public health officials in Texas, with funding from drug manufacturers, had developed a medication program. Within a few years, the program caught the attention of Pennsylvania officials, but the program would require them to rewrite Pennsylvania's prescription guidelines to encourage doctors to use the drugs.

The state began the program in the Department of Corrections. In August 2001, it was expanded to Allentown State Hospital.

More than 85 percent of the state's mental patients now take the medications, state officials say. About 4,000 inmates in the state prison system are prescribed antipsychotics, with about 1,600 of them taking the new drugs.

The state welfare department in 2002, the last year figures were available, paid more than $17 million to the two drugmakers and other firms, or about $6 million more than the previous year. No prison costs were available.

Joan Erney, deputy secretary for Mental Health and Substance Abuse Services, said the program has been a great success and will save money down the road. "The small amount of data we have suggests our clients are feeling and functioning better" than they were with earlier drugs, she said.

The program had the support of the state's top medication experts: Steven J. Fiorello, a pharmacist who oversees drug policies at state hospitals; Steven J. Karp, the medical director for the state's mental health office; Robert Davis, the state's psychiatric physician manager; and Frederick R. Maue, who directs clinical services for the state Department of Corrections. Fiorello, Karp and Davis are also members of a 21-member committee that decides what types of drugs patients receive at the state's hospitals.

Department of Public Welfare officials, who discovered the unauthorized account, said they asked the state inspector general to investigate in January 2002, a month after the payments and the unauthorized account raised questions at the department.

Welfare department officials "were concerned about the relationship between the drug companies and some department officials," Erney said.

Since April 2003, the welfare department has not taken money from drug companies, Erney said. "We do not want to do anything that would be perceived as making any decision based on anything other than the well-being of our clients," she said.

Corrections Department officials investigated the $6,000 in honoraria that drug companies paid to Maue, but found no evidence the funds swayed his decision to use the drugs in the state's prisons. Maue says he gave the money to the state's general fund.

State ethics officials say state law prohibits public employees from taking honoraria, even if the money goes to charity or the state. It is a misdemeanor, punishable by a $1,000 fine and not more than one year in jail.

All four men remain in their state jobs. They did not return phone calls for this article.


Allen L. Jones was the lead investigator for the state Inspector General's Office. He began his inquiry in July 2003 and was removed from the case in mid-September. He alleged political interference from his supervisors. He has since filed a federal whistleblower suit and made his files available to The Inquirer. The case was first reported by the New York Times.

His investigation focused on use of the unauthorized account, which was opened in November 1999 under the name of Harrisburg State Hospital until officials in the Department of Public Welfare froze the account in December 2001, Erney said.

The state has strict guidelines governing the opening of accounts, including notification of the Comptrollers' Office and the Bureau of Financial Operations.

Karp opened the account and told state investigators he followed the rules in creating it.

"It was an unauthorized account because it was done without the knowledge of then-Deputy Secretary Charles Currie, and it is currently being investigated," Erney said, referring to the ethics review.

The account was officially closed in October 2003 and officials used the balance for indigent care at the hospital.

Over two years, the account took in $13,765.75, much of it from Pfizer and Janssen. Investigators do not know who made two deposits totaling $3,500.

For example, Janssen paid $4,000 into the account in May 2001. Fiorello and Davis used the money to attend a conference in New Orleans, where they delivered presentations and met with Texas officials over dinner to discuss adopting the drug program.

Overall, Fiorello and possibly others spent $5,493.39 from the account, according to records.

Fiorello endorsed checks for a $249.99 Palm Pilot, $240 for box lunches, and $40.50 for picture frames, among other items, investigator Jones said.

On at least one occasion, Fiorello requested a $3,000 educational grant from Pfizer, according to an Oct. 2, 2001, letter from the company to Fiorello. Those funds were deposited into the account on Oct. 16, 2001, according to records.

Fiorello also told Jones that he acted as a paid consultant for Pfizer and Janseen. Pfizer paid him to travel with a salesman to meet with Maryland officials about the Pennsylvania program. And Pfizer paid for two trips he took to the company's headquarters in New York. He did not recall the amount, but it was less than $1,300 per visit, he told Jones.

In December 2000, Karp joined an advisory board of a Janssen-funded newsletter, Mental Health Issues Today, and he flew to Seattle; Tampa Bay, Fla.; and Washington, D.C., for board meetings. He resigned in 2002 after he became uncomfortable with a Janssen executive attending the meetings, he told a state investigator.


The issues raised by payments to public officials is so thorny that the U.S. Department of Health and Human Services issued guidelines last year to help public officials steer clear of violations. The agency warns that money given to officials to generate business could violate the federal antikickback statute.

"Any remuneration from a manufacturer or its agents directly or indirectly to a person in a position to influence formulary decisions related to the manufacturers' products are suspect and should be carefully scrutinized," the guidelines say.

Advocates understand the concern. "The hands of pharmaceutical companies are everywhere," said Mary Hurtig, the policy director for the Mental Health Association of Southeastern Pennsylvania.

But, she said, "none of these programs could exist without drug company money.

"What the state is doing is done with the best possible motive," she said. "I'm sorry there are no other ways to pay for these programs, but there just aren't."

Contact staff writer John Sullivan at 717-787-5934 or

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