FORTUNE: "PETER ROST HAS BECOME THE DRUG INDUSTRY'S MOST ANNOYING - AND EFFECTIVE - ONLINE SCOURGE."

BLOGGING ON DRUGS

Fortune Magazine - Jun. 11, 2007

BOOTED OUT OF A LUCRATIVE CAREER, PETER ROST HAS BECOME THE DRUG INDUSTRY'S MOST ANNOYING - AND EFFECTIVE - ONLINE SCOURGE.

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Peter Rost is worked up about pink cupcakes. The ex--Pfizer senior executive turned blogger believes he has uncovered another instance of unethical marketing by Big Pharma. Today he's taking on AstraZeneca, the British pharmaceutical giant. A group of AstraZeneca salespeople anonymously e-mailed Rost a damning internal newsletter. The handout, among other things, encouraged company salespeople to set up brightly decorated display tables in chemotherapy treatment rooms. In honor of Mother's Day, reps were instructed to give away pink flowers, cupcakes with pink icing, and pink bags filled with information about the company's Arimidex breast cancer medicine. The problem? AstraZeneca's sweet sales event could violate patient privacy laws, American Medical Association guidelines, and the company's own policy of not serving food to patients. "Besides," Rost says with a laugh, "it's a bit cheesy. Patients just finishing up a chemo session are on the verge of vomiting. A cupcake is the last thing they want."

The ridicule comes easy for Rost. In his former life, the 48-year-old physician earned $600,000 a year conjuring up marketing plans for companies like Pfizer, Pharmacia, and Wyeth. That's all behind him. Since Pfizer fired Rost from his post as a vice president of marketing in December 2005, he has been blogging from the basement of his suburban New Jersey home. Rost's blog, Question Authority With Dr. Rost (peterrost.blogspot.com), is one part mocking rant, two parts investigative chronicle. A recent week's headlines included PFIZER, VIAGRA, AND THE MOB; and FORMER U.S. ASTRAZENECA CEO LARS BILDMAN: THE CRAZIEST BIG PHARMA CEO EVER? He has also published an exposé of his years in the drug industry, The Whistleblower: Confessions of a Healthcare Hitman.

[PHOTO: PHOTOGRAPH BY NIGEL DICKSON, UNBLINKING Rost, holding a sculpted lamp, believes he has a mission to shed light on pharma malfeasance.]

Trained as a physician in his native Sweden, Rost has worked in the drug industry for most of the past 20 years. He almost certainly never will again. The blog, then, is perhaps Rost's toughest marketing job ever. The product: Dr. Peter Rost. On the site he also hawks T-shirts, coffee mugs, and postage stamps emblazoned with his own square-jawed Nordic visage. Married with two children, Rost hopes that Question Authority-named after the FORTUNE column in which he was once featured-will help him create a new career. "I'm knitting a parachute," he says, "as I see the ground coming closer and closer."

Rost's many critics would love to be able to dismiss him as an embittered crank. But they can't. The blog has clout. As a conduit for Big Pharma whistleblowers, it has taken some notable scalps. Earlier this spring, for example, Rost's muckraking spurred congressional curiosity; federal investigators are now looking into AstraZeneca for Arimidex-related marketing irregularities. Another series of blog entries resulted in a government probe into Pfizer's marketing activities. And a dispatch on dubious sales practices led to at least one sales director's ouster.

For Big Pharma, whose public image is already battered, blogs are an added nuisance. The problem, says Robert Ehrlich, CEO of DTC Perspectives, a health-care marketing consultancy, is that most pharma companies are ill-suited to deal with the blogosphere. "They are medically oriented and legally oriented," he notes. "But as an industry they are not consumer-oriented." The rise of blogging (see table) also coincides with increasing federal scrutiny into how drugs are sold. From 2000 to 2006, drugmakers paid $5.4 billion in civil and criminal penalties to settle sales and marketing violations; in the ten years before that, the figure was $395 million. To bring such cases, the government relies heavily on tips from company insiders. Whistleblowers and their qui tam lawyers-they work essentially on contingency-initiate some 80% of health-care fraud cases. Tipsters get a cut of any penalty-on average, 16%.

These days, people whose complaints do not rise to the level of a federal case are likely to take their grievances to the web. Last April, for example, Rost received a phone call from an anonymous AstraZeneca employee. The caller claimed that sales reps had been instructed to promote the company's $1.5 billion breast cancer medicine, Arimidex, for uses not approved by the FDA. Marketing such off-label uses is illegal.

"SINCE BEING FIRED BY PFIZER IN DECEMBER 2005, ROST HAS STARTED A NEW CAREER AS A PROFESSIONAL PAIN IN THE ASS."

Rost pressed the caller to back up the charges and within hours received e-mails containing scanned documents from sales representatives at AstraZeneca. On April 5 he posted some of the papers and wrote stories about what he saw as possible ethics breaches and marketing violations.

In an internal publication, Mike Zubillaga, an AstraZeneca regional sales director, encouraged the cancer medicine salespeople to think of each oncology office they visit as a "big bucket of money."

[PHOTO, FOR SALE Among the other items Rost is hawking on his site: boxer shorts, infant bibs, and mousepads]

"Every time you go in, you reach your hand in and grab a handful," Zubillaga continued. "The more times you're in, the more money goes in your pocket." Rost printed the quotations in bright green. A day after Rost publicized the "bucket of money" comments, AstraZeneca fired Mike Zubillaga and issued a statement repudiating the language.

Over the next several weeks Rost continued to pore through the AstraZeneca documents, highlighting questionable practices. The mainstream press caught on, and so did Congress. On April 25, Congressman Pete Stark (D-California), chairman of the House Ways and Means Subcommittee on Health, urged the Department of Health and Human Services to investigate the allegations. Meanwhile, AstraZeneca continued an internal review. Says spokesperson Emily Denney: "We investigated the claims from the group of [insiders who sent the documents] and we found there was some merit to what they were saying. These involve personnel matters, so we aren't sharing information with the public, but we are sharing" it with the government.

In the middle of the AstraZeneca brouhaha, a Pfizer employee sent Rost some internal sales documents and presentations relating to the company's HIV medicine, Maraviroc. The drug is still under FDA review but is considered likely to be approved. Once it hits the market, analysts predict sales of $500 million a year. In this case, the tipster alleged that Pfizer is marketing Maraviroc before its FDA approval. This practice, known as "premarketing," is illegal. Rost received a PowerPoint presentation on Maraviroc, which the informant alleged Pfizer wanted passed along to doctors on a thumb-sized computer storage device. "Rost is on that website everyday, accusing people here of everything from wife beating to God knows what," says Bryant Haskins, a Pfizer spokesperson. "We're just not going to respond to every single allegation." On May 1, Rost wrote that his Pfizer contact had received an e-mail from HHS investigators requesting a meeting.

Why did these people go to Rost with their stories? The AstraZeneca whistleblower tried the New York Times and the Washington Post, but says there was no reply: "Dr. Rost understood the importance of what we sent him," the source told FORTUNE, "and posted about it right away."

Rost also offered empathy: He has been through the mill himself. It all began when he was working in Europe as a head of Nordic regional marketing for Wyeth. In the late 1990s, as Rost tells the story, he noticed that Wyeth was sending bonus checks from the U.S. without withholding the proper taxes. He says he reported the noncompliance internally, to no avail. Rost sued the company in 2001, claiming he was demoted for bringing the tax issues to light. The matter was resolved privately in December 2003. Neither Rost nor the company will comment.

Rost left Wyeth in 2001 and joined Pharmacia, where he became a vice president of marketing, overseeing the company's endocrine products, including Genotropin. Genotropin is a human growth hormone approved to spur growth in children with hormonal deficiencies. Rost became suspicious that Pharmacia drug reps were selling Genotropin off-label as an anti-aging drug. Then, in the summer of 2002, Pfizer bought Pharmacia.

From the moment Pfizer took over, Rost says, he tried to alert his new bosses to the illegal marketing and unethical arrangements he believed plagued the Genotropin marketing operations. Pfizer lawyers listened but were "very hostile," says Rost. "It was disheartening. I thought I was such a hotshot with great results, etc., that I could be the one to change things." Instead, he says, he was marginalized.

His career already damaged, in June 2003 Rost took the final step. He got a lawyer and filed a qui tam suit against the company over its alleged off-label marketing of Genotropin. In 2004 he went public, speaking at conferences where he detailed drug industry transgressions and argued in favor of lower drug prices and cheaper reimported drugs from Canada.

Pfizer has a different story to tell. Ethan Posner, an attorney at Covington & Burling who represented Pfizer in the matter, says Rost presented the company with a list of alleged problems and asked for $12.5 million to "go away." Rost says Pfizer asked for the list, and the $12.5 million figure refers to an estimate the company asked him to provide of damages he might be able to prove in court if he was fired. At any rate, Pfizer fired Rost in late 2005. The proximate cause was that Pfizer was restructuring. Clearly, though, Rost had worn out his welcome, just as he had at Wyeth.

In early April, Rost felt vindicated when Pfizer admitted publicly that its Pharmacia subsidiary had paid doctors to plug Genotropin for unapproved use as an anti-aging medication. The company agreed to pay a $34.7 million penalty. (Because the case was settled as a criminal matter and not as a qui tam suit, Rost got no reward.)

Since leaving Pfizer a year and a half ago, Rost has become a professional pain in the ass. It wasn't long before he got an offer to write for the Huffington Post. But Rost ruffled feathers there too. Last June he found that a frequent heckler posting replies to his blog was actually the website's head technician. When Rost revealed that, he was promptly barred. He began Question Authority last fall.

Is Rost a gadfly looking for a cause? Or is he a guardian, protecting consumers from unethical drug companies? Actually, he is both. His zeal is real; it is also sometimes excessive. Even his critics admit that when Rost is on his game, he is a force to be reckoned with. And he is part of a larger phenomenon that is forcing Big Pharma into a new era of accountability. For better or worse, the drug industry is going to have to get used to Dr. Peter Rost-and others like him.

[BOX]

CRITICAL MASS
Thanks to blogs, no industry can escape from its critics.

PHARMA: corante.com/pipeline Balanced critique of drug science. pharmagossip.blogspot.com Witty Brit takes on drugmakers.

FINANCE: wallstreetfolly.com The URL says it all. dealbreaker.com A Wall Street tabloid.

AIRLINES: planebuzz.com Smart analysis, savvy gossip.

RETAIL: walmartwatch.com/blog Hostile views of America's largest retailer.

TECH: calacanis.com Inside Silicon Valley. fakesteve.blogspot.com Satirical riffs on you-know-who.