Pharmaceutical fraud
Encyclopedia
Pharmaceutical Fraud is activities that result in false claims to insurers or programs such as Medicare
in the United States or equivalent state programs for financial gain to a pharmaceutical company. The manner in which this is done varies, and persons engaging in fraud are always seeking new ways to circumvent the law. Damages from fraud can be recovered by use of the False Claims Act
, most commonly under the qui tam
provisions which rewards an individual for being a "whistleblower
", or relator (law)
.
(FBI) estimates that health care fraud
costs American taxpayers $60 billion a year. Of this amount $2.5 billion was recovered through False Claims Act cases in FY 2010. Most of these cases were filed under qui tam provisions.
Some examples of False Claims Act
settlements in the pharmaceutical industry include:
which are particular to the pharmaceutical industry.
(FDA) prohibits drug manufacturers from marketing or promoting a drug for a use that the FDA has not approved. A manufacturer illegally “misbrands” a drug if the drug’s labeling includes information about its unapproved uses. A drug is deemed misbranded unless its labeling bears adequate directions for use. The courts have agreed with the FDA that the Food Drug and Cosmetic Act (FDCA) requires information not only on how a product is to be used (e.g., dosage and administration), but also on all the intended uses of the product. Oral statements and materials presented at industry-support scientific and educational activities may provide evidence of a product’s intended use. If these statements or materials promote a use that is inconsistent with the product’s approved labeling, the product is misbranded under the FDCA for failure to bear labeling with adequate directions for all intended uses.
Federal law, including the Centers for Medicare and Medicaid Services (CMS) guidelines and the regulations of other Government Healthcare Programs, prohibit coverage of claims for “compounded” medications when the claims are submitted by a company that is mass manufacturing large amounts of unapproved drugs in violation of the Federal Food, Drug and Cosmetic Act (FFDCA), under the guise of “compounding.”
People engaging in this type of fraud are also subject to the federal Anti-Kickback statute.
If, however, they want to ensure the government actively investigates the alleged fraud, they are encouraged to contact legal counsel from an experienced firm that specializes in qui tam litigation under the False Claims Act. A good legal team can advise potential whistleblowers of their rights, protections, and what evidence is necessary to solidify a case against the group leading the fraud.
Medicare (United States)
Medicare is a social insurance program administered by the United States government, providing health insurance coverage to people who are aged 65 and over; to those who are under 65 and are permanently physically disabled or who have a congenital physical disability; or to those who meet other...
in the United States or equivalent state programs for financial gain to a pharmaceutical company. The manner in which this is done varies, and persons engaging in fraud are always seeking new ways to circumvent the law. Damages from fraud can be recovered by use of the False Claims Act
False Claims Act
The False Claims Act is an American federal law that imposes liability on persons and companies who defraud governmental programs. The law includes a "qui tam" provision that allows people who are not affiliated with the government to file actions on behalf of the government...
, most commonly under the qui tam
Qui tam
In common law, a writ of qui tam is a writ whereby a private individual who assists a prosecution can receive all or part of any penalty imposed...
provisions which rewards an individual for being a "whistleblower
Whistleblower
A whistleblower is a person who tells the public or someone in authority about alleged dishonest or illegal activities occurring in a government department, a public or private organization, or a company...
", or relator (law)
Relator (law)
-Qui Tam action:A Qui Tam Action may be brought by any party against an entity that is fraudulently collecting money from the United States government by filing false claims. The party bringing the suit -- the relator -- must have possession of information substantiating the claim of fraud against...
.
Estimates
The Federal Bureau of InvestigationFederal Bureau of Investigation
The Federal Bureau of Investigation is an agency of the United States Department of Justice that serves as both a federal criminal investigative body and an internal intelligence agency . The FBI has investigative jurisdiction over violations of more than 200 categories of federal crime...
(FBI) estimates that health care fraud
Health care fraud
Health Care Fraud includes health insurance fraud, drug fraud, and medical fraud.Health insurance fraud occurs when a company or an individual defrauds an insurer or government health care program, such as Medicare or equivalent State programs. The manner in which this is done varies, and persons...
costs American taxpayers $60 billion a year. Of this amount $2.5 billion was recovered through False Claims Act cases in FY 2010. Most of these cases were filed under qui tam provisions.
Some examples of False Claims Act
False Claims Act
The False Claims Act is an American federal law that imposes liability on persons and companies who defraud governmental programs. The law includes a "qui tam" provision that allows people who are not affiliated with the government to file actions on behalf of the government...
settlements in the pharmaceutical industry include:
Types of fraud
There are several different schemes used to defraud the health care systemHealth care system
A health care system is the organization of people, institutions, and resources to deliver health care services to meet the health needs of target populations....
which are particular to the pharmaceutical industry.
- Good Manufacturing Practice (GMP) Violations
- Off Label Marketing
- Best Price Fraud
- CME Fraud
- Medicaid Price Reporting
- Manufactured Compound Drugs
GMP violations
Involve fraud with the Good Manufacturing Practice (GMP) Regulations which require manufacturers to have adequately equipped manufacturing facilities, adequately trained personnel, stringent control over the manufacturing process, appropriate laboratory controls, complete and accurate records, reports, appropriate finished product examination, and so on. Certain violations of the Good Manufacturing Practice Regulations may be the basis for a False Claims Act lawsuit.Off-label marketing
Though physicians may prescribe drugs for off-label usage known as off-label marketing, the Food and Drug AdministrationFood and Drug Administration
The Food and Drug Administration is an agency of the United States Department of Health and Human Services, one of the United States federal executive departments...
(FDA) prohibits drug manufacturers from marketing or promoting a drug for a use that the FDA has not approved. A manufacturer illegally “misbrands” a drug if the drug’s labeling includes information about its unapproved uses. A drug is deemed misbranded unless its labeling bears adequate directions for use. The courts have agreed with the FDA that the Food Drug and Cosmetic Act (FDCA) requires information not only on how a product is to be used (e.g., dosage and administration), but also on all the intended uses of the product. Oral statements and materials presented at industry-support scientific and educational activities may provide evidence of a product’s intended use. If these statements or materials promote a use that is inconsistent with the product’s approved labeling, the product is misbranded under the FDCA for failure to bear labeling with adequate directions for all intended uses.
Best price fraud
A figure reported by the manufacturer to CMS in quarterly reports under the Medicaid Rebate Program, it is used to calculate the Medicaid reimbursement rate. It is defined as the lowest price available to any wholesaler, retailer, provider, health maintenance organization (HMO), nonprofit entity, or the government. BP excludes prices to the Indian Health Service (IHS), Department of Veterans Affairs (DVA), Department of Defense (DOD), the Public Health Service (PHS), 340B covered entities, Federal Supply Schedule (FSS), state pharmaceutical assistance programs, depot prices, and nominal pricing. BP includes cash discounts and free goods that are contingent upon purchase, volume discounts, and rebates. The fraud occurs as the manufacturer falsely self-reports its Best Price.CME fraud
The dissemination of “scientific and educational” literature. In the past a legitimate expense, they can be a tool for improper off-label marketing if they are designed and carried out under the control of a manufacturer’s influence and bias. Neither the presentations nor the literature are truly independent or non-promotional industry-supported educational activities.Medicaid price reporting
In order to decrease the amounts owed to the states, some companies misrepresented material facts regarding the regulatory origin/status of their brand name drugs, the AMP, and/or the best price. Despite the Government’s good faith reliance to charge manufacturers a unit rebate amount based upon the manufacturer’s own representation of drug status, and price, some manufacturers have deceptively and fraudulently, breached their duty to deal honestly with the Government.Manufactured compound drugs
FDA guidelines authorize pharmacists to “compound” or mix medications only in response to a physician’s valid prescription. This assumes, of course, that the physician intends that the medication be compounded. The regulations further require that the mixed or compounded medications are medically necessary and not commercially available. Illegal compounding includes compounding of ingredients such that the compounded drug is tantamount to commercially available medications, involving mass manufacturing of drugs under the guise of compounding.Federal law, including the Centers for Medicare and Medicaid Services (CMS) guidelines and the regulations of other Government Healthcare Programs, prohibit coverage of claims for “compounded” medications when the claims are submitted by a company that is mass manufacturing large amounts of unapproved drugs in violation of the Federal Food, Drug and Cosmetic Act (FFDCA), under the guise of “compounding.”
Kickbacks
Kickbacks are rewards such as cash, jewelry, free vacations, corporate sponsored retreats, or other lavish gifts used to entice medical professionals into using specific medical services. This could be a small cash kickback for the use of an MRI when not required, or a lavish doctor/patient retreat that is funded by a pharmaceutical company to entice the prescription and use of a particular drug.People engaging in this type of fraud are also subject to the federal Anti-Kickback statute.
Examples of fraud cases
- Pfizer $2.3 billion settlement: Pfizer settled multiple civil and criminal allegations for $2.3 billion in the largest case of pharmaceutical and health care fraud in US history. The drugs involved were Bextra (an anti-inflammatory drug), Geodon (an anti-psychotic drug), Lipitor (a cholesterol drug), Norvasc (anti-hypertensive drug), Viagra (erectile dysfunction), Zithromax (antibiotic), Zyrtec (antihistamine), Zyvox (an antibiotic), Lyrica (an anti-epileptic drug), Relpax (anti-migraine drug), Celebrex (anti-inflammatory drug), and Depo-provera (birth control).
- Merk $650 million settlement: Merk settled a nominal pricing fraud case in which the company was accused of taking kickbacks and violating Medicaid best price regulations for various drugs.
- United States et al., ex rel. Jim Conrad and Constance Conrad v. Forest Pharmaceuticals, Inc, et al. involved a drug manufacturer selling a drug, Levothroid, that had never been approved by the FDA. These allegations settled for $42.5 million due to multiple whistleblowers stepping forward to provide detailed information on the alleged fraud. The collective reward to the relators in this case was over $14.6 million.
Reporting fraud
There are many ways to report cases of fraud. If a patient or health care provider believes they have witnessed Health Care Fraud, they are encouraged to contact the FBI via either their local office, telephone, or the online tips form.If, however, they want to ensure the government actively investigates the alleged fraud, they are encouraged to contact legal counsel from an experienced firm that specializes in qui tam litigation under the False Claims Act. A good legal team can advise potential whistleblowers of their rights, protections, and what evidence is necessary to solidify a case against the group leading the fraud.
See also
- Drug fraudDrug fraudDrug fraud is a type of fraud in which drugs, legal or illegal, are cut or altered in such a way that diminishes their value below that which they are sold for.- Illegal drug fraud :...
- QuackeryQuackeryQuackery is a derogatory term used to describe the promotion of unproven or fraudulent medical practices. Random House Dictionary describes a "quack" as a "fraudulent or ignorant pretender to medical skill" or "a person who pretends, professionally or publicly, to have skill, knowledge, or...
- Double billingDouble billing-Commerce:In commerce, double billing is the error of charging a customer twice for the same unique product. This can occur due to a change in product name or due to a software error.-Law:...
- Counterfeit medicationsCounterfeit medicationsA counterfeit medication or a counterfeit drug is a medication or pharmaceutical product which is produced and sold with the intent to deceptively represent its origin, authenticity or effectiveness...
- Health care fraudHealth care fraudHealth Care Fraud includes health insurance fraud, drug fraud, and medical fraud.Health insurance fraud occurs when a company or an individual defrauds an insurer or government health care program, such as Medicare or equivalent State programs. The manner in which this is done varies, and persons...