Pharma Fraud Continues To Fill The US Treasury
13 CommentsBy Ed Silverman // December 19th, 2011 // 3:03 pm
Boasting about recovering lots of money from prosecuting health care fraud has become an annual pasttime at the US Department of Justice. In general, fraud is a hot topic. Why? For the second consecutive fiscal year, the feds recovered more than $3 billion under the False Claims Act, and the total since January 2009 was $8.7 billion.
Of the $3 billion recovered this past fiscal year, which ended September 30, $2.4 billion in recoveries involving fraud committed against federal health care programs, nearly matching the $2.5 billion recovered in the previous fiscal year (see here). And of the $3 billion, whistleblower cases filed under the False Claims Act accounted for $2.8 billion.
As for drugmakers, the feds say that enforcement actions involving the pharmaceutical industry were, once again, the source of the largest recoveries this year. In all, the Justice Department recovered nearly $2.2 billion in civil claims against drugmakers last fiscal year, including $1.76 billion in federal recoveries and $421 million in state Medicaid recoveries (here is the Justice Department statement).
These cases included $900 million from eight drugmakers to resolve allegations they undertook illegal pricing to increase profits. Among the violators were Merck Serono and Novo Nordisk. Another $750 million was paid by GlaxoSmithKline to resolve criminal and civil charges that led to federal healthcare programs paying for adulterated drugs (back story).
For all the headlines grabbed by large fines, the settlements continue to be controversial, since payouts are often described off-the-record by industry execs as a cost of doing business. In any event, they also maintain that many cases reflect years-old practices that have since changed. But one expert on whistleblower cases say drugmakers remain very much in the crosshairs.
“As has been the case in recent years, pharmaceutical companies are expected to be the big payers, which is only fair since they have been the big players as far as fraud is concerned,” writes Patrick Burns of Taxpayers Against Fraud, a non-profit that supports whistleblower lawsuits, in an email. “We are not seeing a decline in pharmaceutical fraud cases. Instead we are seeing the addition of other fraud streams, such as medical devices and pension fraud.”
He also notes that some individual states may get more assertive about joining whistleblower cases. Some cash-starved states have recently taken notice that, if they pass a False Claims statute, they would be able to collect a bigger payday each time they choose to participate in a whistleblower settlement (see here).
benjamins pic thx to amagill on flickr
Mark D. Walters
The False Claims Act is one of the most successful statutes of all time. At a December 13, 2011 cabinet meeting that included Vice President Joe Biden, the Department of Justice announced that it has recovered more than $5.6 billion in fraud proceeds in 2011 – the largest amount for any single year in the history of the department. This represents an increase of more than 167% since 2008, and includes nearly $3.4 billion in civil fraud, as well as $2.2 billion in criminal fraud.
Many states have enacted their own False Claims Act, and Washington State is considering on now. (SB 5978). The Washington General Accounting Office estimates that 10% of Washington government heath dollars are lost to fraud, translating to $660 million wasted in Washington each year. This bi-partisan bill should be enacted into law.
Searching2000
Who says there is “no money in Big Pharma?”
Then again, perhpas they meant - “No money LEFT in Big pharma…”
Good for the defecit … at a minimal level, at least … BAD for the industry short-term. I expect some will argue that it will be a good thing - time will tell.
Teflon no more
Imagine other countries where they do not have similar laws to FCA as in America. The big pharma has free hands to do what ever they want in spite of those countries having criminal laws that could be used but often they are not. Why? Simple. It is very hard to prove misconduct by big pharma for they have taken it to an art form. They have developed such illegal practices that are almost imposible to tell apart from the legal. They simply blend legal and illegal in such a way that the whole approach looks, feels, smels,acts….just like competely proper, ethical, legal and businesslike. So no need for the authorities to look for misconduct for as far as everyone is concerned, there ain’t any done by their “noble” big pharma. Well we have news for them. That bigpharma is almost exactly the same as bigpharma in America that is the worse offender amongst any biz in that country. So could they possibly behave completely correctly in other countries where there is no danger of any kind of being caught, prosecuted and punished? Not likely and the fact that they continue with misconduct even in USA where there is FCA that gets them and pay the fines they consider cost of doing biz, tells us that what they do in those non-FCA countries is at least as bad as in USA. In reality it is worse, much worse.
Erica
The amount of medical fraud in this country is outrageous. Obviously whatever fines are levied are just considered the cost of doing business.
They should up the amount of fines levied, until the fraud stops. Though I suspect that many politicians are being “lobbied” against this.
Justice in MI
Am I correct that an actual fraud conviction in the FCA context, if levied against a whole company, would also bar them from doing business with the feds??
My understanding is that is why we always see settlements, misdemeanor pleas, CIAs conviction of individual execs, or of companies that no longer independently exist (e.g., Upjohn, Pharmacia, etc.).
Is there a single fraud conviction out there against an “actual”, ongoing pharma company?
Justice in MI
Following up some of the links, there are, of course, a lot of fraud-based cases. But I don’t find a fraud _conviction_ of a company as a whole. From a $ point of view, that may not matter. But it has implicaitons in other contexts, like whether ‘fraud exceptions’ built into preemption laws matter.
In that context, there has to be actual conviction. And, even though FCA and fraud-on-FDA are different animals, we’ve learned in Michigan that preemption in second arena can disbar collection in the first.
Observer
May I observe that this is a peice composed last year BUT the title of this post brought it out? Just something seasonal
Pharma Fraud Rock
(Tunr: Jingle Bell Rock)
Pharma Fraud, Pharma Fraud, Pharma Fraud rock
Pharma Frauds sting and Pharma Fraud ‘ca-ching’
Snatching and catching up bushels of money
Here comes a consent decree
Pharma Fraud, Pharma Fraud, Pharma Fraud rock
Pharma Frauds slime with Execs doing time
Ducking and pratting in the courthouse square
In the frosty air.
What a bright time, it’s the right time
To lock the cash away
Pharma Fraud time is a swell time
To go inspecting with the FDA
Giddy-up OSI, pick up your feet
Fraud watch around the clock
Fix and mingle with the tap-dancing feet
That’s the Pharma Fraud rock.
Pharma Fraud, Pharma Fraud, Pharma Fraud rock
Pharma Frauds sting and Pharma Fraud ‘ca-ching’
Snatching and catching up bushels of mon (ey)’
Have the plea bargains now begun?
Pharma Fraud, Pharma Fraud, Pharma Fraud rock
Pharma Frauds slime with Execs doing time
Ducking and pratting in the courthouse square
In the frosty air.
What a bright time, it’s the right time
To lock the cash away
Pharma Fraud time is a swell time
To go inspecting with the FDA
Giddy-up DOJ, pick up your feet
Fraud watch around the clock
Fix and mingle with the tap-dancing feet
That’s the Pharma Fraud
that’s the Pharma Fraud
That’s the Pharma Fraud rock!
dziecko
@Observer - I hate when a tune gets stuck in the head - especially the jingles - lol
Feliciano
Police Navidad, man!
company insider
Justice in MI in the case of the Bextra Pfizer case Pharmacia and Upjohn Co. inc. never existed until 2007 when Pfizer made up the company to cover another criminal case with Growth hormone. THe company that took the fraud never really had more than two employees and CNN figured the whole thing out and did several shows on it. The real Pharmacia company told us exactly what was off label and what would be terms of termination. WHen Pfizer took us over they trained us to do exactly what Pharmacia and even Pfizer’s legal department told us was illegal. The managers tended to laugh at their own legal officers, gave them zero respect. So the feds had a wopping case to take on Pfizer’s executives who knew about it the entire time and the feds did not prosecute likely because they were so understaffed or just afraid of Pfizer.
Justice in MI
CI–Much thanks for the report. I’ll have to try to find it in the CNN archives.
Do you concur with the usual assumption that, besides understaffing and perhaps fear of Pfizer, the DOJ knew that a felony conviction against Pfizer itself would mean no fed contracts, and thus found this “alternative” approach.
Too big too jail, etc….
Dan
This amounts to blood money, pure and simple. Justice hears regularly from families who are waiting for real justice - prosecution of the individuals responsible for the deaths of their loved ones. Start with Lilly’s Zyprexa -4,000 dead and counting - and go from there.
Despite the saber rattling at Justice and the FDA not one hair on one head in pharma has been ruffled, despite overwhelming evidence of criminal behavior. When do the families get their day in court?
company insider
All that you have to read is the federal judges comments on the case before he accepted the guilty plea. He was upset there were no criminal prosecutions in the largest federal fraud case in history. He said there were criminal charges all over the whistle blower cases and I would have to agree with that. THe frauds just went to another coapny like Amgen or stayed in place like Pfizer’s legal departmentor or were promoted like some of the regional directors and lawyers. THe feds said they were to large to prosecute as it would result in to many honest people losing their jobs.
Yes the feds stated publicly they went with the alternative approach as Pfizer did have at least a few good people working for them, who knows by now the management team could have gotten rid of all the good people.