Healthy Skepticism Library item: 18997

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Publication type: Media Release

Pharmaceutical Industry Is Biggest Defrauder of the Federal Government Under the False Claims Act, New Public Citizen Study Finds
Public Citizen 2010 Dec 16
http://www.citizen.org/hrg1924

Abstract:

Civil, Criminal Settlements Have Increased Dramatically; Off-Label
Promotion Largely Responsible

Full text:

The drug industry has now become the biggest
defrauder of the federal government, as determined by payments it has
made for violations of the False Claims Act (FCA), surpassing the
defence industry, which had long been the leader, according to a new
Public Citizen study released today.

The study found that pharmaceutical cases accounted for at least 25
percent of all federal FCA payouts over the past decade, compared with
11 percent by the defence industry.

The fraud results were a key finding from a Public Citizen analysis of
all major pharmaceutical company civil and criminal settlements on the
state and federal levels since 1991 and found that the frequency with
which the pharmaceutical industry has allegedly violated federal and
state laws has increased at an alarming rate. Of the 165
pharmaceutical industry settlements comprising $19.8 billion in
penalties during the past 20 years, 73 percent of the settlements
(121) and 75 percent of the dollar amount ($14.8 billion) have
occurred during the past five years.

Many of the infractions, and the single largest category of financial
penalties, stemmed from the practice of off-label promotion of
pharmaceuticals – the illegal promotion of a drug for uses not
approved by the Food and Drug Administration (FDA). Off-label
promotion can be prosecuted as a criminal offence because of the
potential for serious adverse health consequences to patients from
such promotional activities. Another major category of federal
financial penalties was purposely overcharging for drugs under various
federal programs, which constitutes a violation of the FCA.

On the state level, the largest category of financial penalties has
come from companies deliberately overcharging state health programs,
such as Medicaid. Public Citizen’s study found this to be the most
common category of violation among state settlements.

The increase in payments for fraud is likely attributable to drug
companies engaging in more wrongdoing and better enforcement at the
state and federal level, said Dr. Sidney Wolfe, director of the Health
Research Group at Public Citizen.

“Desperate to maintain their high margin of profit in the face of a
dwindling number of important new drugs, these figures show that the
industry has engaged in such activities as dangerous, illegal
promotion for unapproved uses of drugs and deliberately overcharging
vital government health programs, such as Medicare and Medicaid,” said
Wolfe. Wolfe compiled and analysed the data with physicians from the
Johns Hopkins General Preventive Medicine program, Drs. Sammy Almashat
and Charles Preston, as well as Columbia University public health
student Timothy Waterman, all of whom worked at Public Citizen.

Public Citizen’s study also found that more than one-half of the
industry’s fines were paid by just a few companies – GlaxoSmithKline,
Pfizer, Eli Lilly and Schering-Plough. These four companies accounted
for more than half of all financial penalties over the past two
decades, paying $10.5 billion in fines collectively. These
pharmaceutical companies were among the largest in the world. The two
largest criminal penalties ever assessed by the U.S. government
against any companies were against Lilly ($515 million) and Pfizer
($1.2 billion), both in 2009.

To conduct the study, Public Citizen created a database of information
about pharmaceutical companies’ civil and criminal settlements,
including information about the type of alleged violation and the
amount of money paid in settlements. This study is the first to
attempt to document and analyse all major pharmaceutical company
settlements with both federal and state governments, the authors said.

Nationally, former pharmaceutical company employees and other
whistleblowers have been instrumental in bringing to light the most
egregious violations; they have initiated the largest number of
federal settlements in the past decade. The number of federal
settlements arising from whistleblower cases has more than doubled
over the past five years, yielding total payouts more than two and a
half times higher than in the previous 15 years combined.

Needed remedies include imposing steeper financial penalties and
criminally prosecuting company leadership, including jail sentences,
if merited.

“The danger to public safety and loss of state and federal dollars
that comes with these violations require a more robust response,”
Wolfe said.

To read the full report, visit
www.citizen.org/documents/rapidlyincreasingcriminalandcivilpenalties.pdf