Pharmaceutical Fraud - Pharmaceutical False Claims

The Whistleblower  |  False Claims Act  | Qui Tam Litigation 
  Pharmaceutical Fraud  |  Whistleblower News

Under the False Claims Act, employees or citizens who have knowledge of fraudulent activities against the government can initiate a qui tam action to hold companies accountable for their illegal and fraudulent actions, and to reimburse the federal government. Over the years the basis of qui tam claims has evolved from mainly being defense contracts to more often than not, involving medical false claims in some form or another. As a result of qui tam lawsuits, whistleblowers, and False Claims Act guidelines, pharmaceutical companies have had to repay more than $7 billion to the federal government and individual states.

There are several ways in which the pharmaceutical sector defrauds the government. The law states that a pharmaceutical company or government contractor is liable under the False Claims Act for Medicare and Medicaid fraud in any situation that the government loses money either directly or indirectly. These situations include:

Medical Trial Fraud

Clinical or medical trial fraud occurs when pharmaceutical manufacturers provide false data to the Food and Drug Administration (FDA) or withhold negative data from the FDA about efficacy of a pharmaceutical drug or medical device in clinical research trials to get FDA approval to sell and market the pharmaceutical drug or medical device.

Failure to report adverse events of medications or other products

The FDA collects information on adverse drug experiences that occur after a prescription medication is approved or marketed. Drug application holders and certain manufacturers, packers, and distributors for prescription and non-prescription drugs are required to submit specific adverse event and drug safety information to the FDA as set forth in the Federal Food, Drug, and Cosmetic Act (FDCA) and Title 21 of the Code of Federal Regulations (CFR).

Manufacturing deficiencies resulting in contaminated pharmaceutical products

Current Good Manufacturing Practice or cGMP regulations enforced by the FDA provide for systems that assure proper design, monitoring, and control of manufacturing processes and facilities. Adherence to the cGMP regulations assures the identity, strength, quality, and purity of drug products by requiring that manufacturers of medications adequately control manufacturing operations and properly detect and investigate product quality deviations, and maintain reliable testing laboratories. It is the FDA’s intent that such pharmaceutical manufacturing practices will help prevent instances of contamination, mix-ups, deviations, failures, and errors.

Illegal activities include:

Paying kickbacks and inducements to physicians, hospitals
and pharmacists to prescribe or otherwise favor their drugs

A pharmaceutical kickback consists of payments made to physicians for switching drugs, attending promotional events to lend credibility, or as a reward for high volume sales of a certain drug. Pharmaceutical companies have been known to make it financially advantageous for physicians to prescribe their drug, often advising the same physicians to seek reimbursement from Medicare or Medicaid for the free samples of the drug provided to help both the doctors and the pharmaceutical company to increase their profits at the expense of the government.

Manipulation of Pricing

Misreporting the “best price,” the “average Medicaid price” (AMP), the “federal ceiling price” or other benchmark prices that pharmaceutical companies report to Medicare and Medicaid programs is illegal.

Pharmaceutical companies are required to rebate to state Medicaid programs each year the difference between the price they initially charged Medicaid for a drug each year and their actual best price for the drug that year. The “best price” is the lowest price given to purchasers (both government and private entities) which is then used to calculate the Medicaid reimbursement rate. Pharmaceutical companies are required to report their best price to the Center for Medicare and Medicaid Services (CMS). The best price system is meant to ensure that government programs get the same price, or deal, as the private entities.

Many times drug companies fail to report discounts or other payments offered to private entities which in the end costs the government medical program millions of dollars.

Another form that pharmaceutical companies manipulate pricing is by federal ceiling price fraud. Pharmaceutical companies which provide drug sales to the Department of Defense, the Veterans Administration, Public Health Service and the Coast Guard must provide the drugs at a cost which does not exceed the "federal ceiling price". Pharmaceutical companies which inflate the price for these sales are defrauding the federal government. 

Best price excludes 340B covered entities.

340B Drug Pricing Program Overcharges

Overcharging for drugs discounted under 340B Drug Pricing Program is against the law. The 340B Drug Pricing Program limits the cost of covered outpatient drugs to certain federal grantees, federally-qualified health center look-alikes and qualified disproportionate share hospitals such as Consolidated Health Centers, Migrant Health Centers, Health Care for the Homeless, Healthy Schools/Healthy Communities, Tribal Programs, State-operated AIDS Drug Assistance Programs, black lung clinics, comprehensive hemophilia diagnostic treatment centers and Native Hawaiian Health Centers. Significant savings on pharmaceuticals may be seen by those entities that participate in the 340B program.

Pharmaceutical companies are required to adhere to a ceiling price (based on the AMP and best price for their drugs) in sales of their drugs to covered entities. Unfortunately, the law does not require these companies to report the 340B-ceiling prices to the government, leaving 340B entities without access to the AMP, best price or ceiling price. Some drug manufacturers break the law by overcharging 340B entities and not supplying them with the rebates they are entitled to receive.

Civil monetary penalties for violations of 340B requirements apply to inaccurate or untimely average sales price data, price misrepresentation or false information, etc.             

Engaging in off label marketing

Under the False Claims Act a pharmaceutical company may be held liable if they promote the use of prescription drugs for unapproved indications for Medicare patients. This also includes providing physicians with misleading or false drug marketing literature.

Defective pharmaceutical products inducing birth defects or suicidal behavior

Since 2005, data has been emerging that certain antidepressants may cause birth defects, including cardiac, pulmonary, neural-tube defects, craniosynostosis, infant omphalocele, club foot, anal atresia and PPHN. Baum Hedlund has been investigating whether (and how long prior to 2005) certain pharmaceutical companies knew that their drugs could be causing birth defects, but chose to conceal the risk while continuing to manufacturer, promote and sell their drugs.

The black-box warnings concerning an increased risk of suicidality now on all antidepressant labels resulted, in part, from our firm’s tenacious efforts to expose the harm antidepressants can cause. Baum Hedlund attorneys and staff have tirelessly worked for two decades to ensure critical data was made public, including evidence about SSRI antidepressants causing suicidality, their lack of effectiveness in treating depression, drug companies falsely touting the safety and efficacy of their drugs through ghostwritten medical journal articles, mis-coding side effects, etc.

Because Baum Hedlund has been at the forefront of the SSRI-antidepressant litigation and has handled over 3,000 SSRI-antidepressant cases in the past 20 years, whistleblowers who have approached Baum Hedlund feel confident that our firm has the knowledge and experience necessary to aggressively represent them in their qui tam lawsuits. Our firm digs deep into pharmaceutical company files through the process of discovery as part of our thorough investigation into drug company wrongdoing. We are relentless in our pursuit in finding out when drug companies knew of risks associated with their drugs and what efforts, if any, the companies took to hide those risks.

By representing whistleblowers in qui tam claims, we continue our legacy of seeking the truth, obtaining justice and holding Big Pharma accountable.

Medical trial fraud | Failure to report adverse events
Manufacturing deficiencies and contaminated pharmaceuticals
Paying kickbacks | Manipulation of pricing | 340B Drug Pricing Program overcharges
Engaging in off label marketing | Defective pharmaceutical products