For many years, the biggest defrauders of the United States Government appeared to be defense contractors. Not so anymore according to a Public Citizen study released on December 16, 2010. The biggest defrauder of the U.S. government now appears to be the pharmaceutical industry, which accounted for 25% of all Federal False Claims Act (FCA) payouts over the last decade, more than double that of the defense industry.
The last five years alone have seen $14.8 billion in fines levied against pharmaceutical companies for their illegal activities, which accounts for nearly 75% of all such fines over the last 20 years.
The study also found that, over the last few decades, huge companies like Pfizer, GlaxoSmithKline, Eli Lilly, and Schering-Plough paid over half of all fines associated with industry fraud ($10.8 billion).
According to the Public Citizen study, the most common fraud is off-label marketing, which is the illegal promotion of a drug for uses that are not approved by the Federal Food and Drug Administration (FDA). Pharmaceutical companies engage in promoting drugs for unapproved purposes in order to increase their market share.
| Type of Violation | Description |
|---|---|
| Overcharging Government Health Programs | Inflating the average wholesale price (AWP) of products, failing to give the lowest market price to government health programs, or failing to pay required rebates to any government health program |
| Unlawful Promotion | Off‐label promotion of drug products or other deceptive marketing practices (e.g., downplaying health risks of a product) |
| Monopoly Practices | Unlawfully attempting to keep monopoly patent pricing privileges on products, or collusion with other companies undertaken with the purpose of increasing the market share of a particular product |
| Kickbacks | Kickbacks (e.g., monetary payments) to providers, hospitals, or other parties to influence prescribing patterns in favor of the company |
| Concealing Study Findings | Concealing results of company‐sponsored studies from either the federal or state governments |
| Poor Manufacturing Practices | Selling drug products that fail to meet FDA standards or specifications (e.g., contaminated or adulterated products, or products that fail to meet size or dosage specifications) |
| Environmental Violations | Clean Air Act and Clean Water Act violations, or failing to meet federal emissions standards |
| Financial Violations | Accounting or tax fraud, or insider trading |
| Illegal Distribution | Distributing an unapproved pharmaceutical product |
The study also found companies violated the FCA by deliberately overcharging for medications under numerous federal programs.
Federal whistleblowers have been instrumental in bringing industry wrongdoers to justice. The Public Citizen study shows that settlements from federal qui tam lawsuits have doubled over the last five years, yielding payouts close to three times higher than the previous 15 years combined.
The study concluded that government response to fraud perpetrated by the pharmaceutical industry should be more robust. When compared to industry profits, the financial penalties levied for committing fraud are relatively small. Increased fines and appropriate criminal prosecution of company leadership could provide better deterrents to stop pharmaceutical industry fraud.