The 5 Most Common Pharmaceutical Frauds

Pharmaceutical Fraud AttorneyPharmaceutical fraud in our government healthcare programs (Medicare, Medicaid, and TRICARE) is, unfortunately, wide-ranging, and involves a number of activities resulting in false claims. Because the False Claims Act was strengthened in 2009, whistleblowing activity concerning fraudulent pharmaceutical claims has increased. Only three years later (by 2012), almost 40 percent of the approximately $16 billion that had been recovered by the U.S. Department of Justice (DOJ) over those three years was for healthcare fraud arising from cases first brought by whistleblowers.

Not only that, qui tam whistleblower cases have increased since 2003 and jumped even higher starting in 2010. The largest pharmaceutical industry settlements since 2009 have been qui tam cases, according to research done by Public Citizen.

Pharmaceutical false claims cases are not limited to Big Pharma companies. Such claims can involve individual physicians and group practices, hospitals and medical centers, pharmacy benefit managers, pharmacies and pharmacy chains, and private insurance companies such as those who administer Medicare Part D plans.

But what types of fraudulent activities occur most often when it comes to the prescribing and administering of pharmaceuticals? We have a list of the top 5 types of pharmaceutical frauds that involve false claims against government healthcare programs.

  1. Kickbacks. Kickbacks are perhaps the most common of pharmaceutical fraud schemes and there is virtually no circumstance under which they are legal. The Anti-Kickback Statute is clear on that point. A kickback is a reward or award for favoritism; when it comes to pharmaceuticals, it would be for prescribing or otherwise giving favorable consideration to certain drugs. Kickbacks can take the form of vacations, cars, other non-monetary compensations, or good old cash under the table. The variations in kickback schemes and the number of cases that have been brought are seemingly endless. The Department of Justice (DOJ) has settled kickback allegations with a number of Big Pharma companies such as Johnson & Johnson ($2.2 billion in 2013) and GlaxoSmithKline ($3 billion in 2012). The two GSK cases originated as qui tam suits, and the four whistleblowers split $1.017 billion. But pharmaceutical companies are not the only violators. A nursing home pharmacy, Omnicare, paid over $28 million to settle kickback allegations involving drugs from Abbott Laboratories. Additionally, Walgreens has settled kickback allegations for $50 million.
  2. Best price violations. The “best price” for a drug means the lowest price available to any retailer, wholesaler, nonprofit organization, HMO, the government, or other provider. (340B drug pricing, and sales to certain other government entities, are excluded when it comes to determining the best price for a drug.) It is a violation of best price regulations to sell specifically to Medicaid at a price that is higher than the lowest price available, and fraud occurs when the pharmaceutical company reports an incorrect best price. The best price calculation must include all rebates, cash discounts, or volume discounts given to others.
  3. Overcharges in the 340B drug pricing program. This program requires pharmaceutical companies, if they wish to sell their drugs, to provide them at significant discounts to particular health care providers that serve disadvantaged, underinsured, or poverty-level patients. Such providers can include certain children’s hospitals, cancer centers, health care centers for the homeless, migrant health centers, black lung clinics, and state-run AIDS and drug assistance programs. Violations of the 340B drug pricing program are related to best price fraud because best prices are used to calculate the sale prices of the drugs.
  4. Off-label marketing. “Off-label” usage of a drug means that the FDA has not approved it to treat a certain health problem, generally because the drug has not undergone medical trials that have tested it for that usage. For example, an off-label usage of a blood pressure drug might be to control migraine headaches, meaning there is some anecdotal evidence that the drug works for that purpose, but the FDA has not approved the usage. This situation has occurred with some medications known as beta blockers (specifically, atenolol, metoprolol, and nadalol).A doctor who prescribes a drug for off-label usage is not doing something illegal, nor is taking a drug that you have been legally prescribed. However, Medicare, Medicaid, and TRICARE do not pay for drugs that are prescribed for off-label usage, and doctors are not supposed to conceal the actual reason for the prescription in an effort to obtain government healthcare payments for them. Additionally, when a pharmaceutical company markets a drug for a usage not approved by the FDA, doing so is also considered an act of fraud. Thus, if the maker of a beta blocker were to promote it to the medical establishment as effective against migraines when the FDA had not approved it for such a use, that activity would be considered fraudulent. When this sort of thing is done by a pharmaceutical company, it is sometimes combined with a kickback scheme and is always intended to increase drug sales, bringing in more revenue.
  5. Manufactured compounded drugs fraud. Pharmacists are allowed to mix medications to fill a prescription; the practice is called compounding. However, compounding is supposed to be limited to creating drugs that are medically necessary but not generally commercially available. Illegal compounding can create opportunities to mass produce medications and charge more for them than the pharmacy would be able to if they used the commercially available drug.

It has been reported that claims paid out for compounded drugs have been skyrocketing, so this medical area is considered ripe for fraud. In June of 2016, 25 people were arrested in connection with $47 million in false claims paid by TRICARE (our military’s health plan) for compounded drugs over recent years. Involved in the fraud were four doctors, four pharmacists, one physician’s assistant, and 16 others.

Pharmaceutical fraud and false claims have been on the increase over the years. The nonprofit group Public Citizen, after analyzing their research, believes that fraud will continue to grow and that bigger penalties, along with tougher enforcement actions, are called for. If you believe you have information about pharmaceutical false claims and fraud, and that the information is solid and backed up by evidence of some sort, it might be time for you to consider stepping forward as a whistleblower.

Blowing the Whistle? We Can Help You with Your Next Step.

If you think you have the facts needed to bring a whistleblower case, the experienced whistleblower attorneys at the Louthian Law Firmcan review your case and help you file the appropriate disclosure statement. Under some circumstances, the government will intervene, or join in your lawsuit.




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