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Controlling Excessive Off-Label Medicare Drug Costs through the False Claims Act

High prescription drug prices are driving ever-increasing United States healthcare costs, and the federal government is following this alarming trend with ninety-five billion dollars in expenditures for prescription drugs under Medicare Part D. Even accepting arguments that high drug prices are necessary to encourage the development of safe and effective drugs, Medicare Part D is flawed in that it will pay top dollar for ineffective drugs. Because Part D lacks adequate oversight for off-label drug usage, pharmaceutical companies obtain windfall profits for drugs that have not been proven effective for off-label conditions. Permitting companies to reap such profits without incurring the costs of demonstrating efficacy creates a distorted marketplace that leads to excessive Medicare drug expenditures. In addition to the financial burden to taxpayers and the risks to Medicare patients’ health, the flaws in Medicare Part D also increase the risk that non-Medicare patients will be prescribed ineffective and expensive drugs. This article proposes a theoretical reimbursement scheme that encourages fairness and restrains excessive off-label drug reimbursement by tying reimbursement rates to competitive products. Fully correcting this systemic problem will require substantial statutory, regulatory, and institutional reforms that are not immediately likely. In the interim, courts and regulators should embrace the civil False Claims Act to begin to correct the incentive problems created under the present off-label reimbursement structure, thereby immediately curbing excessive Medicare spending on prescription drugs.