Pharmaceuticals are recognized as an important part of modern health care. That’s why the federal and state governments spend billions every year to buy prescriptions for patients covered by Medicare and Medicaid and other government sponsored healthcare programs. It’s also an area that has been overrun by fraud on the government. Fifteen of the top twenty False Claims Act cases leading to a civil recovery for the United States involved pharmaceutical companies as defendants. Together those settlements amounted to more than $11.3 billion in civil fines. Many of the defendants with the dubious honor of making this list have paid additional amounts in other cases.
The government’s desire to provide lifesaving drugs and devices to beneficiaries of government-funded health care programs and the potential for enormous profits for the pharmaceutical companies in selling their products to these programs can lead to widespread fraud, and the damages can grow quickly.
If you believe someone has engaged in Pharmaceutical fraud and you would like to learn more about or would like to bring a whistleblower lawsuit, the qui tam lawyers at Keller Grover LLP can help you. These whistleblower lawyers understand qui tam litigation, including the whistleblower protection provisions, and strive to achieve the best possible results for their clients.
Though there is no set formula for how pharmaceutical fraud may occur, the schemes which have led to the largest settlements include the following unlawful practices:
Under both federal and state laws, every health care provider who provides goods or services to a government-funded health care program is prohibited from giving, accepting, soliciting or arranging items of value in any form (gifts, certain discounts, cross-referrals between parties), either directly or indirectly for the purpose of inducing or rewarding another party for referrals of services paid for by those government programs.
Once a drug or medical device is FDA-approved, the drug manufacturer may only market or promote its product for the approved use. If a company markets for a different use, “off-label,” and engages in interstate commerce for that unapproved use, the drug is “misbranded.” The marketing of misbranded products has taken many forms, from brochures touting bogus therapies, to kickbacks to pharmacies, and speaking fees to doctors. Despite billions in recovery against an array of pharmaceutical companies, new cases involving new drugs are still routinely exposed.
Most people recognize that it’s cheaper to buy in quantity. The same is true for the United States government in buying pharmaceutical products. It buys massive quantities of these products consistently every year. In exchange for that volume of sales, it insists that it be given the Best Price available on the market. Sometimes, however, a pharmaceutical company may deprive the government of this arrangement in order to entice a private purchaser with a better, lower price than even the government gets. However, the pharmaceutical is able to offer those products at such low prices because it knows it has the steady stream of volume and profits from government sales. When a pharmaceutical company intentionally manipulates pricing in this way, it is committing a fraud on the government.
Manipulation of AWP emerged as a common type of fraud when pharmaceutical manufacturers realized they could financially induce those entities responsible for actually dispensing the prescriptions to consumers to sell more of their products if they could find a way for their products to return a greater profit margin. The pharmaceutical manufacturers accomplished this by artificially increasing the AWP and thereby increasing the spread between the WAC and AWP. With a bigger spread the manufacturer could then promote the fact that the product would return a bigger profit for the seller. The scheme became known as “marketing the spread.”
There are roughly fifty PBM who do business in the United States, but most of these entities are small. The industry is dominated by three companies, Caremark Rx, Inc., Medco Health Solutions, Inc., and Express Scripts, Inc.PBM fraud occurs when these entities induce pharmacies or medical providers to switch from cheaper drugs, like generics, to more expensive drugs or formulary.
Medicare Part D
Another emerging area of pharmaceutical fraud involves Medicare Part D which was enacted as part of the Medicare Modernization Act of 2003 and went into effect on January 1, 2006. As of 2012, there were more than 31 million program beneficiaries enrolled in Part D. As the single largest expansion in Medicare coverage since its enactment, experts are just now understanding how these benefits are being improperly manipulated in order to defraud the government.