Pharmaceutical fraud is one of the most common types of fraud pursued by
the government under the False Claims Act (FCA). The FCA allows individuals
with knowledge of pharmaceutical fraud against the government to
initiate a whistleblower lawsuit to hold companies accountable for their illegal and fraudulent actions.
The government has recovered billions from big pharma stemming from claims
brought under the FCA. Whistleblowers have been vital to bringing pharmaceutical
fraud perpetrators to justice, and have been awarded hundreds of millions
in awards for bringing allegations to the government’s attention.
Types of Pharmaceutical Fraud
While there are a variety of ways in which companies can engage in pharmaceutical
fraud, the following are some of the most common pharma fraud schemes:
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 clinical research trials about the efficacy
of pharmaceutical drugs or medical devices in order to get FDA approval
to sell and market them.
Failure to Report Adverse Events of Medication 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 (FD&C Act) and Title 21 of the
Code of Federal Regulations (CFR).
Manufacturing Deficiencies Resulting in Contaminated Pharmaceutical Products:
The FDA enforces a number of regulations that address the proper design,
monitoring, and control of manufacturing processes and facilities used
to make pharmaceutical products. These regulations are known as Current
Good Manufacturing Practice regulations, or cGMP regulations. Adherence
to 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,
Drugs that are not manufactured according to cGMP regulations are considered
adulterated and their sale is prohibited by the FDCA
In 2013, generic drug manufacturer Ranbaxy USA Inc., a subsidiary of Indian
generic manufacturer Ranbaxy Laboratories Limited, paid $500 million to
resolve FDCA and cGMP violations, as well as four felony counts of making
material false statements to the FDA. Inspections of two Ranbaxy facilities
in India revealed incomplete testing records, inadequate quality controls,
and significant cGMP violations. Batches of adulterated drugs, including
drugs used to treat epilepsy and nerve pain and an antibiotic, were introduced
into interstate commerce in the U.S., a violation of FDCA laws.
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Violations of Federal Laws and Regulations Governing the Sale of Drugs:
The FDCA and the CFR also prohibit a number of other activities related
to the sale of prescription drugs.
- Knowingly selling, purchasing or trading prescription drug samples.
- Resale of any prescription medication previously purchased by a public
or private hospital or other health care entity.
- The sale, purchase, trade, or counterfeiting of prescription drug coupons
(i.e. coupons redeemable for free or low-cost prescription drugs)
- The wholesale distribution of prescription drugs in interstate commerce
without a state license
- Re-importation of exported prescription drugs by anyone other than the
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, clinics,
pharmacies or other health care service providers in exchange for prescribing
certain drugs. Pharmaceutical companies have been known to make it financially
advantageous for physicians to prescribe their drugs, 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.
Many of the largest pharmaceutical fraud settlements of the past decade
involved charges that drug makers were paying kickbacks. Department of
Justice settlements with Johnson & Johnson (2013, $2.2 billion), AstraZeneca
(2010, $520 million), Pfizer (2009, $2.3 billion), and Bristol-Myers Squibb
(2007, $515 million) and many others involved allegations that the companies
paid kickbacks to health care providers to induce them to prescribe their
drugs. In each of these cases, the drug makers were charged with
violations of the False Claims Act after relators filed whistleblower lawsuits against the companies. The
whistleblowers involved with these four actions were awarded a combined
total of over $260 million.
Misreporting the “best price,” the “average manufacturer price” (AMP), the “federal
ceiling price” or other benchmark prices that pharmaceutical companies
report to Medicare and Medicaid programs is illegal.
The “best price” is the lowest price given to purchasers (both
government and private entities) which is then used to calculate the Medicare
reimbursement rate. The AMP is the average price wholesalers pay to manufacturers
for drugs distributed to retail pharmacies. The federal ceiling price
is based on the best price and the AMP. The federal ceiling price is the
maximum price that a manufacturer can charge when selling to the Department
of Defense (DoD), the Veterans Administration (VA), the Public Health
Service (PHS) and the Coast Guard.
Pharmaceutical companies are required to offer rebates to state Medicaid
programs for the difference between the price they initially charged Medicaid
for a drug each year and their actual best price for the drug during the
same year. Pharmaceutical companies are also 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 private entities. Drug companies occasionally
fail to report the discounts or other payments offered to private entities,
which ends up costing government healthcare agencies millions.
Another way that pharmaceutical companies manipulate pricing is through
federal ceiling price fraud, that is, by selling drugs to the DoD, VA,
PHS and/or the Coast Guard at prices that 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:
The 340B Drug Pricing Program (named for the section in the Public Health
Service Act of 1992 that describes the program) requires drug manufacturers
to give steep discounts to hospitals and other qualified health care providers
that serve a significant number of poor, uninsured, or disadvantaged patients.
This includes health centers funded through the Consolidated Health Centers
Program, children’s hospitals and cancer hospitals, 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. Entities
that participate in the 340B program may enjoy significant savings on
pharmaceuticals they purchase.
Pharmaceutical companies are required to adhere to a ceiling price (based
on the AMP and best price) 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
Defective Pharmaceutical Products Inducing Birth Defects or Suicidal Behavior:
For many years, Wisner Baum has been at the forefront of harmful drug litigation,
having faced off against many of the world’s top pharmaceutical
Our firm has broken new ground in antidepressant litigation by exposing the harmful effects of antidepressants and the lengths to
which some companies will go to bury their associated health risks.
Since 2005, data has been emerged that certain antidepressants may cause
birth defects, including cardiac, pulmonary, neural-tube defects, craniosynostosis,
infant omphalocele, club foot, anal atresia, and PPHN. Wisner Baum product
liability attorneys have secured justice for our clients in these antidepressant
birth defects cases, which has led to increased public awareness of the
risks associated with prenatal antidepressant use.
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. Wisner
Baum attorneys and staff 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, miscoding side effects, etc.
SSRI antidepressants have also been linked to severe withdrawal effects
that affect a large percentage of patients. Wisner Baum was involved in
litigation against Eli Lilly and Company, the maker of the antidepressant
Cymbalta. Many Cymbalta users experienced such severe and long lasting
withdrawal symptoms that they were unable to quit taking the drug. Symptoms
included dizziness, nausea, headache, fatigue, paresthesia [electric shock-like
sensations], vomiting, irritability, nightmares, insomnia, diarrhea, and anxiety.
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 government healthcare beneficiaries. This illegal promotion is known
as off-label marketing and often involves providing physicians with misleading
or false drug marketing literature.
Many of the largest False Claims Act settlements with pharmaceutical companies
have involved charges of off-label marketing. Some of these settlements
came as a result of pharmaceutical fraud whistleblowers bringing allegations
of wrongdoing to the government’s attention.
As one example, Eli Lilly & Co. paid $1.415 billion in 2009 to settle
charges that it illegally marketed the antipsychotic drug Zyprexa for
the treatment of dementia, Alzheimer’s, agitation, aggression, hostility,
depression, and generalized sleep disorder, even though the drug had not
received FDA approval to treat any of these conditions. The settlement
resolved a whistleblower lawsuit filed by four relators who shared a $78.9
million reward for bringing the allegations to the government’s
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