Pharmaceutical fraud involves fraudulently acquiring, prescribing, and/or dispensing controlled substances by physicians and pharmaceutical manufacturers. The means by which these companies contract with the federal government are complex and varied. Each year, billions of taxpayer dollars are lost to fraudulent claims submitted to government healthcare programs such as Medicare, Medicaid, and Tricare. Since this type of fraud is difficult to detect, it is nearly impossible to determine exactly how much of a program’s budget is consumed by fraud, although the FBI has estimated that three to ten percent of a program’s budget is lost to fraudulent claims. When considering the loss to all of the relevant government programs together, the financial losses and the impact on the U.S. healthcare budget is substantial. Spending on prescription drugs has increased from $40 billion in 1990 to $234 billion in 2008 in part due to pharmaceutical fraud. To combat this financial waste, the government uses the False Claims Act as an essential tool to restrain fraud and abuse within the pharmaceutical industry, a global industry generating hundreds of billions of dollars in profits each year.
Large financial incentives, intense competition, and practical limits on the scope of government regulation have led some pharmaceutical companies to continually push legal boundaries in favor of maximizing profit potential and business growth. In particular, the False Claims Act has become an instrumental tool in detecting and prosecuting off-label promotion of a drug for indications not approved by the FDA for treatment. Although False Claims Act cases focused on off-label promotion have accounted for billions of dollars in criminal and civil recoveries over the past decade, the legal theory is in fact a relatively recent phenomenon.
Greene LLP attorneys first advanced the innovative theory, in a False Claims Act case against Pfizer for the company’s aggressive marketing practices promoting off-label use of Neurontin, an epilepsy drug promoted for a wide range of off-label uses unapproved by the FDA. After Greene LLP attorneys recovered $430 million in civil and criminal fines on behalf of the government in that case, whistleblowers have adopted the novel theory and pursued False Claims Act cases against pharmaceutical companies for off-label promotion of drugs, resulting in recovery of billions of dollars in criminal and civil penalties.
Greene LLP remains committed to pursue meritorious cases alleging fraud and abuse of taxpayer funds even where prosecution requires innovative approaches to litigation or where the government has declined to intervene in the case. In addition to liability for off-label marketing and promotion, the False Claims Act prohibits a wide range of activity concerning the submission or inducement of false claims, including: financial arrangements and kickbacks to prescribing physicians, falsified Medicare and Medicaid cost reports, overcharging hospitals and providers, and seeking reimbursement for ineffective and unapproved drugs.
Individual employees with knowledge of off-label promotion of drugs, improper sales and marketing practices, financial arrangements, or other policies and activity in violation of the False Claims Act have played in instrumental role in detecting, investigating, and prosecuting pharmaceutical fraud. Indeed, cases against pharmaceutical companies account for the largest source of recoveries in False Claims Act actions for fraud, by implicating Medicare, Medicaid, and other federal health programs.
For example, Astra-Zeneca International, one of the world’s largest pharmaceutical companies, plead guilty to felony charges of pharmaceutical fraud in 2003 after it engaged in a nationwide scheme to illegally promote a prostate cancer drug called Zoladex. It agreed to pay $355 million to settle criminal and civil accusations arising out of the scheme. Since then, settlements have soared into the billions of dollars. In 2012, GlaxoSmithKline, a British multinational pharmaceutical, biologics, vaccines, and consumer healthcare company, agreed to pay $3 billion in combined criminal and civil penalties for pharmaceutical fraud relating to at least ten of its drugs. As of 2012, pharmaceutical companies have paid more than $19.8 billion in civil and criminal penalties, with more than half that amount coming from four manufacturers who are repeat violators. In 2009 alone, the Department of Justice recovered roughly $2.48 billion from pharmaceutical companies.
The following types of pharmaceutical fraud represent common examples of practices which may expose a pharmaceutical company to liability under the False Claims Act: