Unapproved Drugs

“The problem with unapproved drugs is that FDA does not know what is in them, whether they are effective or safe, or how they are made.” FDA Commissioner Margaret A. Hamburg.

In 1962, Congress amended the Federal Food, Drug and Cosmetic Act to require that all new drugs must demonstrate through studies to be both “safe and effective” before going on the market. Drugs before 1962 were only approved as safe, and thus had to be studied for their effectiveness under the Drug Efficacy Study Implementation (DESI) program. If the DESI review did not result in proven effectiveness, the drug was classified as a “less-than-effective” (LTE or DESI-LTE) drug until approved by the Food and Drug Administration (FDA). Despite legislative changes, however, the FDA estimates that there are several thousand drug products on the market in the United States without required FDA approval. It is extremely difficult to compile data on illegally marketed drugs since these products are constantly entering and leaving the market. Since the FDA cannot track down all illegally marketed products, it focuses on drugs with potential safety risks, drugs that lack evidence of effectiveness, and health fraud drugs.

Certain pharmaceuticals such as LTE drugs are not covered under the Medicare or Medicaid programs. Therefore, misrepresenting a drug’s LTE designation may constitute a false claim violating the FCA. Additionally, drugs manufactured after 1962 that never received FDA approval as safe and effective are ineligible for payment under Medicare and Medicaid. Finally, even drugs that were once approved can be ineligible under Medicare and Medicaid if later studies by the FDA reverse this approval.

Many FCA cases alleging the use of unapproved drugs involve drugs obtained overseas. Often times these drugs can be obtained at below market rates and thus tempt health care providers into prescribing them at clinics and other healthcare facilities. These cases are especially dangerous to patients because they are exposed to potentially counterfeit, contaminated, ineffective, and dangerous medications.


Pharmaceutical manufacturing company Schwarz Pharma Inc. manufactured and sold the drugs Deponit and Hyoscyamine Sulfate ER during the 1990s. However, in 1997 and 1999 the FDA made determinations that the drugs were less than effective, and therefore ineligible for Medicare or Medicaid coverage. Schwarz Pharma nonetheless submitted reports misrepresenting the regulatory status of the drugs and failing to disclose the drugs’ ineligibility Medicare or Medicaid coverage. As a result, the company settled the case under the FCA for $22 million in 2010.


In 2013, Dr. Kincaid, the managing partner of McLeod Cancer and Blood Center in Johnson City, Tennessee, agreed to pay $4.25 million to resolve civil false claims allegations regarding unapproved foreign drugs. In particular, from 2007 to early 2008 and from August 2009 to February 2012, McLeod Cancer purchased numerous chemotherapy and other drugs which were alternative versions of U.S. brands from a Canadian distributor who had in turn obtained these drugs from foreign sources. McLeod Cancer paid substantially less than what drugs from legitimate U.S. manufacturers would have cost. Dr. Kincaid administered these drugs to his patients and submitted claims for reimbursement to Medicare, TennCare, and other government health benefit programs. This clearly violated the FCA.

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