Drug Companies Top Other Industries in Federal Fraud Lawsuits: Report

The pharmaceutical industry leads the way in committing fraud against the U.S. government, according to the findings of a study conducted by the consumer watchdog group Public Citizen. 

One out of every four dollars collected by the U.S. government due to fraud charges under the False Claims Act comes from pharmaceutical companies, according to a report released by Public Citizen on December 16. That 25% is more than twice the amount paid by defense companies, which was the second most fraudulent industry, but only accounted for 11% of fraud settlement amounts, the report found.

The numbers come from an analysis of civil and criminal settlements under the False Claims Act at the state and federal level since 1991. There have been 165 pharmaceutical industry settlements with the federal government over fraud charges in the last 20 years, totalling $19.8 billion. But 73% of those cases, and 75% of that money, have happened in just the last five years.

Most of the fraud cases brought against pharmaceutical companies by the U.S. Department of Justice (DOJ) are for attempting to market medications for uses that have not been approved by the FDA as safe and effective. Referred to as “off-label marketing,” it is illegal under federal drug regulations for a company to promote their products for uses that have not been approved by the FDA, although doctors are allowed to prescribe approved drugs for any use they see fit. However, fraud lawsuits brought by individual states have been more focused on companies that overcharge state health programs, including Medicaid.

Public Citizen researchers found that more than half of the nearly $20 billion has been paid by just four companies: Eli Lilly, GlaxoSmithKline, Pfizer and Schering-Plough. Collectively, they have had to shell out $10.5 billion to settle government fraud charges.

The largest criminal fraud fine in history was $1.2 billion paid by Pfizer in 2009 for charges that it illegally marketed the painkiller Bextra. The company had to pay $2.3 billion in total to settle the civil and criminal lawsuits against it and had to enter into a five-year corporate integrity agreement with the U.S. Department of Health and Human Services. It was the fourth illegal marketing fraud case the company had paid to settle since 2002.

The day the Public Citizen report was released, the Justice Department announced that Elan Pharmaceuticals had agreed to pay $203 million to settle fraud claims that the company illegally marketed the epilepsy drug Zonegran. The company promoted the drug, only approved to prevent seizures, for everything from migraine treatment to weight loss. In 2009, the FDA warned that Zonegran side effects may include a chemical imbalance in the blood known as metabolic acidosis, which can damage the kidneys and bones and could retard growth in children.

A large number of the cases brought against pharmaceutical companies, including both the Pfizer and Elan settlements, have been whistleblower lawsuits brought by former employees, doctors, and others in the medical profession who were privy to information on the companies’ wrongdoing. Public Citizen found that from 1991 to 2000, whistleblower lawsuits accounted for about 9% of federal fraud settlements. However, from 2001 through 2010, that number has climbed to 67%.

Under the qui tam provision of the False Claims Act, whistleblowers who report a false claim against the government may be entitled to receive a portion of any money that the government recovers from the offenders. In return, the whistleblower must be the first to bring the case to the government’s attention, and must not publicize the claim until the DOJ decides to prosecute the claim.