Drug Company Settlements for Fraud Result in Billions for States, Feds

State and federal governments are reaching record settlements with pharmaceutical companies over claims involving fraudulent or illegal activity promoting prescription drugs, with more than $6 billion collected from the industry this year. 

A new report by the consumer watchdog group Public Citizen finds that states have been harder than ever before on pharmaceutical companies over illegal activity, such as off-label marketing, by going after them for Medicaid fraud and drug pricing schemes that overcharge health care programs.

Southern states lead the pack, with Kentucky receiving the most settlements since 1991 and Texas leading in the most settlements that result from whistleblower lawsuits invoving industry insiders.

The report found that since 2009, all state governments combined have more than doubled the number of drug settlements and collected six times the amount of money than the 18 years before combined. In fact, between January and mid-July of this year, states and the federal government collectively reached $6.6 billion in Medicaid fraud settlements with pharmaceutical companies.

“What this new report unequivocally shows is that those states that have chosen to hold the pharmaceutical industry accountable have largely seen their enforcement efforts pay for themselves,” said Dr. Sammy Almashat, the study’s author and a researcher with Public Citizen’s Health Research Group.

The report found that a total of 74 settlements have been reached between state or federal governments and drug companies since November 2010, collecting $10.2 billion in financial penalties.

Whistleblower lawsuits have been responsible for a large amount of the cases and the money collected, particularly involving the federal government. Under the qui tam provisions of the Federal False Claims Act, whistleblowers are entitled to receive a portion of any recovery made by the federal government in return for being the first to bring the case to the government’s attention and not publicizing the lawsuit until the Department of Justice decides whether it wants to intervene.

The report notes that the money collected still pales in comparison to drug company profits and rarely results in companies being excluded from Medicare and Medicaid participation, raising questions as to the deterrent effect of the penalties. However, it notes that states that do pursue enforcement have seen their costs more than offset by their financial recoveries.