Qui Tam

Drug companies pay billions to settle criminal and civil charges, report says

By Phillips & Cohen LLP

Does it seem as though every day there's another report of a drug company paying millions to settle allegations of off-label promotion, poor manufacturing practices or overcharging the government? It may not be your imagination.

A report issued by Public Citizen's Health Resource Group documents the scope of payments by pharmaceutical companies to resolve such allegations. Among the report's main findings:

- During the past 20 years $19.8 billion in penalties has been collected, 75 percent of that in the past 5 years.

- Four large pharmaceutical companies (GlaxoSmithKline, Pfizer, Eli Lilly, and Schering-Plough) accounted for more than half (53 percent or $10.5 billion) of all financial penalties imposed over the past two decades.

- The pharmaceutical industry now tops not only the defense industry, but all other industries in the total amount of fraud payments for actions against the federal government under the False Claims Act.

- Illegal off-label promotion of pharmaceuticals accounts for the largest amount of financial penalties levied by the federal government over the past 20 years. It can also be prosecuted as a criminal offense because of the potential for serious harm to patients.

- Whistleblowers are responsible for bringing to light the most egregious violations and for initiating the largest number of federal settlements over the past 10 years. From 1991 through 2000, qui tam (whistleblower) cases made up only 9 percent of payouts to the government, but from 2001 through 2010, they comprised 67 percent of total payouts.

Among the reasons for the huge figures are the increase in U.S. healthcare spending (over $2 trillion a year) and, much more troubling, the fact that drug companies and their sales staffs can make more money by bending or breaking the rules on off-label marketing. The report notes that although financial penalties are increasing, they "remain a very small fraction of company net profits and therefore do not provide a sufficient deterrent against further violations. Increased punishments may be needed, such as significantly larger financial penalties and, if appropriate, felony prosecution?including jail?for company executives engaging in criminal behavior."

Full post as published by False Claims Act - Qui Tam on December 16, 2010 (boomark / email).