WASHINGTON,
D.C. – The drug industry has now
become the biggest defrauder of the federal government, as determined by
payments it has made for violations of the False Claims Act (FCA), surpassing
the defense industry, which had long been the leader, according to a recently released Public
Citizen study.

The study found that pharmaceutical cases accounted for at
least 25 percent of all federal FCA payouts over the past decade, compared with
11 percent by the defense industry.

The fraud results were a key finding from a Public Citizen analysis
of all major pharmaceutical company civil and criminal settlements on the state
and federal levels since 1991 and found that the frequency with which the
pharmaceutical industry has allegedly violated federal and state laws has
increased at an alarming rate. Of the 165 pharmaceutical industry settlements
comprising $19.8 billion in penalties during the past 20 years, 73 percent of
the settlements (121) and 75 percent of the dollar amount ($14.8 billion) have
occurred during the past five years.

Many of the infractions, and the single largest category of
financial penalties, stemmed from the practice of off-label promotion of
pharmaceuticals – the illegal promotion of a drug for uses not approved by the
Food and Drug Administration (FDA). Off-label promotion can be prosecuted as a
criminal offense because of the potential for serious adverse health
consequences to patients from such promotional activities. Another major
category of federal financial penalties was purposely overcharging for drugs
under various federal programs, which constitutes a violation of the FCA.

On the state level, the largest category of financial
penalties has come from companies deliberately overcharging state health
programs, such as Medicaid. Public Citizen’s study found this to be the most
common category of violation among state settlements.

The increase in payments for fraud is likely attributable to
drug companies engaging in more wrongdoing and better enforcement at the state
and federal level, said Dr. Sidney Wolfe, director of the Health Research Group
at Public Citizen.

“Desperate to maintain their high margin of profit in the
face of a dwindling number of important new drugs, these figures show that the
industry has engaged in such activities as dangerous, illegal promotion for
unapproved uses of drugs and deliberately overcharging vital government health
programs, such as Medicare and Medicaid,” said Wolfe. Wolfe compiled and
analyzed the data with physicians from the Johns Hopkins General Preventive
Medicine program, Drs. Sammy Almashat and Charles Preston, as well as Columbia University public health student Timothy
Waterman, all of whom worked at Public Citizen.

Public Citizen’s study also found that more than one-half of
the industry’s fines were paid by just a few companies – GlaxoSmithKline,
Pfizer, Eli Lilly and Schering-Plough. These four companies accounted for more
than half of all financial penalties over the past two decades, paying $10.5
billion in fines collectively. These pharmaceutical companies were among the
largest in the world. The two largest criminal penalties ever assessed by the U.S. government
against any companies were against Lilly ($515 million) and Pfizer ($1.2
billion), both in 2009.

To conduct the study, Public Citizen created a database of information
about pharmaceutical companies’ civil and criminal settlements, including
information about the type of alleged violation and the amount of money paid in
settlements. This study is the first to attempt to document and analyze all
major pharmaceutical company settlements with both federal and state
governments, the authors said.

Nationally, former pharmaceutical company employees and
other whistleblowers have been instrumental in bringing to light the most
egregious violations; they have initiated the largest number of federal
settlements in the past decade. The number of federal settlements arising from
whistleblower cases has more than doubled over the past five years, yielding
total payouts more than two and a half times higher than in the previous 15
years combined.

Needed remedies include imposing steeper financial penalties
and criminally prosecuting company leadership, including jail sentences, if
merited.

“The danger to public safety and loss of state and federal
dollars that comes with these violations require a more robust response,” Wolfe
said.

 

To read the full report, visit http://www.citizen.org/hrg1924.