“Step aside, defense industry, there’s a new defrauder in town,” the group said on its Web site with the release of a 35–page report.
While the action used to be at the Pentagon, now it is at the Department of Health and Human Services. The drug industry has overtaken defense as the main target of federal investigations for fraud, the report notes, especially in the last five years, when $14.8 billion of those civil and criminal payments were made.
Four drug makers – GlaxoSmithKline, Pfizer, Eli Lilly and Schering-Plough — accounted for $10.5 billion of that amount, the report said.
The study was the first to tally all criminal and civil settlements of at least $1 million during the past 20 years.
In some of those cases, companies denied illegal activity such as fraud and kickbacks while making major payments to settle investigations, and the government agreed to settlements rather than pursue the cases further.
Pfizer holds the record for the largest criminal fine in United States history, $1.3 billion, and the largest health care fraud case, $2.3 billion including the criminal fine, from a settlement last year involving its marketing of the painkiller Bextra and other drugs.
Yesterday another one joined the list: the government announced the Irish drug maker Elan had agreed to pay $203.5 million, half in criminal penalties, half in a civil payment, to settle an investigation of its illegal marketing of the anti-seizure medicine Zonegran. Elan sales people had promoted it for weight loss and mood disorders.
The study covered False Claims Act violations, where companies are found to have encouraged improper medical billings by marketing drugs for uses not approved by the Food and Drug Administration, as well as Medicaid fraud against states.
The report was written by Dr. Sammy Almashat, Dr. Charles Preston, Timothy Waterman and Dr. Sidney Wolfe. The research group is part of a national nonprofit founded by Ralph Nader in 1971.
There are many reasons for the drug industry’s prominence as a target of federal and state investigations.
For one, the money: U.S. health care spending has soared above $2 trillion a year, comprising about one-sixth of the gross domestic product and more than one-third of federal spending.
For another, the opportunity: drug companies and their sales staffs can make much more money by bending or breaking the rules on off-label marketing. This has proved especially true in recent years with illegal marketing of expensive anti-psychotic medicines. Drug marketing rules come in shades of gray, and individuals are almost never charged.
And finally, the bounty: industry whistle-blowers can claim a part of the settlements when they help the government bring false-claims cases. Such whistle-blowing activity has accounted for two-thirds of the payouts in the last ten years, the report says.