Pharmaceutical Fraud Sets Record

Pharmaceutical companies paid $6.6 billion so far this year to settle claims that they defrauded federal and state government health programs. That's more than double the amount of all settlements in 2011, the Washington-based watchdog group Public Citizen said in a report issued on Thursday. The report noted that the penalties are only a small fraction of drug makers' profits. "The consensus seems to be that this is a business model, and unless the federal government moves first to increase these penalties, that's likely to remain the case," Sammy Almashat, the author of the report, told Bloomberg News.

The Public Citizen report noted that Sen. Bernie Sanders proposed legislation this year to strip patent protections from drugs manufactured by companies involved in fraud against the government. The Sanders amendment "would have more effectively targeted companies' bottom lines, while increasing access to cheaper generics for Medicare and Medicaid patients," the report said.  But the politically-potent pharmaceutical industry flexed its muscle. Sanders's amendment received only nine votes.

Read the Public Citizen report »

Watch Sanders' floor statement »

Here are the key findings of the Public Citizen report:

  • A total of 74 settlements, totaling $10.2 billion in financial penalties, were reached between the federal and state governments and pharmaceutical manufacturers between November 2, 2010 and July 18, 2012, with the first half of 2012 alone already representing a record year for both federal ($5 billion) and state ($1.6 billion) financial recoveries. Since 1991, a total of 239 settlements, for $30.2 billion, have now been reached (through July 18, 2012) between federal and state governments and pharmaceutical companies. 

Other key findings included:

  • Single-state settlements have been responsible for most of the recent increase in settlement activity, comprising almost three-fifths of all settlements since the beginning of 2009, compared to only one-fourth of settlements prior to 2009.
  • Since 1991, 27 states have reached at least one single-state settlement with a pharmaceutical company. Kentucky has had the most single-state settlements (17) while Texas has had the highest number of single-state settlements resulting from actions initiated by private whistleblowers (6).
  • Seventeen of the 27 states with at least one single-state settlement since 1991 have attained a return on investment of $1 or greater for every dollar spent on enforcement of all (both pharmaceutical-related and non-pharmaceutical) Medicaid fraud.
  • Since 2009, the federal government has concluded almost as many settlements and recovered more in financial penalties as it had in the previous 18 years combined.
  • Whistleblower-initiated investigations were responsible for most federal settlements (75%) and financial penalties (78%) during the current study period.
  • Overcharging government health insurance programs, mainly drug pricing fraud against state Medicaid programs, was the most common violation, while the unlawful promotion of drugs was associated with the largest penalties.

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