Pharmaceuticals
Background
Given the size of the pharmaceutical industry, it should come as no surprise that many of the largest False Claims Act (FCA) recoveries have come from pharmaceutical cases. Unlike cases against doctors, hospitals, and nursing homes, pharmaceutical schemes are frequently national in scale. As a result, settlements and judgments in such cases can easily reach hundreds of millions of dollars.
Common pharmaceutical fraud schemes include kickback arrangements with prescribing physicians, failing to comply with federal manufacturing standards, off-labeling marketing, and co-pay manipulation through company-affiliated non-profits.
Pharmaceutical Kickbacks
Off-Label Marketing
Off-label marketing occurs when a drug company promotes a drug for some purpose other than the approved use of that drug (which is typically determined by the FDA) or for a specific population for whom the FDA has not approved the drug. Drug companies are not allowed to promote such off-label uses and, if they do, claims for payment submitted to Medicare or Medicaid that arise from those promotional efforts can be considered false and fraudulent under the False Claims Act.
While kickbacks and off-label marketing are distinct theories of liability, the two schemes often go hand in hand. Pharmaceutical representatives are pressured to meet high sales quotas (often incentivized with large bonuses), which easily leads to kickbacks and off-label marketing to prescribers and even beneficiaries.
Other Pharmaceutical FCA Violations
Drug manufacturers can also run afoul of the False Claims Act when they fail to follow the FDA’s drug manufacturing rules. These rules are designed to ensure that patients receive drugs of consistent strength and quality and that the drugs are safe and untainted. Federal healthcare programs expect manufacturers to comply with these rules as a condition of receiving payment, so when a manufacturer fails to meet these requirements (e.g., if it fails to properly sterilize manufacturing equipment or follow temperature controls) those violations can lead to False Claims Act liability.
Finally, in recent years, pharmaceutical manufacturers have been exposed for inducing patients to utilize their expensive therapies and drugs by paying their co-pays or establishing affiliated foundations to defray the costs.
Pharmaceutical companies are some of the largest and most sophisticated businesses on earth, and the regulatory landscape surrounding drugs and drug pricing is constantly shifting. That is why private whistleblowers remain a critical tool in uncovering and reporting fraud within the industry.