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Big pharma is biggest defrauder

By Alexandria Pešić, 21-Dec-2010

Related topics: Excipients, raw materials and intermediates, QA/QC, Regulatory & Safety

Big pharma has eclipsed the defence industry as the biggest defrauder of the US federal government under the False Claims Act (FCA), say researchers.

A report conducted by Public Citizen, a non-profit lobbying organisation, has revealed that over the last decade the pharmaceutical industry has accounted for 25 per cent of all payouts made for violating the FCA – more than doubling fines paid by the defence industry.

The FCA provides a legal tool to counteract fraudulent billings turned in to the federal government.

Sammy Almashat, co-author of the report, attributes a lack of important new drugs entering the market as a notable instigator for the violations.

He told in-PharmaTechnologist: “Pharmaceutical companies appear to have been trying to maintain their large profit margins by systematically engaging in illegal, off-label promotion of their drugs as well as overcharging the government in violation of the FCA.

“The kinds of activities resulting in these settlements endanger public safety and rob the federal and state governments of increasingly scarce resources,” he said.

Civil and criminal cases

Public Citizen reported 165 pharmaceutical industry settlements of civil and criminal cases since 1991, which amount to almost $20bn (€15bn) in financial penalties.

Drug giants GlaxoSmithKline, Pfizer, Eli Lilly, and Schering-Plough were responsible for over half of the financial penalties paid by pharma for every category of violation over the 20-year period.

Two thirds of these cases have been implemented in the last five years, during which time sales of prescription medicines soared, topping $234bn in the US alone in 2008.

Almashat suggests that engaging in “illegal” conduct may have become second nature for big pharma firms which frequently incur minor fines from the federal government.

“The current fines are not enough to drastically affect corporate profits,” he said, “so, while the government is likely doing more to hold these companies accountable, more needs to be done.”

The study warns it is the public who pay the price when purchasing prescription and over-the-counter medicines.

However, “with the incessant drive for higher profits, the industry is simply following what they may believe is a good 'business model',” said Almashat.

“So long as the likely profits to be gained from such behaviour as illegal off-label promotion remain high enough to outweigh the relatively smaller financial penalties for such conduct, it makes sense for them to continue to engage in this behaviour to the detriment of patients and the general public,” he added.

Deliberate overcharging

It is claimed the illegal off-label promotion of drugs for uses not approved by the US Food and Drug Administration (FDA) is the violation responsible for the largest number of financial penalties.

“This is a dangerous practice, as the companies are systematically promoting drugs for diseases for which we don’t know whether the benefits outweigh the risks,” said Almashat.

He cited the deliberate overcharging of government health programs, such as Medicaid and Medicare as another major category of FCA violations with prices reported by pharma companies exceeding 12 times the true cost of the drug in some cases.

A spokesperson for drug major, Pfizer, denies such claims, telling in-PharmaTechnologist the company “takes compliance very seriously.”

With a programme incorporating employee training, monitoring and surveillance, and strict enforcement of all federal and state health care laws, the firm says it takes “extensive procedures to investigate and re-mediate potential issues of non-compliance.”

“These significant steps not only comply with state and federal laws, but also meet the high standards that patients, physicians and the public expect from a leading worldwide company dedicated to healing and better health,” the company added.

Increased enforcement

Almashat says a likely factor in the increase in settlements and financial penalties in recent years has been increased enforcement on the part of the federal and state governments.

He suggests further government action is needed to remedy the problem.

“The government should dramatically increase the amount of these financial penalties so that it begins to significantly affect the companies’ bottom line.”

Eric Blumberg, deputy chief counsel for litigation at FDA agrees that increased criminal prosecution with the prospect of jail time for pharmaceutical company executives involved in illegal behaviour may act as a suitable deterrent and has been pushing for further action of this nature to be taken.

“This could, combined with larger financial penalties, have a powerful impact in reducing this systematic wrongdoing,” said Almashat.