Florida Pharmaceutical Fraud Lawyer
What is Considered Pharmaceutical Fraud?
Pharmaceutical Fraud encompasses many types of fraud that may involve the manufacture, distribution, marketing, pricing, sale or prescription of drugs. Pharmaceutical fraud may include a wide variety of schemes set in place by drug manufacturers, pharmacies, or health care providers. Examples of pharmaceutical fraud schemes or activities may include marketing drugs for uses other than those approved by the FDA, providing kickbacks to physicians for promoting certain drugs over others, arbitrarily inflating the price of prescription drugs, falsifying drug manufacturing research or even funneling prescription drugs to an illegal market.
When this type of fraud results in false claims to Medicare, Medicaid, or other taxpayer funded programs the False Claims Act may be used by whistleblowers to recover damages on behalf of the government.
The False Claims Act, a federal statute, 31 U.S.C. §§ 3729-3733, provides that any person who knowingly submits a false claim to the government is liable for the government’s damages, as well as additional monetary penalties. The statute was originally enacted during the Civil War in response to widespread defense contractor fraud.
The FCA allows the government to pursue perpetrators of fraud on its own, as well as allowing private citizens to act as whistleblowers in suing the perpetrators of fraud on behalf of the United States government. Cases in which private citizens bring fraud actions on behalf of the government are called qui tam actions. In these cases the private citizen plaintiff is referred to as the “relator.” The act has been strengthened by Congress a number of times to encourage citizens to bring lawsuits on behalf of the United States government by increasing the amount of money the whistleblowers, or relators, can recover in False Claims Act lawsuits.
When pharmaceutical fraud involves the misuse of public funds, private citizens can bring False Claims Act lawsuits on behalf of the United States government and receive a portion of the damages. Damages in these cases typically result in treble damages, three times the amount of money expended for each prescription, as well as civil penalties for each prescription. Whistleblowers who bring such claims on behalf of the government are entitled to thirty percent of the settlement funds.
The majority of these settlements have included significant monetary payouts along with the institution of Corporate Integrity Agreements. Under a Corporate Integrity Agreement the pharmaceutical company agrees to comply with certain obligations to the Office of Inspector General in exchange for being allowed to continue to participate in Medicare, Medicaid or other Federal healthcare programs. In addition to monetaries damages, penalties and Corporate Integrity Agreements, the Office of Inspector General plans to be more aggressive in the coming years in imposing different remedies including banning fraudulent drug companies and individuals from participation in Federal health care programs.
In 2019 the Department of Justice recovered over $3 billion in fraud and False Claims Act cases. Pharmaceutical companies were at the center of some of the largest health care related settlements.
Pharmaceutical Misbranding, Off-Label Marketing
When pharmaceutical companies, pharmacies or health care providers sell or market drugs for uses other than those approved by the FDA it is known as misbranding or off-label marketing and it may constitute fraud. Under the Federal Food, Drug and Cosmetic Act (FDCA) pharmaceutical companies are required to clearly identify the intended uses of a new drug in their application to the FDA for approval. Once approved, a drug may not be marketed for any purposes, or “off-label” uses, other than those uses specifically approved by the FDA.
Additionally any attempts made by drug manufacturers to promote or market drugs for unapproved uses are known as misbranding or off label marketing. Under the Federal Food, Drug, and Cosmetic Act it is unlawful to attempt to introduce misbranded drugs into commerce. The Centers for Medicare & Medicaid Services put out a fact sheet identifying misbranding or off-label use of pharmaceuticals as use for unapproved symptoms or conditions, use in unapproved patient groups or use in approved dosages.
When a drug is misbranded or used for off label purposes under the Food, Drug, and Cosmetics Act (FDCA) and that wrongful conduct results in the expenditure of government taxpayer dollars, private citizens may potentially seek redress on behalf of the government under the False Claims Act. The United States Department of Justice and the States’ Attorneys General have undergone significant fraud enforcement efforts using the False Claims Act to combat off label marketing and misbranding. Examples of off-label use include drugs approved for one condition but used to treat another, approved at one dose but prescribed at another level, approved for one type of patient but used on another, or approved for a certain period of time but used for another. While it may often be accepted medical practice for doctors to prescribe drugs for so-called off-label uses, and may even reflect cutting-edge expertise, the risks lie in the difference between the individual case by case practice of medicine and the large scale marketing and sale of drugs. The restrictions on off label marketing and misbranding imposed on pharmaceutical companies are meant to prevent the widespread acceptance of a drug for an off-label use that may be unsafe.
Examples of misbranding and off-label marketing False Claims Act lawsuits highlight the dangers of these practices on vulnerable populations. In 2010 a pharmaceutical giant agreed to pay $520 million to settle allegations regarding a drug that was narrowly approved by the FDA for the short term treatment of only schizophrenia and bipolar mania and depression, which the drug company knowingly promoted for many other non-approved conditions such as aggression, Alzheimer’s disease, anger management, anxiety, attention deficit hyperactivity disorder, dementia, mood disorder, post-traumatic stress disorder and sleeplessness. The drug maker targeted its fraudulent marketing towards primary care physicians, pediatric and adolescent physicians, and physicians dealing with the elderly and incarcerated populations because those physicians did not typically handle schizophrenia or bipolar disorder.
In 2013 a major pharmaceutical company agreed to a $2.2 billion settlement in another False Claims Act lawsuit that involved allegations that the company illegally marketed its drugs to elderly nursing home residents, children and individuals with mental disabilities for non approved uses that posed risks such as stroke in elderly patients and elevated hormone levels in children.
Kickbacks are the willful payment of “remuneration” which may include any type of monetary payment, gift or thing of value given to induce or reward someone for the promotion of a product, generation of business or referral of patients involving any item or service payable by Federal healthcare programs. The Anti Kickback Statute [42 U.S.C.§ 1320a-7b(b)] is a criminal law that specifically prohibits this practice. Under the Anti KickBack Statute remuneration may include many forms beyond just cash, such as “free rent, expensive hotel stays and meals, and excessive compensation for medical directorships or consultancies.”
When it comes to pharmaceutical fraud, kickbacks can take many forms. In a 2019 settlement, a dermatology pharmaceutical company agreed to pay 3.5 million dollars to resolve allegations that its employees provided physicians and health care providers with illegal meals and food items, entertainment, trips, gift cards, profitable speaking engagements, advisory board positions and consulting services as a means to induce them to promote their line of dermatology drugs to patients. The whistleblower in this False Claims Act case received $735,000 as her share of the damages.
In addition to simply promoting one drug over other similar drugs, kickbacks can be dangerous because they often go hand in hand with other types of pharmaceutical fraud including misbranding and off label marketing. In fact, The Centers for Medicare & Medicaid Services Off Label Marketing fact sheet lists kickbacks as one of the ways to identify off label marketing.
According to a 2019 statement from the Department of Justice “kickbacks have the power to corrupt a provider’s medical judgment” which is “particularly concerning when a pharmaceutical company uses kickbacks to drive up sales in connection with a vulnerable population.”
Examples of this danger include a 2019 False Claims Act settlement for $108 million that resolved allegations that a pharmaceutical company utilized kickbacks to promote its false and misleading marketing of a drug to vulnerable elderly patients with symptoms of dementia for which it was not approved.
In another case a pharmaceutical company agreed to pay $2.2 billion to settle allegations that it used kickbacks to help market a drug for unapproved uses to some of the most vulnerable patients including elderly nursing homes residents, children and those with mental disabilities.
Another example of kickbacks includes covering the cost of copays for certain drugs in order to increase the purchase or perscription of that drug. In 2018 a pulmonary arterial hypertension drug maker agreed to pay $360 million to settle allegations that it used a 501c3 foundation as a conduit to fraudulently cover the copays of thousands of Medicare patients to induce them to buy its drug because it knew the price that it set would be a barrier.
Pricing Practices Fraud
In January of 2019 the House Committee on Oversight and Reform announced one of its most wide-ranging investigations in decades into the pricing practices of the prescription drug industry, stating in its announcement that “94% of widely-used brand-name drugs on the market between 2005 and 2017 more than doubled in price during that time, and the average price increase in 2017 was…four times the rate of inflation.”
Conspiring to raise or fix prices of generic medications constitutes fraud and its impact could mean that consumers and patients may not be able to afford vital medications. In 2019 a major pharmaceutical company was charged with conspiring along with four of its competitors to fix prices and rig bids on generic medications.
Another way to rig prices is to prohibit other companies from making generic drugs by making their active ingredients unavailable. Makers of generic drugs often purchase the Active Pharmaceutical Ingredient (API) from a third party and make identical versions of branded drugs, but available at a more affordable price. When drug companies conspire to make sure the Active Pharmaceutical Ingredient is not available to other pharmaceutical companies they are participating in price fixing in the generic drug market.
Best Price & Medical Rebate Fraud
The Medicaid Drug Rebate Program requires drug manufacturers to pay quarterly rebates to Medicaid programs for drugs prescribed to Medicaid patients as a condition of having Medicaid cover their drugs. Often referred to as the best price rule, the goal of the program is to ensure Medicaid receives the lowest available price, with generic drugs bringing the lowest rebate and brand name drugs the highest. This mandatory rebate includes an inflation related rule that helps to protect the Medicaid program from drug price increases that exceed the rate of inflation. The Medicaid Rebate Statute forces all participating pharmaceutical manufacturers to report their “best prices” and other cost related information to the government.
When a drug company knowingly provides the government with false information related to their drug pricing they are committing price fraud. By fraudulently manipulating data related to best-price, drug manufacturers are essentially increasing their profit at the cost of federal assistance programs that were put in place to provide the most vulnerable populations with the lowest prices possible for vital medication.
In March of 2020, the government intervened in a False Claims Act lawsuit alleging that a drug company violated the False Claims Act by deliberately underpaying its required Medicaid rebates which were due as a result of large increases in the price of its drugs. The whistleblower lawsuit alleges that the pharmaceutical company increased the cost of its drug to an extraordinary level and cheated the Medicaid program of hundreds of millions of dollars, which would have been due under a provision of the Medicaid Drug Rebate Program requiring drug makers to pay additional rebates when prices increase beyond a certain level.
Pharmacy Benefits Manager (PBM) Fraud
A pharmacy benefit manager (PBM) is a third party administrator that helps to manage prescription drug coverage on behalf of the insurer. PBMs contract with commercial plans, as well as state and federal programs such as Medicaid and Medicare Part D or other state and federal employee health plans to help those health plans negotiate payment rates with drug manufacturers. PBMs have a large impact on drug costs for insurers and eventually impact patients’ access to medications. As such they have been under scrutiny for their role in drug costs and the impact of their business practices on pharmaceutical spending.
Over the last decade PBMs have been the target of government investigations related to rising pharmaceuticals costs, specifically focusing on the potential for health care fraud involving the contractual relationships between pharmaceutical manufacturers and PBMs. A recent report from the New York State Senate concluded that while PBM’s were “initially created to control drug costs and manage prescription claims, PBMs have grown and consolidated so that only a handful of near-monopolies with limited accountability dominate the drug market, giving them immense power to affect the price of pharmaceuticals.”
The types of fraud associated with PBMs include many of those listed here such as improper rebate processing, as well as the high potential for fraudulent schemes available to them as a result of their position as intermediaries between government funded programs and the pharmaceutical manufacturers.
Drug Manufacturing or Research Fraud
In order for pharmaceutical drugs to be prescribed and sold to the public for a particular use the drug companies must submit their research to be approved by the FDA. Any falsifying of research or data submitted constitutes fraud. Clinical research for new drugs is often financially sponsored by drug manufacturers. As a result, the reporting of fraud in the medical research field is much less prevalent than in other scientific fields because of the potential negative impact on drug makers.
In one example a for profit research institution sponsored by a pharmaceutical company conducted fraudulent clinical trials despite multiple audits for over a decade before being brought to light by a False Claims Act whistleblower lawsuit. In that case, the lead clinical investigator stated that “most researchers are forced to cheat because drug companies issue requirements for test subjects that sound good in marketing material, but are impossible to meet in the real world.”
In 2012 a global health care giant agreed to pay $3 billion dollars to resolve a False Claims Act lawsuit alleging medical research fraud, among other violations. The lawsuit alleged that the drug company failed to include certain safety data about its drug in reports to the FDA for approval. The missing information included data regarding concerns about the cardiovascular safety of the drug, as well as number of post-marketing studies.
Pharmaceutical diversion, or prescription drug diversion, is defined as “the unlawful channelling of regulated pharmaceuticals from legal sources to the illicit marketplace” The illegal procurement of prescription drugs for personal use or profit can take many forms such as forged or altered prescriptions, substitution of generic drugs for brand name also known as drug switching, over-prescribing, unauthorized auto-refilling. Those involved may include pharmacy workers, physicians, health care providers, patients or other individuals.
When drug diversion or redirection of prescriptions for illegal purposes takes money from Medicare, Medicaid or other federally funding health care programs it constitutes fraud against taxpayers and the government. Drug providers, health care providers, physicians and pharmacists involved in drug diversion schemes have written thousands of illegal, medically unnecessary prescriptions which are eventually billed to federally funded healthcare programs like Medicare. With these types of schemes on the rise, the Office of Inspector General has ramped up its investigations of pharmaceutical diversion fraud.