Pharmaceutical Industry Still Ranks as Top Defrauder

defective drug attorney ncThe pharmaceutical industry steals more money from federal and state governments than any other industry. Our Raleigh defective drug attorneys read an announcement from the United States Department of Justice made in late 2012 that, as measured by the size of civil and criminal penalties reached with the federal government in fiscal 2011, the pharmaceutical industry was still the biggest defrauder of the federal government.  

This report is consistent with a landmark 2010 report entitled, "Rapidly Increasing Criminal and Civil Monetary Penalties Against the Pharmaceutical Industry: 1991 to 2010."  

At the time of the report's publication, the pharmaceutical industry had paid almost $20 billion over the previous two decades to the federal and state governments in civil and criminal penalties for fraudulent activities ranging from illegal marketing of drugs to widespread bribery of physicians to prescribe those drugs.  

In an update of their report, Public Citizen published its September 2012 "Pharmaceutical Industry Criminal and Civil Penalties: An Update.” This update shows that from November 2010 through mid July 2012, drug companies were forced to pay an additional $10 billion to settle allegations of fraud. In the first half of 2012 alone there were record financial recoveries, with $6.6 billion paid by the drug industry to the federal and state governments.  

Raleigh Defective Drug Lawyers Explain:

If you are wondering why the cost of Medicare and Medicaid is so high, you can look to the pharmaceutical industry as a significant part of the problem. Much of the fraudulent activity is on the state level where drug companies defraud state Medicaid programs which assist poor, elderly and disabled patients. Now, state governments have increased their enforcing activities.  

Since 2009, state governments have concluded more than twice as many settlements (94 versus 41) for nearly six times more money ($3.7 billion versus $660 million) than they had during the previous 18 years combined. The most common fraud committed against the states by drug companies has been in connection with the fraudulent overcharging of Medicaid programs.  

Many Medicaid programs reimburse pharmacies and drug wholesalers for medications using the "average wholesale price" for a drug.  This price is based upon the manufacturer's assessment of value. Drug companies however have been reporting to Medicaid figures for the "average wholesale price” which are actually much higher than the actual prices they charge these intermediaries such as pharmacies and drug wholesalers.  

The difference between the actual prices charged intermediaries and the figures which drug companies give to Medicaid is called the "spread" which represents a source of profit for the intermediaries. Drug companies purposefully and significantly inflate these "average wholesale price" figures and show the intermediaries the profit to be made in an effort to induce the intermediaries to buy drugs from them. The drug manufacturers profit from the resulting increasing market share they realize from this scheme.  

As an example of such overpayments, U.S. House of Representatives Energy and Commerce Committee investigated a case in which a drug manufacturer charged intermediaries $82.62 for a pack of 2000 Fluoxetine capsules (the generic version of the antidepressant PROZAC). Many Medicaid programs paid $5,300 for the same product, a price nearly 65 times the price the intermediaries paid for the drug.

Both federal and state governments are increasing their enforcement activities to crack down on illegal practices by the pharmaceutical industry.

Whistleblowers were responsible for initiating many of the investigations that resulted in over $6 million of penalties imposed against drug companies. Under the Federal Claims Act, private-sector whistleblowers can be awarded up to 25 percent of any settlement proceeds resulting from an investigation initiated by their tip offs to the government. The whistleblowers usually come from private sectors, or either former company employees or others with knowledge of the illegal activities.  

Almost half of the federal and state settlements prompted by whistleblowers from November 2, 2010 through July 18, 2012 were made possible by a single informer, Ven a Care, a small pharmacy located in Key West, Florida. This pharmacy has been responsible for recovering more than $1.3 billion dollars for the federal government from the pharmaceutical industry since 2001.  

Whistleblowers were responsible for the largest fraud settlement in history. The case involved fraud against the government committed by GlaxoSmithKline (GSK). In July, GSK settled with the government by paying $3 billion to resolve numerous violations.  

GlaxoSmithKline has been the worst offender over the past decade and has paid more than $7.5 billion in penalties to federal and state governments according to a report by Public Citizen made in 2012.  

Unfortunately, the general public has become blasé over concerning reports of fraud by the pharmaceutical industry. When the record $3 billion settlement with GlaxoSmithKline was announced recently, the company stock actually rose to a near 52 week high. In a way, it appears that the public expects drug companies to cheat.  

It seems to be business as usual with the executives of pharmaceutical companies who direct their illegal activities yet suffer no personal penalties for their wrongful conduct.  

Only a handful of pharmaceutical executives have ever faced criminal charges for their leadership of fraudulent pharmaceutical companies and only one of those has been given any prison time, then for only 30 days.

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