Big Pharma - Fraud Under Fire

Large pharmaceutical companies have been increasingly involved in healthcare fraud litigation.  Due to the ubiquity of their products and the depth of their pockets, they continually find themselves defending their aggressive and allegedly deceptive marketing practices.  

Since the 1970s, Congress has actively pursued legislation that allows recovery against any individual or entity that procures unjust profits generated by fraudulent claims for reimbursement from federal healthcare agencies.  In the past few decades and more recently with the passage of the Patient Protection and Affordable Care Act (“PPACA”), the government has gained a number of powerful statutory tools that facilitate prosecution of healthcare fraud. [1]

The False Claims Act (“FCA”), 31 U.S.C. §§ 3729-33 allows the United States to recover treble damages against any individual or entity that knowingly submits a fraudulent claim for reimbursement to a federal healthcare agency. [2] The FCA is frequently employed along with the federal Anti-Kickback Statute (“AKS”), 42 U.S.C. § 1320a-7b(b), which arose out of congressional concern that remuneration given to those who can influence health care decisions would result in the provision of goods or services that are medically unnecessary or harmful to a vulnerable patient population. [3] The AKS makes it illegal for individuals or entities to offer or provide any remuneration, including kickbacks, bribes, or rebates, that would induce a person to purchase or recommend purchasing a good that will be paid for by a federal healthcare program. [4] 

Under these regulations, a drug manufacturer may not negotiate with any healthcare provider, such as a pharmacist or prescriber, for the purpose of increasing product utilization in exchange for rebates or other financial incentives.

A recent example of one such kickback relationship is that of Novartis Pharmaceuticals (“Novartis”) and BioScrip, Inc. (“BioScrip”).  The United States Government is currently pursuing healthcare fraud claims against Novartis and BioScrip in U.S. Federal District Court, seeking treble damages and civil penalties under the FCA. [5] The government’s amended complaint alleges that Novartis provided kickbacks to BioScrip in the form of rebates in exchange for patient referrals and refill recommendations to potential consumers, causing Medicare and Medicaid to pay tens of millions of dollars in reimbursements. [6]

Many other pharmaceutical corporations have been the subjects of high-profile settlements, facing similar charges. [7] Allergan, AstraZeneca, KV Pharmaceuticals, Mylan, UDL Laboratories, Ortho McNeil, and Forest Laboratories are but a few examples of pharmaceutical companies that have found themselves in the AKS “hot-seat.” [8]

The government has become increasingly involved in AKS cases such as these, aggressively pursuing providers that use illegal kickbacks to boost their profits at the expense of Medicaid and Medicare.  In 2010 alone, the Department of Justice (“DOJ”) secured $3 billion in civil settlements and judgments involving fraud against the government. [9] This includes $2.5 billion in healthcare recovery, the largest in history. [10] The most substantial recoveries came from the pharmaceutical and medical device industries, accounting for $1.6 billion in settlements. [11]  Since 1986, recoveries under the False Claims Act have totaled over $27 billion. [12]

Despite high profile settlements and large fines, pharmaceutical corporations continue to operate under ambitious marketing schemes that prove to be so lucrative that the government’s attempts to thwart their utilization have been largely unsuccessful.  As the government continues to aggressively combat healthcare fraud, it will become increasingly important for pharmaceutical companies and their counsel to recognize and adapt to the ever-changing legal and regulatory environment in which they operate.

 

References:

[1] David L. Douglass, Healthcare Fraud Enforcement After Healthcare Reform, 23 Health Lawyer 35 (2011).

[2] 31 U.S.C. §§3729-33.

[3] 42 U.S.C. §1320a-7b(b).

[4] Id.

[5] Amended Complaint. United States v. Novartis Pharmaceuticals and BioScrip, Inc. 11 Civ. 8196 (S.D.N.Y 2014).

[6] Id.

[7] Douglass, supra

[8] Id.

[9] Tony Ogden, Department of Justice Recovers Record $3 Billion in False Claims Cases.Lawyers Weekly USA, Dec. 3, 2010.

[10] Id.

[11] Id.

[12] Id.