Pharmaceutical Fraud and Abuse in the United States, 1996-2010

Prescription drug spending totaled $234 billion in 2008 (up from $40 billion in 1990) and accounted for 10% of health care expenditures.¹ Pharmaceutical fraud may be an important component of health care costs. Between 1996 and 2005, $3.6 billion was recovered for 13 pharmaceutical fraud cases initiated by “whistle blowers” (termed qui tam relators). These recoveries, despite accounting for 3% of the number of federal fraud cases involving health care, accounted for 40% of federal fraud financial recoveries involving qui tam relators.² We report on pharmaceutical fraud investigations completed between 1996 and 2010 regardless of qui tam relator involvement status.

All cases involved pharmaceutical manufacturers and False Claims Act (FCA) violations (the most commonly used law invoked in health care fraud prosecutions). The FCA allows private citizens (qui tam relators) to file antifraud actions on behalf of the government and imposes liability of up to triple damages and civil penalties of $5500 to $11 000 per claim for submitting false claims to the government.³ Data were from Lexis/Nexis News databases (search terms included Pharmaceutical fraud, False Claims Act, and Qui tam) and Department of Justice Web site (1996-2010). Cases with less than $5 million in financial recoveries were excluded. Data were abstracted on allegations, financial settlements, occupations of and payments to qui tam relators, and date of settlement.

Total FCA recoveries for pharmaceutical fraud were $8 million during 1996 through 2000 (1 case), $3.9 billion during 2001 through 2005 (15 cases), and $8.1 billion during 2006 through 2010 (15 cases) (Table). Almost all cases involved marketing violations. Off-label or fraudulent marketing and misbranding charges were implicated in 15 cases ($8.7 billion), billing fraud in 17 cases ($3.9 billion), and receiving kick-backs in 1 case ($2.3 billion). One case resolved allegations of producing defective pharmaceuticals ($750 million). Six settlements included criminal and civil fines.

With respect to individual cases, 1 company was involved in 3 cases, and 3 companies were involved in 2 cases each. The largest recovery, $2.3 billion (19% of recoveries) in 2009, was for misbranding, illegal marketing, and paying kickbacks to physicians for prescribing a cox-2 inhibitor that is no longer marketed. The second largest recovery, $1.4 billion (11% of recoveries), also in 2009, was for off-label marketing of a drug approved to treat bipolar disorder and severe schizophrenia for off-label administration to children in foster care, persons with insomnia, and elderly patients in nursing homes. In 2010, $750 million (6% of recoveries) was recovered when a pharmaceutical manufacturer was implicated for selling contaminated drugs from a factory located in Puerto Rico.

Qui tam relators initiated 77% of the cases (median qui tam award of $31 million and total qui tam awards of $836 million). The largest qui tam awards were $102 million (12% of qui tam recoveries), $96 million (11%), $79 million (9%), and $78 million (9%). All involved cases of marketing fraud and resulted in recoveries from between $750 million to $2.3 billion.

Since 1996, $12 billion has been recovered in concluding 31 pharmaceutical FCA prosecutions. Mean per case recovery has doubled since 2006 to $550 million from the prior 5 years, although the same number of cases, 3 per year, was concluded. In interpreting our findings several factors should be considered.

Settlements and fines resolving allegations of fraudulent marketing practices accounted for the largest recoveries. Mello et al⁴ highlighted the central role of litigation, and subsequent large monetary fines and settlements and institution of corporate integrity agreements (that require institution of practices designed to prevent recidivism), in protecting against fraudulent marketing practices. Recently, the Department of Health and Human Services raised the stakes even higher in barring the chief executive officer of one firm from negotiating future contracts with federal health care providers.⁵

Qui tam relators, usually employees or former employees of pharmaceutical corporations, are the primary information source for fraud investigations.² With awards as high as $102 million being awarded to qui tam relators and qui tam relators having initiated 77% of pharmaceutical cases, their central role in identifying fraudulent pharmaceutical marketing practices is likely to expand.

Our analysis has limitations, primarily absence of a central data repository. Despite this, our analysis highlights the observation that many of the largest pharmaceutical corporations have been implicated in health care fraud cases, sometimes more than once. With expansion of government health care, investigations of pharmaceutical manufacturers will continue to result in substantial financial recoveries. Our findings raise concern that despite these recoveries, industrywide changes in the way pharmaceutical corporations conduct marketing activities are needed.

Correspondence: Dr Bennett, South Carolina College of Pharmacy, 715 Sumter St, Ste 311, Columbia, SC 29208 (charlesleebennett@gmail.com).

Author Contributions:Study concept and design: Qureshi, Sartor, and Bennett. Acquisition of data: Qureshi and Bennett. Analysis and interpretation of data: Qureshi, Sartor, Xirasagar, Liu, and Bennett. Drafting of the manuscript: Qureshi, Sartor, Xirasagar, Liu, and Bennett. Critical revision of the manuscript for important intellectual content: Qureshi, Sartor, Xirasagar, Liu, and Bennett. Statistical analysis: Qureshi, Xirasagar, and Bennett. Obtained funding: Bennett. Administrative, technical, and material support: Liu and Bennett. Study supervision: Sartor and Bennett.

Funding/Support: This study was supported in part by the National Cancer Institute (1R01CA 102713-01) (Dr Bennett) and the South Carolina Center of Economic Excellence Center for Medication Safety initiative (Dr Bennett).