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 The statute was originally enacted during the Civil War in response to widespread defense contractor fraud.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.