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Category: Articles

What 20 Years Of Pharma Fraud Has Wrought
By Ed Silverman
January 04, 2011

Once upon a time, defense contractors were considered the biggest hucksters. You know, the US Defense Department would pay $10 for a pencil. Now, though, drugmakers have surpassed every other industry when it comes to defrauding the US government, according to a new analysis by Public Citizen, which calls for stiffer penalies and increased criminal prosecution of pharma execs.

The findings: Of 165 settlements comprising $19.8 billion in penalties during the past 20 years, 73 percent of the settlements and 75 percent of the penalties - representing $14.8 billion - have occurred in just the past five years. And four drugmakers - GlaxoSmithKline, Pfizer, Eli Lilly, and Merck’s Schering-Plough -accounted for 53 percent, or $10.5 billion, of all financial penalties. The chart below shows there were 10 deals in 2006, 27 in 2008, and 38 last year. Through Nov. 1, 32 settlements have been reached this year, but there have been more recent deals (see here and here).

Off-label marketing was responsible for the largest amount of financial penalties, although Glaxo recently agreed to pay $750 million fine to settle charges over numerous production problems at a former facility in Puerto Rico, signaling the feds are now eyeing manufacturing fraud as another avenue of pursuit (back story).

The most common violation against state governments was deliberately overcharging state health programs, primarily Medicaid, and this was responsible for the largest amount of financial penalties levied by the states. And former pharma employees and other whistleblowers initiated the largest number of federal settlements over the past 10 years. From 1991 through 2000, such cases comprised 9 percent of payouts to the government, but from 2001 through 2010, they accounted for 67 percent.

The report goes on to list all violations that led to settlements: overcharging government health programs; illegal promotion; anti-trust violations; kickbacks; concealing clinical trial findings; poor manufacturing practices; environmental violations; financial violations and illegal distribution.

And for those wondering about comparisons to defense contractors, last year, pharma settlements involving charges brought under the False Claims Act totaled $1.16 billion compared with $438 million involving defense companies. So far this year, pharma is up to $989 million versus $261 million for defense contractors (here is the complete report).

Hat tip to the Milwaukee Journal-Sentinel