Pharmaceutical fraud is when pharmaceutical companies engage in illegal, fraudulent activities to the detriment of patients and/or insurers. Examples include counterfeit drugs that do not contain the active ingredient, false claims in packaging and marketing, suppression of negative information regarding the efficacy or safety of the drug, and violating pricing regulations.
Pharma fraud refers to:
Because of a lack of regulation and enforcement, the quality, safety and efficacy of both imported and locally manufactured medicines in many developing countries cannot be guaranteed. Subsequently, smuggling and illegal importation of drugs are common. Substandard and counterfeit drugs are then not only sold in these countries but also exported or re-exported.[9] According to the World Customs Organization, counterfeit drugs are a $200 billion a year industry that kills hundreds of thousands of people annually.[10]
|
Main article: List of largest pharmaceutical settlements in the United States |
|
See also: List of off-label promotion pharmaceutical settlements |
In the United States, there are several different schemes[11] used to defraud the health care system which are particular to the pharmaceutical industry.
Involve fraud with the Good Manufacturing Practice (GMP) Regulations which require manufacturers to have adequately equipped manufacturing facilities, adequately trained personnel, stringent control over the manufacturing process, appropriate laboratory controls, complete and accurate records, reports, appropriate finished product examination, and so on. Certain violations of the Good Manufacturing Practice Regulations may be the basis for a False Claims Act lawsuit.[12]
|
See also: List of off-label promotion pharmaceutical settlements |
Though physicians may prescribe drugs for off-label usage known as off-label marketing, the Food and Drug Administration (FDA) prohibits drug manufacturers from marketing or promoting a drug for a use that the FDA has not approved. A manufacturer illegally “misbrands” a drug if the drug's labeling includes information about its unapproved uses. A drug is deemed misbranded unless its labeling bears adequate directions for use. The courts have agreed with the FDA that the Food, Drug, and Cosmetic Act (FDCA) requires information not only on how a product is to be used (e.g., dosage and administration), but also on all the intended uses of the product. In 2004, whistleblower David Franklin prevailed in a suit under the False Claims Act against Warner-Lambert, resulting in a $430 million settlement in the Franklin v. Parke-Davis case. It was the first off-label promotion case successfully brought under the False Claims Act in U.S. history. Oral statements and materials presented at industry-support scientific and educational activities may provide evidence of a product's intended use. If these statements or materials promote a use that is inconsistent with the product's approved labeling, the product is misbranded under the FDCA for failure to bear labeling with adequate directions for all intended uses.[13]
A figure reported by the manufacturer to CMS in quarterly reports under the Medicaid Rebate Program, it is used to calculate the Medicaid reimbursement rate. It is defined as the lowest price available to any wholesaler, retailer, provider, health maintenance organization (HMO), nonprofit entity, or the government. BP excludes prices to the Indian Health Service (IHS), Department of Veterans Affairs (DVA), Department of Defense (DOD), the Public Health Service (PHS), 340B covered entities, Federal Supply Schedule (FSS), state pharmaceutical assistance programs, depot prices, and nominal pricing. BP includes cash discounts and free goods that are contingent upon purchase, volume discounts, and rebates. The fraud occurs as the manufacturer falsely self-reports its Best Price.[14]
In order to decrease the amounts owed to states under the Medicaid Drug Rebate Program, some companies misrepresented material facts regarding the regulatory origin/status of their brand name drugs, the AMP, and/or the best price. Despite the Government's good faith reliance to charge manufacturers a unit rebate amount based upon the manufacturer's own representation of drug status, and price, some manufacturers have deceptively and fraudulently, breached their duty to deal honestly with the Government.[15]
FDA guidelines authorize pharmacists to “compound” or mix medications only in response to a physician's valid prescription. This assumes, of course, that the physician intends that the medication be compounded. The regulations further require that the mixed or compounded medications are medically necessary and not commercially available. Illegal compounding includes compounding of ingredients such that the compounded drug is tantamount to commercially available medications, involving mass manufacturing of drugs under the guise of compounding.
Federal law, including the Centers for Medicare and Medicaid Services (CMS) guidelines and the regulations of other Government Healthcare Programs, prohibit coverage of claims for “compounded” medications when the claims are submitted by a company that is mass manufacturing large amounts of unapproved drugs in violation of the Federal Food, Drug and Cosmetic Act (FFDCA), under the guise of “compounding.”[16]
Kickbacks are rewards such as cash, jewelry, free vacations, corporate sponsored retreats, or other lavish gifts used to entice medical professionals into using specific medical services. This could be a small cash kickback for the use of an MRI when not required, or a lavish doctor/patient retreat that is funded by a pharmaceutical company to entice the prescription and use of a particular drug.[11]
People engaging in this type of fraud are also subject to the federal Anti-Kickback statute.