Pharmaceutical fraud

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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.

Definition

Pharma fraud refers to:

• Trade involving
  counterfeit drugs: the practice of falsely claiming to be an authorized product of another firm, including but not limited to the use of another firm's mark to deceive the public.^[1]
• Deliberately manufacturing and marketing products that do not contain the required active ingredients or not contain the right amount of active ingredient.[2]^[3]
• Packaging and labeling of drugs that make false claims regarding medical properties, including but not limited to the active medical ingredients, the date of expiration of products, or the methods of storage.^[4]
• Marketing of products using false claims regarding the efficacy of the product which will lead to the irrational use[5]^[6] of medicines or deliberately failing to provide information about safety concerns of the product.
• Deliberate suppression of data, including evidence from clinical trials, that reveal
  adverse effects of the medicine.^[7][8]

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]

Types of fraud

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]

Off-label marketing

Though physicians may prescribe drugs for off-label usage known as off-label marketing, the

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]

Medicaid price reporting

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]

Manufactured compound drugs

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

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.

Examples of fraud cases

• $3 billion GSK settlement. On 2 July 2012,
  Valtrex were involved in the kickback scheme.^[19][20][21] The government investigation of GSK was launched largely on the basis of information provided by four whistleblowers who filed two qui tam (whistleblower) lawsuits against the company under the False Claims Act. GSK settled the whistleblowers’ lawsuits for a total of $1.017 billion out of the $3 billion settlement, the largest civil False Claims Act settlement to date.^[22]
• Pfizer $2.3 billion settlement: Pfizer settled multiple civil and criminal allegations for $2.3 billion in the
  Depo-provera (birth control).^[23]
• Merck $650 million settlement: Merck settled a nominal pricing fraud case in which the company was accused of taking kickbacks and violating Medicaid best price regulations for various drugs.[24]^[25]
• United States et al., ex rel. Jim Conrad and Constance Conrad v. Forest Pharmaceuticals, Inc, et al. involved a drug manufacturer selling a drug, Levothroid, that had never been approved by the FDA. These allegations settled for $42.5 million due to multiple whistleblowers stepping forward to provide detailed information on the alleged fraud. The collective reward to the relators in this case was over $14.6 million.^[26][27]
• In response to a
  counterfeit drugs. Tests carried out found no traces of active product, which confirmed that they were false. Bottles and labels were, however, copied to perfection. According to estimates, around 60,000 persons were inoculated with false vaccines out of a total 5 million vaccinated during the campaign.^[28]

• Big Pharma (2006) by Jacky Law
• Bad Pharma (2012) by Ben Goldacre
• Drug fraud
• Health care fraud
• Lists about the pharmaceutical industry

References