Pharmaceutical and FDA Fraud

Pharmaceutical and FDA Fraud is the utilization of methods of bypassing or outright refusal to comply with legislature, standards and procedures established by the US Food and Drug Administration and other applicable regulatory agencies to skirt safety standards, turn an illegal profit and encourage medical professionals to prescribe drugs illegally or unethically. In addition to jeopardizing the health and welfare of the American public, this type of illegal behavior defrauds the federal government and U.S. taxpayers, costing billions of dollars annually.

Pharmaceutical companies are the entities most often responsible for pharmaceutical and FDA fraud, typically in cooperation with unscrupulous or uninformed medical professionals. The companies guilty of this behavior encourage doctors to prescribe medications for uses not approved by the FDA, offer financial incentives to doctors to prescribe certain drugs, participate in unsafe manufacturing and safety procedures that fail to comply with FDA regulations and/or fraudulently bill the government for drugs. These companies employ a number of different methods to perpetrate this fraudulent activity.

Examples of Pharmaceutical and FDA Fraud

Skirting FDA Quality and Control Procedures

The Food, Drug, and Cosmetic Act governs the processing, manufacturing, packing or holding of a drug in accordance with the Good Manufacturing Practice regulations to ensure safety and quality assurance. Failure to adhere to these regulations in the area of quality control, adequately equipped manufacturing facilities, properly trained staff, and accurate and comprehensive record-keeping for drug manufacturing is a method of pharmaceutical and FDA fraud. There is a wide range of areas in this highly regulated and complicated process where violations exist, resulting in fraud and other illegal activities.

Kick-back Schemes

These schemes include illegal marketing methods to medical professionals, such as financial kick-backs, expense-paid vacations cloaked as consulting trips for pharmaceutical providers and physicians, and granting speaker engagements on the basis of the professional’s involvement in illegal or unethical activities in the area of prescribing and charging methods for pharmaceuticals. Bribes, rebate programs and other forms of compensation for prescribing a specific drug is prohibited by federal law. Indirect compensation such as trips, tickets to events and paid speaking engagements are barred, as well.

Another onerous practice, known in the industry as “tying” is also illegal. This is the practice of offering a discount on one drug as encouragement for the purchase and prescribing of another drug. Federal law also bars other associated incentives, like rebates and discounted rates.

Off-label Drug Marketing

This is the promotion, marketing and selling of drugs for uses the FDA has not approved. Though doctors are not prohibited from prescribing medication for off-label use, it’s illegal for pharmaceutical companies to market drugs for off-label uses. Drug companies seek to increase their revenue by encouraging doctors to prescribe drugs for additional off-label uses, thereby raising the number of medications sold. The FDA regulates pharmaceuticals in the United States. The promotion of off-label uses by drug companies undercuts the efficacy standard. Some off-label use may be ineffective and unsafe, and by promoting this use without scientific analysis and research, data is not gathered to support or deny a finding of efficiency and safety. Allowing drug companies to engage in this type of unsafe activity unchecked removes any financial incentive for pharmaceutical companies to fund and conduct essential clinical trials to determine whether the off-label use is indeed effective, and even more importantly, whether it’s dangerous to the consuming public.

Government-funded health insurance fraud

This is the practice of fraudulently obtaining reimbursements for pharmaceutical sales for health care insurance programs funded by the government, such as Medicaid and Medicare. This is typically accomplished by methods such as over-prescribing, off-label prescribing, and charging for unused medications that have been returned to the pharmacy providers. Prescribing unnecessary drugs or more medications than is medically required is known as upcoding. Failure by pharmaceutical companies and suppliers to provide government-mandated discounts is another one of these fraudulent methods.

Pharmaceutical Fraud and The False Claims Act

Employees and independent contractors who expose pharmaceutical and FDA fraud are protected from retaliation by federal legislation and many individual state statutes. These protections extend to the prevention of discriminatory actions such as termination, suspension, demotion, harassment, adverse alterations to the employee’s terms and conditions of employment and the threat of these actions.

Additionally, under the federal False Claims Act, whistleblowers may be able to file qui tam lawsuits on behalf of the government to recover moneys fraudulently obtained by these illegal practices and methods. The worker is eligible to recoup 15 to 30 percent of the funds recovered in a successful lawsuit. The recovery of funds for Pharmaceutical Fraud under the Federal False Claims Act is responsible for some of the largest the U.S. government financial recoveries.

Show Sources
  1. 31 U.S.C. § 3729 - False Claims
  2. 31 U.S.C. § 3730 - False Claim Act
  3. 21 U.S.C. § 301, (Ch 9) - The Food, Drug, and Cosmetic Act – Drugs and Devices
  4. FDA Website; “How Drugs are Developed and Approved”, 2014; web, http://www.fda.gov/Drugs/DevelopmentApprovalProcess/HowDrugsareDevelopedandApproved/default.htm
  5. FDA Website: “Promotion of Unapproved Drugs and Medical Devices”, 2009; web, http://www.fda.gov/newsevents/testimony/ucm115098.htm

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