Drugmakers Paid Feds and States $6.6 Billion in First Half of 2012

Over the past 20 years drugmakers have paid more than $30 billion in record settlements with federal and state governments over alleged fraud and illegal marketing, according to a recent report.

In an update to a report originally published in December 2010, the consumer advocacy group Public Citizen found that pharmaceutical companies paid $10.2 billion in financial penalties between November 2010 and July 2012, with the first half of 2012 alone representing a record year for both federal ($5.0 billion) and state ($1.6 billion) financial recoveries.

Investigations involving health care fraud and illegal practices have soared dramatically since President Barack Obama took office in 2009. Most of the investigations into health care fraud involve drug companies overcharging government and state health care programs like Medicare and Medicaid. Federal and state governments have also moved aggressively against illegal marketing practices that push doctors to prescribe drugs for unapproved uses.

The report comes as fines and settlements between state and federal governments and Big Pharma have exploded, both in number and dollar amounts. The $6.6 billion in settlements in 2012 through mid-July include the record $3 billion GlaxoSmithKline (GSK) agreed to pay in July to settle claims over its marketing of the depression medicines Paxil and Wellbutrin for unapproved uses and its failing to report clinical data on the diabetes drug Avandia. The companies that have paid out the most — GSK, Johnson & Johnson, Abbott and Merck — together account for $6.7 billion of the $30 billion in payouts.

Public Citizen documented all major financial settlements and court judgments between pharmaceutical manufacturers and the federal and state governments since 1991. At the time of the first report’s publication, almost $20 billion had been paid out by the pharmaceutical industry to settle allegations of numerous violations, including illegal, off-label marketing and the deliberate overcharging of taxpayer-funded health programs.

Three quarters of the settlements and accompanying financial penalties had occurred in just the five-year period prior to 2010 and there was no indication that the upward trend was subsiding. The update assesses the level of settlement activity since 2010 and adds an analysis of the results of individual state enforcement efforts since 1991.

According to the report, since 1991, 27 states have reached at least one single-state settlement with a pharmaceutical company, and 17 of those 27 states, have attained a return on investment of $1 or greater for every dollar spent on enforcement of all pharmaceutical-related and non-pharmaceutical-related Medicaid fraud.

The report also found that the federal government has concluded almost as many settlements and recovered more in financial penalties since 2009 in the previous 18 years combined. Three-quarters of federal investigations were initiated by whistleblowers during the past year-and-a-half.

While overcharging government health insurance programs — mainly drug pricing fraud against state Medicaid programs — was the most common violation, the unlawful promotion of drugs was associated with the largest penalties.

On a federal level, financial penalties still continue to pale in comparison to company profits and criminal charges are rarely brought against violating drugmakers and their employees. Public Citizen says stronger legislation and penalties will be needed to stem unlawful behavior.

Copyright 2012 Burrill & Company. For more life sciences news and information, visit www.burrillreport.com.