HEALTH AND SAFETY

» Drug, Devices, and Supplements

» Physician Accountability

» Consumer Product Safety

» Worker Safety

» Health Care Delivery

» Auto and Truck Safety

» Global Access to Medicines

» Infant Formula Marketing

 

More Information on Drug Company Practices

Pharmaceutical Industry Criminal and Civil Penalties: An Update

September 27, 2012

Sammy Almashat, M.D., M.P.H, Sidney Wolfe, M.D.
Public Citizen’s Health Research Group

Executive Summary


Background

In December 2010, Public Citizen published a report that, for the first time, documented all major financial settlements and court judgments between pharmaceutical manufacturers and the federal and state governments since 1991. At the time of the 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, such as Medicare and Medicaid.

Three-fourths of the settlements and accompanying financial penalties had occurred in just the five-year period prior to 2010. At the time of the report’s publication, there was no indication that this upward trend was subsiding. The following study was undertaken to assess the level of settlement activity from the previous report through the first half of 2012 – an additional 1 ½ years – and to conduct, for the first time, an analysis of the results of individual state enforcement efforts since 1991.

Methods

Methodology from the 2010 report was largely replicated, with all federal and state government settlements, of $1 million or greater, reached with pharmaceutical manufacturers from November 2, 2010 through July 18, 2012 included in the current study. In addition, a 50-state analysis of settlement activity, going back to 1991, was conducted for the first time on state settlements that did not involve the federal government. State settlements were classified as single-state settlements (those in which only one state was a party to the final settlement) or multi-state settlements (all other state settlements).

Main Findings

A total of 74 additional settlements, totaling $10.2 billion in financial penalties, were reached between the federal and state governments and pharmaceutical manufacturers between November 2, 2010 and July 18, 2012, with the first half of 2012 alone already representing a record year for both federal ($5.0 billion) and state ($1.6 billion) financial recoveries. Since 1991, a total of 239 settlements, for $30.2 billion, have now been reached (through July 18, 2012) between federal and state governments and pharmaceutical companies. Other key findings included:

  • Single-state settlements have been responsible for most of the recent increase in settlement activity, comprising almost three-fifths (59%) of all settlements since the beginning of 2009, compared to only one-fourth (25%) of settlements prior to 2009.
  • Since 1991, 27 states have reached at least one single-state settlement with a pharmaceutical company. Kentucky has had the most single-state settlements (17) while Texas has had the highest number of single-state settlements resulting from actions initiated by private whistleblowers (6).
  • Seventeen of the 27 states with at least one single-state settlement since 1991 have attained a return on investment of $1 or greater for every dollar spent on enforcement of all (both pharmaceutical-related and non-pharmaceutical) Medicaid fraud.
  • Since 2009, the federal government has concluded almost as many settlements and recovered more in financial penalties as it had in the previous 18 years combined.
  • Whistleblower-initiated investigations were responsible for most federal settlements (75%) and financial penalties (78%) during the current study period.
  • As in the previous study, overcharging government health insurance programs, mainly drug pricing fraud against state Medicaid programs, was the most common violation, while the unlawful promotion of drugs was associated with the largest penalties.

Conclusion

The past two years have seen a continuation of the recent trend of record settlements between the federal and state governments and pharmaceutical manufacturers. A much larger proportion of these recent settlements have been brought about by individual state investigations than in previous years which, in most states involved in such litigation, has resulted in financial recoveries that more than offset enforcement expenses. However, despite the scale of the fraud against their Medicaid programs and the potential recoveries at stake, many states, including some with the highest prescription drug expenditures, have yet to successfully pursue investigations on their own.

On a federal level, financial penalties still continue to pale in comparison to company profits and, to our knowledge, a parent company has yet to be excluded from participation in Medicare and Medicaid for the illegal activities, which endanger the public health and deplete already overstretched taxpayer-funded programs. In what will hopefully represent an emerging trend, the federal government has recently pursued criminal charges against key company employees and executives, but the cases so far have either been thrown out or resulted in minor sentences. Stronger legislation and more robust enforcement are needed on a federal and state level to deter future unlawful behavior.

Copyright © 2014 Public Citizen. Some rights reserved. Non-commercial use of text and images in which Public Citizen holds the copyright is permitted, with attribution, under the terms and conditions of a Creative Commons License. This Web site is shared by Public Citizen Inc. and Public Citizen Foundation. Learn More about the distinction between these two components of Public Citizen.


Public Citizen, Inc. and Public Citizen Foundation

 

Together, two separate corporate entities called Public Citizen, Inc. and Public Citizen Foundation, Inc., form Public Citizen. Both entities are part of the same overall organization, and this Web site refers to the two organizations collectively as Public Citizen.

Although the work of the two components overlaps, some activities are done by one component and not the other. The primary distinction is with respect to lobbying activity. Public Citizen, Inc., an IRS § 501(c)(4) entity, lobbies Congress to advance Public Citizen’s mission of protecting public health and safety, advancing government transparency, and urging corporate accountability. Public Citizen Foundation, however, is an IRS § 501(c)(3) organization. Accordingly, its ability to engage in lobbying is limited by federal law, but it may receive donations that are tax-deductible by the contributor. Public Citizen Inc. does most of the lobbying activity discussed on the Public Citizen Web site. Public Citizen Foundation performs most of the litigation and education activities discussed on the Web site.

You may make a contribution to Public Citizen, Inc., Public Citizen Foundation, or both. Contributions to both organizations are used to support our public interest work. However, each Public Citizen component will use only the funds contributed directly to it to carry out the activities it conducts as part of Public Citizen’s mission. Only gifts to the Foundation are tax-deductible. Individuals who want to join Public Citizen should make a contribution to Public Citizen, Inc., which will not be tax deductible.

 

To become a member of Public Citizen, click here.
To become a member and make an additional tax-deductible donation to Public Citizen Foundation, click here.