State drug fraud cases on the rise, study says

Federal and state prosecutors have collected more than $30 billion from drug companies for alleged fraud and illegal marketing over the last 20 years, according to a new report by consumer advocacy group Public Citizen.

The report shows that state attorneys are increasingly following the lead of federal prosecutors in seeking multimillion-dollar settlements with drugmakers such as GlaxoSmithKline and Eli Lilly and Co. Analysis by Public Citizen found that state governments have collected $3.7 billion from drugmakers since 2009, or roughly six times more money than in the previous 18 years combined.

Overcharging state health plans like Medicaid was the most common allegation, while unapproved drug marketing was the most costly, the group says.

Drug companies are permitted to market drugs only for uses that have been approved by the Food and Drug Administration. In recent years the Department of Justice and state attorneys general have increasingly pursued cases of off-label marketing, or promoting drugs for unapproved uses.

Governments are spending more on prescription drugs as programs like Medicare and Medicaid swell with aging baby boomers. That increased spending has attracted scrutiny from investigators looking to recover taxpayer dollars.

"It should come as no surprise that states facing Medicaid budget shortfalls are finally deciding to root out fraud that has likely cost their taxpayers billions of dollars over the years," said Dr. Sammy Almashat, a researcher with Public Citizen.

State and federal attorneys have collected $6.6 billion through mid-July this year, setting a new record for settlement totals in a single year.

Three drug companies have paid two-thirds of the financial penalties paid out since November 2010: GlaxoSmithKline, Johnson & Johnson and Abbott Laboratories. In July, British drugmaker GlaxoSmithKline agreed to pay $3 billion in fines — the largest health care fraud settlement in U.S. history — for criminal and civil violations involving 10 drugs, including the diabetes pill Avandia.

Indianapolis-based Lilly and Pfizer Inc. have also paid penalties of more than $1 billion in recent years to settle allegations of improper marketing.

The Pharmaceutical Research and Manufacturers of America's Vice President Matt Bennett responded to the report in a statement: "Our member companies devote significant resources to internal compliance programs and thorough investigations of any reported misconduct — activities that complement the government's enforcement efforts."

Health care companies have historically accounted for about 80 percent of settlements under the federal False Claims Act, which allows the government to collect damages reported by private citizens. In many cases, the alleged fraud is reported by company whistleblowers, who are eligible to receive between 15 percent and 30 percent of the total collected by the government. Public Citizen often supports whistleblowers and their attorneys who report fraud to the federal government.