As the Pharmaceutical Industry gets its ‘Foot in the Door’ for Medicare Reimbursement, Will Efforts to Curb Fraud be Effective?

One of the government’s most potent weapons in the fight against Medicare and Medicaid fraud is known by government attorneys, defense attorneys and whistleblowers’ attorneys alike as the "death sentence." A law passed in 1996 requires that any corporation that is found guilty of felony health care fraud must be excluded from applying for or receiving Medicaid or Medicare payments.

What would this mean for a major pharmaceutical company if found guilty of health care fraud? The loss of billions of dollars per year - and the distinct possibility of financial disaster, including having to file for bankruptcy reorganization.

Why then has no major pharmaceutical company or, for that matter, any major national health care corporation been given the "death sentence" in the past few years?  The answer is not that national health care and pharmaceutical companies necessarily comply with federal law in collecting federal dollars from health care assistance programs. The government historically has had to cut deals with defrauding companies, accepting hefty fines and civil lawsuit settlements in False Claims Act cases brought by whistleblowers in exchange for permitting corporations to continue to do business with Medicaid and Medicare. The arrangement enables both sides to avoid the considerable risks involved in taking a case to trial.

It is a matter of public record that settlements have been structured in such a way that continued participation in the Medicaid and Medicare programs is assured. Whether this serves the greater public good is a matter of debate.  Basically, the large health care corporations and pharmaceutical companies argue that the "death penalty" would ultimately operate to deprive those in need of health care from necessary care and services. In the case of a large pharmaceutical company, the drug company will argue that imposition of the "death penalty" could deprive millions of Medicaid and Medicare recipients of essential medications, including drugs that are currently keeping many patients alive.  Obviously, this puts the government in a significant dilemma and requires the exercise of discretion in imposing the ultimate penalty.

The recently passed federal law permitting prescription drugs to be compensated by Medicare thus represents a double-edged sword. On the one hand, millions of senior citizens will be eligible for reimbursement for their prescription medications, helping to cut the ever-increasing financial burden of prescription drugs on seniors, (or perhaps more precisely, shifting the burden from individuals to taxpayers).

But the other side of the coin is that major pharmaceutical companies will now have a new stake in - and will derive huge new profits from - our Medicare program, greatly increasing the potential for Medicare fraud.