FAQ's - Health Care and Pharmaceutical Fraud

What kinds of activities constitute Pharmaceutical Fraud?

What is our government doing about Pharmaceutical Fraud committed by national and multi-national drug companies?

What are some other examples of health care fraud?

Can health care fraud and pharmaceutical fraud be prosecuted under the False Claims Act?


1. What kinds of activities constitute Pharmaceutical Fraud?

There are many ways in which large pharmaceutical companies defraud our government and the taxpayers. These include attempts by these large corporations to tap into Medicaid reimbursements to which they are not entitled and to influence members of the medical community, and particularly physicians, physicians' assistants and nurses, to prescribe certain drugs for 'off-label' or non-indicated uses.

2. What is our government doing about Pharmaceutical Fraud committed by national and multi-national drug companies?

Unfortunately, not enough. The pharmaceutical industry has grown by leaps and bounds in the past three decades, and it has become accustomed to influencing the government into relaxing its standards for enforcement of basic pharmaceutical marketing practice laws. They have arguably the strongest lobby in the business world: there are more lobbyists for pharmaceutical companies than there are members of Congress. The biggest companies are represented by large Washington D.C. law firms which often hire regulatory experts directly from the very agencies that are supposed to be protecting the consumer.

Recently, in large part due to public pressure as well as pressure from some members of Congress, outgoing HHS Inspector General Janet Rehnquist announced Compliance Guidelines for pharmaceutical marketing and promotional practices. Many of the prohibited practices have been accepted practices in the pharmaceutical industry, it will be interesting to see how enforcement proceeds. The compliance guide states that pharmaceutical companies, at the risk of prosecution, must not:

  • Make payments to health plans of pharmacy benefit managers to encourage the use of their products;
  • Link research and education grants to product promotions;
  • Pay physicians to conduct research that serves only as a "pretext to generate prescriptions of a drug;"
  • Pay physicians to allow their sales representatives to observe patients;
  • Pay physicians to listen to promotional campaigns from sales representatives; or
  • Report fraudulent data to Medicaid or Medicare in order to increase income.

3. What are some other examples of health care fraud?

There is a variety of medical fraud, and much of it goes undetected. Few people realize, for example, that only about 20% of Medicare payments go to physicians. The rest goes, for the most part, to providers who are not physicians, including hospitals, home health agencies, nursing homes, clinical laboratories, medical equipment companies and ambulance companies. All of these entities are able to bill Medicare directly and they have been known to find ingenious ways to bill for products and services that are not provided, or at least not provided at the level for which government is paying.

Another example would be a nursing home that does not provide the level of care for which it is compensated. Each Medicare invoice from a long term health care facility requires a certification that the provider has met all applicable state and federal regulations. To the extent that the provider is cutting corners - particularly as those cost-cutting measures impact patient care - the long term care facility may be fraudulently inducing Medicare to pay.

Another example is the Anti-Kickback statute, a federal law that provides for both criminal and civil penalties for inducing Medicare payments by means of illegal remuneration. The law also makes illegal certain kinds of referrals that result in compensation or value to the source of the referral.

4. Can health care fraud and pharmaceutical fraud be prosecuted under the False Claims Act?

In most cases, if an insider or employee has information about health care or pharmaceutical fraud, that employee can, after reporting the fraudulent activity, file a lawsuit on behalf of the government pursuant to the False Claims Act. A significant percentage of the cases filed under the act every year relate to health care fraud and usually involve Medicare or Medicaid or both.