Tuesday, January 25, 2011

Health Care and White Collar: Fraud Recoveries Come from Pharmaceutical Giants

In 2009, the Department of Health and Human Services and Department of Justice jointly created the Health Care Fraud Prevention & Enforcement Action Team ("HEAT"). The goal of the venture was and remains the prevention of waste, fraud, and abuse in programs such as Medicare and Medicaid. The program utilized task forces throughout the country dedicated to the prosecution and hopefully the eradication of health care fraud.

An HHS report claims that the HEAT program obtained 140 indictments in the last fiscal year against 284 defendants. Prosecutors obtained 726 convictions. (The reasons for a larger number of convictions than indicted defendants probably arises from cases already in the prosecutorial pipeline and those that resulted in negotiated pleas without indictments.) The average prison sentence was in excess of three years.

Most remarkable is the report's claim that the program obtained recovery of $4 billion of monies taken by fraud. An analysis of this amount reveals that the largest category of recovery is payment obtained fraudulent by large pharmaceutical companies that marketed drugs for uses not approved by the Food and Drug Administration.

Botox marker Allergan, Inc., agreed to pay the government $600 million to resolve criminal and civil charges stemming from its marketing of Botox as a treatment for headaches. The drug manufacturer Novartis agreed to pay $422.5 billion to resolve criminal and civil issues arising from its illegal marketing of pharmaceutical products for off label uses. Also, AstraZeneca paid $520 million to settle allegations that the company marketed its anti psychotic drug Seroquel for off label uses and also paid kickbacks to physicians for prescribing the drug.

In total, of the $4 billion collected, approximately half came from settlements with large drug manufacturers. In the future the HEAT task forces will no doubt continue to pursue the individual practitions of fraudulent medicine with the goal of financial recovery and prison time. However, it will be interesting to see if the approach taken against the pharmaceutical companies will dissuade future fraudulent conduct. If not, look for the next round of cases against big pharma to include indictments of management with the potential for significant prison terms.

For more about the report please see "Health Care Fraud Crackdown Nets $4 Billion," on CNNMoney.com, http://money.cnn.com/2011/01/24/news/economy/health_care_fraud/.

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