Pharmaceutical fraud is when pharmaceutical companies engage in illegal, fraudulent activities to the detriment of patients and/or insurers. Examples include counterfeit drugs that do not contain the active ingredient, false claims in packaging and marketing, suppression of negative information regarding the efficacy or safety of the drug, and violating pricing regulations.
Definition Pharma fraud refers to:
Trade involving counterfeit drugs: the practice of falsely claiming to be an authorized product of another firm, including but not limited to the use of another firm's mark to deceive the public. Deliberately manufacturing and marketing products that do not contain the required active ingredients or not contain the right amount of active ingredient. Packaging and labeling of drugs that make false claims regarding medical properties, including but not limited to the active medical ingredients, the date of expiration of products, or the methods of storage. Marketing of products using false claims regarding the efficacy of the product which will lead to the irrational use of medicines or deliberately failing to provide information about safety concerns of the product. Deliberate suppression of data, including evidence from clinical trials, that reveal adverse effects of the medicine. Serious compliance deficiencies with Current Good Manufacturing Practice (CGMP). Overbilling. Bait & Switch in which the purchaser receives a cheaper product at the retail level.
History Because of a lack of regulation and enforcement, the quality, safety and efficacy of both imported and locally manufactured medicines in many developing countries cannot be guaranteed. Subsequently, smuggling and illegal importation of drugs are common. Substandard and counterfeit drugs are then not only sold in these countries but also exported or re-exported. According to the World Customs Organization, counterfeit drugs are a $200 billion a year industry that kills hundreds of thousands of people annually.
Types of fraud
In the United States, there are several different schemes used to defraud the health care system which are particular to the pharmaceutical industry:
Good Manufacturing Practice violations Off-label marketing Best Price fraud Continuing Medical Education fraud Medicaid price reporting Manufactured compound drugs Kickbacks
GMP Violations These relate to the Good Manufacturing Practice (GMP) Regulations, which require manufacturers to have adequately equipped manufacturing facilities, adequately trained personnel, stringent control over the manufacturing process, appropriate laboratory controls, complete and accurate records, reports, appropriate finished product examination, and so on. Certain violations of the Good Manufacturing Practice Regulations may be the basis for a False Claims Act lawsuit.
Off-label marketing
Though physicians may prescribe drugs for off-label usage known as off-label marketing, the Food and Drug Administration (FDA) prohibits drug manufacturers from marketing or promoting a drug for a use that the FDA has not approved. If the drug's labeling includes information about its unapproved uses, or does not contain adequate directions for use, it may be considered "misbranded". The courts have agreed with the FDA that the Food, Drug, and Cosmetic Act (FDCA) requires information not only on how a product is to be used (e.g., dosage and administration), but also on all the intended uses of the product. In 2004, whistleblower David Franklin prevailed in a suit under the False Claims Act against Warner-Lambert, resulting in a $430 million settlement in the Franklin v. Parke-Davis case. It was the first off-label promotion case successfully brought under the False Claims Act in U.S. history. Oral statements and materials presented at industry-support scientific and educational activities may provide evidence of a product's marketed use. If these statements or materials promote a use that is inconsistent with the product's approved labeling, the product is misbranded under the FDCA for failure to bear labeling with adequate directions for all intended uses.
Best price fraud A drug's "Best Price" (BP) is a figure reported by the manufacturer to the Centers for Medicare & Medicaid Services (CMS) in quarterly reports under the Medicaid Rebate Program, and is used to calculate the Medicaid reimbursement rate. It is defined as the lowest price available to any wholesaler, retailer, provider, health maintenance organization (HMO), nonprofit entity, or the government. BP excludes prices to the Indian Health Service (IHS), Department of Veterans Affairs (DVA), Department of Defense (DOD), the Public Health Service (PHS), 340B covered entities, Federal Supply Schedule (FSS), state pharmaceutical assistance programs, depot prices, and nominal pricing. BP may include cash discounts and free goods that are contingent upon purchase, volume discounts, and rebates. The fraud occurs when the manufacturer falsely self-reports its Best Price.
Medicaid price reporting In order to decrease the amounts owed to states under the Medicaid Drug Rebate Program, some companies misrepresent material facts regarding the regulatory origin, status, Average Manufacturer Price (AMP), and/or BP of their brand name drugs. Despite the Government's reliance on manufacturers' good faith in order to charge manufacturers a unit rebate amount based upon the manufacturer's own representation of drug status, and price, some manufacturers have deceptively and fraudulently breached their duty to deal honestly with the Government.
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