The pharmaceutical industry has been repeatedly involved in fraud of all types and whistleblowers have unique powers to disclose fraud to the government. 

Pharmaceutical fraud includes activities which lead to false claims being submitted to government insurers, such as Medicare or state Medicaid programs, in violation of the Federal and state False Claims Acts.

Pharmaceutical fraud is a serious issue that can have serious consequences for both patients and the industry as a whole. And it can come in many different forms, including:

  • Off-label marketing
  • Price fixing
  • False advertising
  • Distribution of unapproved or substandard drugs
  • Kickbacks to healthcare providers
  • And more

Whistleblowers have been instrumental in combating health care fraud and helping to improve patient safety. Without their bravery and willingness to speak out, many instances of fraud may have never come to light.

In this article, we will explore the most common types of pharmaceutical fraud reported by whistleblowers and the important role that whistleblowers play in exposing and preventing this type of fraud.

At Jeff Newman Law, we specialize in representing whistleblowers in pharmaceutical fraud cases, and we have a long track record of recovering multi-million dollar settlements on behalf of our whistleblower clients. 

Get in touch today for a free confidential assessment of whether you might have a potential pharmaceutical fraud lawsuit that could result in a whistleblower award:

pharmaceutical company

Types of pharmaceutical fraud

Off-Label Marketing

Prior to any drug’s approval for use, the drug has to first be approved by the Food and Drug Administration (FDA). The FDA specifies which conditions can be treated by a certain drug. This is known as the “label” of the drug.

Off-label marketing, also known as off-label promotion or off-label use, occurs by promoting or prescribing a drug for uses that have not been approved by regulatory agencies such as the FDA. 

While doctors may prescribe drugs for off-label uses using their professional judgment, it is illegal for pharmaceutical manufacturers to promote or market their products for off-label uses under the Food Drug and Cosmetic Act (FDCA).

Why might a drug be prescribed for off-label use? There are several legitimate reasons. For example, a drug that has been approved for one condition may also be found to be effective in treating other conditions. 

In these cases, doctors may prescribe the drug for the additional uses based on their clinical judgment and the needs of their patients.

However, the drug manufacturers, or pharmaceutical companies, are not allowed to promote drugs for these off-label uses because they have not been tested and approved for these specific indications.

Off-label marketing can be harmful to patients because it can lead to the prescription of drugs that have not been proven to be safe and effective for the particular use being promoted. It can also lead to overuse or inappropriate use of drugs, which can contribute to the development of antibiotic resistance and other public health problems.

Examples of off-label marketing in the pharmaceutical industry include promoting drugs for uses that have not been approved by the FDA, misrepresenting the safety or effectiveness of a drug for off-label uses, and providing incentives to healthcare providers to prescribe drugs for off-label uses.

Because of the significant harm that can result from off-label marketing, a pharmaceutical company that is found to be engaging in off-label marketing directly violates the False Claims Act, and can face fines, criminal charges, and exclusion from participating in government healthcare programs. 

Individual employees involved in off-label marketing may also face personal legal consequences.

Medicaid Best Price Fraud

In essence, “best price” refers to the fact that a pharmaceutical company must give state Medicaid programs the best price that company offers to nearly any other purchaser of the drug.

Because the Medicaid program does not directly purchase prescription drugs and provide them to patients, the government enforces the “Best Price” rule through a system of price reporting to the Centers for Medicare and Medicaid Services (“CMS”), the organization responsible for managing the Medicaid and Medicare programs, and through mandatory rebates that the manufacturer must pay to the Medicaid programs.

Sometimes, however, pharmaceutical companies will offer their drugs at a lower cost to other customers in order to ensure their drugs are prescribed more often. These discounts are usually concealed from the government. 

By manipulating their “best price” to lower the amount they must reimburse to state Medicaid programs, pharmaceutical companies can defraud Medicaid and violate the False Claims Act.

Illegal Kickbacks

Pharmaceutical companies sometimes lobby for their product’s use by providing certain improper incentives to medical professionals, including doctors. Offering cash, gifts, vacations, sponsored retreats or anything of similar nature to doctors is fraud and subject to the Federal Anti-Kickback statute.

Kickbacks are illegal under federal law because they can distort medical decision making and lead to the prescription of drugs or devices that are not in the best interest of the patient.

Other examples of kickbacks provided by pharmaceutical manufacturers include:

  • Providing direct payments to healthcare providers in exchange for prescribing or promoting a particular drug,
  • Offering discounts or rebates to providers who prescribe or promote a high volume of a particular drug, and
  • Providing funding for continuing education programs or research projects in exchange for prescribing or promoting a particular drug.

Whistleblower cases have proven to be an effective way of fighting against pharmaceutical fraud. According to reports, over $19 billion has been charged to different companies for violations of the Federal and state False Claims Act and the Federal Anti-Kickback Statute.

The top twenty largest settlements under the False Claims Act are related to healthcare. The biggest whistleblower settlement in the US cost the pharmaceutical giant Pfizer $2.3 billion in September of 2009.

Billing for Brand

“Billing for brand” is a type of health care fraud that occurs when a healthcare provider bills a payer (such as private insurance companies or Medicare) for a more expensive brand-name medication, but instead dispenses a cheaper generic drug to the patient. This type of fraud is also sometimes referred to as “generic substitution fraud.”

Here’s an example: a healthcare provider writes a prescription for a brand-name medication, but instead of filling the prescription with the brand-name drug, the pharmacist dispenses a generic version of the medication. The healthcare provider then bills the payer for the more expensive brand-name drug, pocketing the difference in cost.

This type of healthcare fraud can occur in various settings, including hospitals, pharmacies, and medical offices. In some cases, the healthcare provider may not be aware that they are committing fraud, as they may have been misled by a pharmaceutical sales representative or a representative from the pharmaceutical company.

Billing for brand is a serious issue, as it can lead to inflated healthcare costs and can compromise patient care. 

medical education

Manufactured Compound Drugs Fraud

Manufactured compound drugs fraud refers to the fraudulent production or marketing of compounded drugs.

Compounded drugs are medications that are prepared by a pharmacist by combining, mixing, or altering ingredients to create a medication tailored to the specific needs of an individual patient.

Manufactured compound drugs fraud can occur in a variety of ways, including:

  • Creating and marketing compounded drugs as a substitute for FDA-approved drugs without proper evidence of safety and efficacy;
  • Misrepresenting the ingredients or dosage of compounded drugs;
  • Failing to follow proper compounding techniques and standards, which can lead to contaminated or ineffective drugs; and
  • Billing payers (such as Medicare) for compounded drugs that were not actually dispensed to patients.

Manufactured compound drugs fraud can compromise the safety and effectiveness of the medications being produced and can lead to inflated healthcare costs.

Illegal drug-switching

Illegal drug-switching is a type of health care fraud where one medication is substituted for another, without the knowledge or consent of the patient or prescribing healthcare provider. 

This type of fraud can occur for various reasons, including to save money, to promote the use of a particular medication, or to exploit the patient’s insurance coverage.

Here are some examples of illegal drug-switching:

  • Substituting a generic medication for a brand-name medication without the knowledge or consent of the prescribing healthcare provider;
  • Substituting a cheaper medication for a more expensive one without the knowledge or consent of the prescribing healthcare provider;
  • Misrepresenting the ingredients or dosage of a medication; and
  • Failing to disclose that a medication has been changed or substituted.

Illegal drug-switching can compromise the safety and efficacy of the treatment being provided to the patient and also lead to unnecessary costs and complications if the substituted medication is not appropriate for the patient’s needs.

Health care providers are required to carefully evaluate any changes to a patient’s medication regimen and to fully disclose any substitutions to the patient and the prescribing healthcare provider.

Misuse of the 340B drug discount program

The 340B drug discount program is a federal program that requires pharmaceutical manufacturers to provide discounted drugs to eligible healthcare organizations and providers serving uninsured or low-income patients. It was created to help these organizations and providers stretch their resources and provide more comprehensive care to their patients.

Misuse of the 340B drug discount program occurs when an organization or provider that is enrolled in the program fails to follow the program’s guidelines and requirements, or when an organization or provider that is not eligible for the program fraudulently enrolls in the program and receives discounted drugs.

Misuse of the 340B drug discount program can occur in several ways:

  • Dispensing discounted drugs to patients who are not eligible for the program, such as patients with private insurance or patients who are not low-income;
  • Failing to maintain accurate records and documentation of the drugs dispensed under the program;
  • Failing to adhere to the required patient eligibility requirements for the program;
  • Billing payers (such as private insurance companies or Medicare) for both the discounted and full price of the drugs dispensed under the program.

Misuse of the 340B drug discount program can lead to inflated healthcare costs and can undermine the integrity of the program.

Medicare Part D Fraud

Medicare Part D is a federally-funded prescription drug program for Medicare beneficiaries. It is administered by private insurance companies, and it provides coverage for prescription drugs that are not covered under Medicare Part A or Part B.

medicare

Medicare Part D fraud occurs when an individual or entity defrauds the Medicare Part D program by submitting false or misleading information in order to receive Medicare benefits or payments to which they are not entitled.

It can take many forms, including:

  • Billing Medicare for prescription drugs that were not actually dispensed to patients;
  • Charging Medicare for more expensive brand-name drugs when generic drugs were dispensed;
  • Submitting false or fraudulent claims for prescription drugs that were not medically necessary; and
  • Altering prescription orders or creating false prescriptions in order to receive Medicare benefits or payments.

Fraud by Pharmacy Benefit Managers (PBMs)

Pharmacy Benefit Managers (PBMs) are third-party organizations that administer prescription drug benefits for insurers, employer health plans, and other payers. They negotiate and manage contracts with pharmacies, pharmaceutical manufacturers, and other healthcare providers. They are also responsible for processing and paying claims for prescription drugs.

Fraud by PBMs occurs when PBMs engage in actions that result in improper or illegal payments or benefits. Examples include:

  • Charging payers (such as Medicare) higher prices for prescription drugs than the PBMs actually paid to the pharmacies or manufacturers;
  • Receiving kickbacks or other financial incentives from pharmaceutical manufacturers in exchange for promoting their drugs;
  • Failing to accurately report their activities or financial arrangements to payers;
  • Misrepresenting the terms of their contracts with pharmacies or other healthcare providers.

Clinical trials manipulation

Clinical trials are research studies that are conducted to evaluate the safety and effectiveness of new medical treatments, devices, or interventions. Clinical trials are a crucial step in the process of bringing new medical products to market because they provide the evidence needed to demonstrate the safety and effectiveness of these products.

Clinical trials manipulation involves the fraudulent manipulation or falsification of clinical trial data or results in order to secure FDA approval for a medical product.

There are many ways this can occur, but here are a few common examples:

  • Falsifying or altering data or results in order to make a product appear safer or more effective than it actually is;
  • Failing to disclose negative or adverse results from clinical trials;
  • Misrepresenting the qualifications or experience of clinical trial investigators;
  • Failing to follow proper protocol or procedures during clinical trials.

Clinical trials manipulation can compromise the integrity of the regulatory process and can put the safety of patients at risk. It is important for clinical trial sponsors, investigators, and other stakeholders to follow ethical guidelines and to accurately report the results of clinical trials to the FDA. 

About Jeff Newman Law

At Jeff Newman Law, we specialize in representing whistleblowers in pharmaceutical fraud cases, and we have a long track record of recovering multi-million dollar settlements on behalf of our whistleblower clients. 

Get in touch today for a free confidential assessment of whether you might have a potential pharmaceutical fraud lawsuit that could result in a whistleblower award: