Pharmaceutical sales, qui tam cases and whistleblowers: How drug companies may be liable under the False Claims Act
Whistleblowers have brought qui tam cases against pharmaceutical companies for Medicare fraud and Medicaid fraud involving kickbacks, off-label marketing and other improper practices.

Pharmaceutical companies may be liable under the False Claims Act for Medicare and Medicaid fraud in any case where the government loses money directly or indirectly. This would include practices such as:

• paying kickbacks and inducements to physicians, hospitals and pharmacists to prescribe or otherwise favor their drugs;
• engaging in off-label marketing;
• misreporting the “best price,” the “federal ceiling price” or other benchmark prices  that pharmaceutical companies report to the Medicare and Medicaid programs;
• overcharging for “340B” program drugs;
• manufacturing or diverting substandard or tainted drugs.
• Providing false data to the Food and Drug Administration or withholding negative data from the FDA about the efficacy of a pharmaceutical drug or medical device in clinical research trials to get FDA approval to sell and market the pharmaceutical drug or medical device.

Pharmaceutical companies have paid more than $3 billion to the federal government and individual states as a result of False Claims Act (qui tam) lawsuits for Medicare and Medicaid fraud that were brought by whistleblowers. One of the more recent Medicaid fraud settlements involved Merck, which paid $650 million to settle two qui tam lawsuits brought by whistleblowers. The whistleblowers, joined by the U.S. Department of Justice and state governments, alleged that Merck overcharged the Medicaid program for prescriptions of Zocor and Vioxx for Medicaid recipients and paid kickbacks to hospitals to prescribe Merck's Pepcid heartburn medication rather than cheaper alternatives. In 2005, Seronon S.A. and its U.S. subsidiaries paid a total of $704 million to settle several whistleblower cases and related criminal charges. The government and whistleblowers alleged that Serono paid kickbacks to doctors to prescribe Serostim, submitted fraudulent bills for off-label use of Serostim and engaged in other illegal schemes to promote, market and sell Serostim.

Other drug companies that have settled qui tam lawsuits include TAP Pharmaceuticals, AstraZeneca, Bayer, GlaxoSmithKline, Pfizer and Schering-Plough Corp. Additional pharmaceutical companies are under investigation for possible False Claims Act violations and face qui tam lawsuits  A federal official recently said the government has about 150 pharmaceutical fraud cases pending that involve over 500 different drugs.

Pharmacy benefits management companies also have come under increasing scrutiny as a result of qui tam lawsuits. Qui tam lawsuits have been filed against three of the largest pharmacy benefits management companies – Caremark Rx Inc., Medco Health Solutions Inc. and Express Scripts Inc. – for defrauding health plan beneficiaries, including Medicaid and other federal and state health insurance recipients.

Phillips & Cohen has extensive expertise and experience in representing whistleblowers in qui tam lawsuits against pharmaceutical companies. In perhaps its most prominent qui tam case involving Medicare fraud by a drug company, Phillips & Cohen represented two whistleblowers whose qui tam lawsuit was part of a settlement by TAP Pharmaceuticals. The pharmaceutical company paid $875 million to settle two whistleblower lawsuits and related criminal charges, making it the nation’s largest Medicare fraud settlement.

Part I    --  Kickbacks to doctors from pharmaceutical companies

Part II   --  Off-label marketing and qui tam lawsuits