Posted May 29th, 2012

The Affordable Care Act created some desperately needed means to start controlling ever-rising health care costs. Many — like preventive care or delivery reforms — will take some time to realize savings. In contrast, new anti-fraud efforts look to be paying off right away, in amounts much bigger than expected.

The health reform law provided $350 million over ten years to increase anti-fraud investigation and enforcement resources for the Department of Justice (DOJ) and State Attorneys-General. The goal? Saving $6.4 billion over the next decade. Given that some estimate that fraud and waste cost as much as $60 billion a year, or $600 billion over a decade, saving one percent of that amount seems a pretty modest impact.

But wait! New estimates project that current or pending settlements of drug fraud litigation by the DOJ and the Attorneys-General will top $8 billion in FY2012 alone, according to the group Taxpayers Against Fraud. (See list below.) This is not the culmination of hundreds of lawsuits; it’s just the eight biggest. So it looks like this anti-fraud effort under the ACA will meet and then surpass its ten-year goal in less than two years!

To be fair, most of these eight drug fraud investigations were undoubtedly underway before the increased funding for anti-fraud efforts reached the DOJ and State Attorneys-General offices. But there is little doubt that providing these over-worked regulators with increased resources was a big help in increasing enforcement. DOJ probably has fewer lawyers working on all their pending drug fraud cases than some of the biggest drugmakers hire to defend a single lawsuit. But despite these disparities, these results show that very modest government investment in fighting fraud, coupled with hard work by government lawyers and whistleblowers, can pay off big.

For example, earlier this week drugmaker Abbott Labs in Chicago settled a civil and criminal investigation of their illegal promotion of the anti-convulsant drug Depakote as an unapproved treatment of dementia in seniors, and of various conditions in children. Abbott pleaded guilty to promoting these unapproved, or ‘off-label’ uses of Depakote, and agreed to pay $1.6 billion – one of the biggest settlements for the illegal promotion of a single drug.

There could be as many as a couple hundred pending whistle-blower lawsuits that are filed under seal and being investigated now by the federal or state regulators. These pending lawsuits may add up to billions of dollars of additional fines and settlements.

Some critics have warned that even billion-dollar fines are an inadequate deterrent when a drug company can make far in profits on illegally promoted sales of a drug.

For instance, the $1.4 billion record-breaking settlement with Eli Lilly in 2009 for illegal promotion of their antipsychotic drug Zeprexa was less than 5 percent of Lilly’s gross sales. Eight months later, DOJ shattered this record with an even bigger $2.3 billion settlement, which amounted to 14 percent of Pfizer’s gross sales of eight illegally marketed drugs (see here).

Similarly, this month’s $1.6 billion Depakote settlement is nearly 12 percent of the drug’s $13.8 billion in gross sales revenue from 1998 to 2008. Furthermore, DOJ is pioneering two mechanisms to deter future illegal conduct by Abbott, along with this hefty fine.

First, the Depakote settlement places Abbott on probation and imposes a corporate compliance and monitoring program, for five years. If Abbott violates the compliance agreement or significantly violates the law, the government can exclude Abbott, and all their drug products, from federal health care programs. That would cost Abbott billions in lost sales on numerous drugs.

The settlement also aims to hold Abbott’s corporate leadership personally accountable. Abbott’s CEO must personally certify compliance and the board of directors must review and report on compliance each year. If the CEO or the board is lax in these duties, they could be excluded from their positions at Abbott. And if CEO or board intentionally lie to the government to cover up any misconduct, they could face personal criminal liability under the federal False Statements Statute. (Find the plea agreement and related documents here.)

Sadly, Abbott’s illegal promotion of ineffective and dangerous uses of Depakote has both harmed and put at risk what is arguably the most vulnerable patient population – seniors suffering from dementia, who live away from their families in nursing homes. Undoubtedly millions of seniors were, and likely continue to be given Depakote inappropriately as a result of Abbott’s illegal promotional campaign.

Check back soon for more on (1) actions that Medicare and Medicaid can take to address the continuing effects on patients of illegal promotions of off-label use of drugs and (2) how the Arkansas AG fought prescription drug fraud, winning huge fines to plug the state’s Medicaid budget deficit.

Wells Wilkinson

Director, Prescription Access Litigation

Staff Attorney, Community Catalyst

Projected Drug Fraud Settlements in FY 2012, excerpted from the Taxpayers Against Fraud website.

A version of this blog was posted earlier on Health Policy Hub and Postscript. 

The National Coalition for Appropriate Prescribing (led by the Prescription Project - a sister organization to us here at Prescription Access Litigation) is working to pass the Physician Payments Sunshine Act, a transparency bill requiring pharmaceutical companies to publicly report their gifts and payments to doctors. The Senate version of the bill is
here and the House version is here.

Pharmaceutical and medical device industry marketing to doctors (well over $30 billion each year) takes the form of gifts, honoraria and other payments. This spending subtly and not-so-subtly induces doctors to prescribe newer and more expensive treatments, regardless of whether they’re better. This in turn drives up drug costs and puts patients at risk, because new and heavily marketed drugs are almost always more expensive, even though they are often no more effective than older, established therapies. Newer drugs may also have unknown side effects.

We believe the public deserves to know how much money individual physicians are accepting from industry. (Disclosure laws in Minnesota and Vermont reveal that many doctors receive industry payments of thousands or tens of thousands of dollars a year.) The Sunshine Act will benefit patients, payers, policy makers and taxpayers alike by creating transparency.

Key provisions include:

• Comprehensive and publicly available reporting of information down to the individual prescriber level;
• A low ($25) threshold for reporting; inclusion of all payments; and
• penalties for companies that don’t report.

Sign this petition today to ask your members of Congress to support these bills: http://www.thepetitionsite.com/1/sunshine

For more information:

• To learn more about industry payments to doctors click here
• For factsheets on the Sunshine Act House and Senate bills click here
• To see the organizations that are members of the National Coalition for Appropriate Prescribing click here

Sign the petition

Over at A Healthy Blog, our friends at Health Care For All (a member of the Prescription Access Litigation coalition) report today on the fight that is brewing in the Massachusetts legislature over a proposed ban on pharma gifts to physicians. They quote an article from yesterday’s State House News Service:

Pharmaceutical companies are attacking Senate President Therese Murray’s effort to block their firms from providing gifts, meals or trips to doctors, calling it an anti-business policy that would hobble efforts to deliver cutting-edge drugs to patients. In a letter to the chairs of the Legislature’s Economic Development and Emerging Technologies Committee, executives from Pfizer, Amgen, Abbot Bioresearch Center, Genentech, all of which have facilities in Massachusetts, ripped the gift ban as counter to Beacon Hill’s painstaking efforts to lure the life sciences industry, highlighted by Gov. Deval Patrick’s nearly year-old $1 billion incentives plan headed for legislative approval.

It’s somewhat odd to cast a gifts and lunches to doctors as being on par with a $1 billion state incentive plan — unless perhaps the gifts and trips and meals are worth more than $1 billion to the industry — after all, Massachusetts has dozens of teaching hospitals and a new health care law that means more and more people with health insurance. The prescriptions written as a result of a modest investment in gifts and trips and meals could easily garner more than a billion in new sales.

To learn more about the proposed gift ban, go visit the Massachusetts Prescription Reform Coalition.

CalPIRG, a member of Prescription Access Litigation’s coalition, released a new report last week, titled “Playing By Their Own Rules: An Analysis of Drug Company Gifts to Doctors”. As CALPIRG’s announcement describes:

CALPIRG released a new analysis today examining drug companies’ self-imposed limits on their marketing to doctors – efforts that include lavish wining-and-dining and thousands of dollars worth of gifts. The report, Playing By Their Own Rules: An Analysis of Drug Company Gifts to Doctors, finds that these limits are riddled with exceptions, and that some companies have evaded even the least restrictive limits on their marketing.

“Patients need to know that prescriptions are being written on the basis of science, not high-priced meals and upscale gifts,” said Michael Russo, Health Care Advocate with CALPIRG. “Strong limits on these marketing efforts are necessary to protect patients – and our research shows that the limits the drug companies have chosen for themselves amount to no limits at all.”

Drug company marketing showers doctors with fancy dinners and costly giveaways, aimed at convincing them to prescribe the latest, most expensive, least-tested drugs – forcing patients to pay top dollar, and subjecting them to potentially unknown side effects. Current California law requires drug companies to choose, and then abide by, dollar limits on the value of gifts and free meals they give to doctors as part of their marketing efforts.

But CALPIRG’s analysis shows that these “limits” often allow the companies to give as much as they wish. Key findings include:

• Drug companies fail to count some meals and other payments as “gifts,” and therefore they are not subject to the limit;
• Some companies reserve the right to exceed their limits if they so choose;
• Others assert that they are following a limit, but do not disclose what that limit actually is, while a few fail even to post their policies at all;
• Since 2005, 5 of the largest companies have raised their limits, by an average of $1,100 dollars per doctor per year.

“It’s disappointing that the drug industry hasn’t even been able to comply with their own rules,” said Russo. “We’ve let the foxes guard the henhouse long enough.”

When drug company marketing succeeds, it induces doctors to over-prescribe the newest, priciest drugs, inflating the cost of prescription drugs. Also, because the newest drugs have been on the market for the least time, they may have potentially unknown side effects.

“By playing by their own rules, the drug companies have let themselves get away with whatever they want,” said Russo. “It’s time we set a hard, enforceable limit on doctor gifts, and require those gifts to be publicly disclosed. Patients need to have confidence that when a doctor decides which drug to prescribe, drug company marketing isn’t part of the equation.”

CALPIRG’s analysis shows that some companies by all appearances are not complying with California law governing drug company marketing to doctors. “We urge the Attorney General to investigate our findings, and take appropriate action to make sure these companies follow the law,” said Russo.