The Justice Department says it has recovered a record $2.5 billion in health care fraud over the past year — mostly with the help of drug company employees who blow the whistle to the federal government.
The big-ticket settlements mostly came from Pfizer, AstraZenica and Novartis, pharmaceutical companies accused of questionable marketing practices or overbilling federal insurance programs.
"This administration has made health care fraud a priority," said Tony West, assistant attorney general for the department's civil division. "When you look at health care fraud and the recoveries that we've been able to obtain over the last two years, it's been about $4.6 billion. That's more money recovered in a two-year period than at any other time in history."
These companies paid some of the biggest settlements and judgments to the federal government in fraud cases during the fiscal year ending Sept. 30, according to the Justice Department:
Pfizer Inc. paid $669 million plus interest "to resolve claims that the company illegally promoted the drugs Bextra, Geodon, Zyvox and Lyrica for uses not approved by the FDA, and paid kickbacks in connection with its marketing of these and nine other drugs." The total settlement added up to $2.3 billion in damages, fines and forfeitures. Whistle-blowers' share: $106 million
AstraZeneca paid $302 million over claims that it marketed an antipsychotic drug, Seroquel, for uses unapproved by the Food and Drug Administration and not covered by federal and state Medicaid programs. (The company also paid out $218 million to participating states.) Whistle-blowers' share: $45 million
Novartis Pharmaceuticals Corp. paid $192.7 million in two settlements — also primarily over drugs marketed for uses not approved by the FDA and not covered by Medicaid. In total for the settlements, the company paid $495 million in damages, fines and forfeitures. Whistle-blowers' share: $33.5 million
The Health Alliance of Greater Cincinnati and The Christ Hospital, a former member hospital, shelled out $108 million over claims that the hospital gave out kickbacks to cardiologists. "The United States alleged that TCH provided cardiologists with exclusive time at TCH's Heart Station for which their private practices received compensation in exchange for the cardiologists referring patients to TCH for coronary arterial bypass graph procedures and catheter laboratory services." Whistle-blower's share: $23.5 million
Teva Pharmaceuticals paid $100 million "to resolve allegations that Teva knowingly reported inflated drug prices that caused providers to submit inflated claims to the Medicaid program." Whistle-blower's share: $25 million
Source: Justice Department
The Justice Department is leveraging the False Claims Act, a law from the Civil War era that helps the federal government yank back money when it's been overcharged by contractors.
The law has worked so efficiently in the health care sector that the government is trying to enlist whistle-blowers in all sorts of ways. The Securities and Exchange Commission recently developed a program where corporate insiders can share in the financial rewards if they provide tips on fraud to the federal government, just as the Justice Department initiative works.
Vermont Sen. Patrick Leahy played a key role supporting the fraud recoveries in Congress.
"I applaud the Department of Justice for this historic recovery," Leahy said in a prepared statement. "It not only returns billions of dollars to the American people; it also sends a powerful message that those who defraud the government will be punished."
'One Of The Best Tools We Have'
Iowa Sen. Charles Grassley helped expand the False Claims Act two decades ago.
"The False Claims Act is one of the best tools we have against fraud in government," Grassley said. "And as the author of the upgrade of that legislation in 1986, quite frankly I never anticipated it would be the really big tool that it's turned out to be."
Grassley is often a vocal critic of the government. But he says the Justice Department strategy is really working, with one exception: It takes too long.
Lawyers who represent whistle-blowers agree.
"Right now, simply put, the U.S. government is being outgunned and outmanned by the people who are stealing from it," said Patrick Burns, a spokesman for Taxpayers Against Fraud.
He said the Obama administration is taking the issue seriously, but it needs more resources to hack away at a backlog of some 1,000 cases.
"If we're really serious about hammering down on fraud, the most powerful message that we could send is to lawyer up at the U.S. Department of Justice," Burns said.
The Criminal Element
Experts who follow the issue say the settlements can never match up to the billions of dollars in profit that drug companies make before the Justice Department ever comes calling.
"We probably cannot hit these companies up hard enough financially for them to change the economics of fraud," Burns said. "But what we can do is start putting key executives in jail or making sure they can never work again."
Government watchdogs recently signaled they are open to barring pharmaceutical executives from doing business with the federal government if they knew about a fraud in the works.
And lawyers at the Justice Department said they are working on the issue, too. Last year they charged the former president of a major medical device company, Stryker Biotech, with making false statements to the U.S. Food and Drug Administration.
And the former top lawyer at GlaxoSmithKline now faces as many as 20 years in prison for allegedly lying in another health care fraud investigation.