Opinion: Big Pharma Has Defrauded $30B from States, Federal Government: Report

By Morgan Korn | Daily Ticker, September 27, 2012

States and the federal government are taking a tougher stance against the pharmaceutical industry and have collected a record amount of money from drug companies this year according to a new report issued by consumer lobbying group Public Citizen.

Big Pharma has swindled $30 billion from states and the federal government for nearly two decades says Public Citizen's Dr. Sammy Almashat. States are fighting the pharmaceutical industry over a range of allegations including overcharging taxpayer programs like Medicare and Medicaid and illegally marketing their drugs to patients. Drug companies are sometimes inflating the cost of their drugs by as much as 60 or 70 times the real value of that drug, according to Almashat.

Many states are facing severe budgetary constraints and have been increasing their enforcement efforts against drug companies to reap additional revenue. More than $6.6 billion has been recovered through mid-July by both the federal government and states.

"Since 2009 state governments have finalized more than twice as many settlements, for more than six times as much money, as they had from the previous 18 years combined," the report said. GlaxoSmithKline (GSK), Johnson & Johnson (JNJ) and Abbott Labs (ABT) accounted for two-thirds of the financial penalties paid to state governments and Washington, according to the report.

In July GlaxoSmithKline, the UK's largest drug manufacturer, pleaded guilty to criminal charges and agreed to a $3 billion settlement with states and the U.S. government over accusations that it improperly promoted its drugs for unapproved uses and failed to report safety data. Almashat says 50,000 to 100,000 patients died from using Glaxo's blockbuster diabetes drug Avandia because the company did not report studies that showed an increased risk of heart attack and other fatal side effects.

"In these cases it's not only defrauding taxpayer programs at billions of dollars it's also putting patients' lives in danger," Almashat says in an interview with The Daily Ticker.
GlaxoSmithKline CEO Sir Andrew Witty said of the settlement:

"Whilst these originate in a different era for the company, they cannot and will not be ignored. On behalf of GSK, I want to express our regret and reiterate that we have learnt from the mistakes that were made. We are deeply committed to doing everything we can to live up to and exceed the expectations of those we work with and serve."

Glaxo's settlement was the largest in U.S. history, eclipsing the $2.3 billion fine Pfizer paid in 2009 for over-marketing its drugs including the painkiller Bextra.

"We are seeing systematic fraud," he says. "Almost every drug company has been involved in at least one settlement with the federal or state governments."

GlaxoSmithKline has been involved in as many as 20 settlements and could be regarded as a "repeat offender" Almashat notes. The federal government and states may be announcing a record number of settlements with drug companies but the financial penalties are not stopping the unlawful action.

"It has been going on for years and ultimately only results in slaps on the wrist," he says. "Every year there is a new billion dollar settlement. Payouts are only a fraction of the profits that are generated by the fraudulent activity. Crime does pay in these cases."

To end this continual cycle of wrongdoing, Almashat says the government needs to take a new tactic with drug makers: criminally prosecute executives involved in the fraud. Financial penalties paid by drug companies also need to align with the profits companies reap from improper drug marketing and pricing fraud.