With the pharmaceutical industry generating nearly $200 billion in revenue each year, it’s needless to say that there are immense possibilities for fraud here! And as the industry grows by leaps and bounds, fraud is a growing concern not to be taken lightly.

Fraud in the pharmaceutical industry can pose a grave risk to the health of several patients. Fraud perpetrators also cause the government losses by eating away at taxpayer money.

It’s hard list all the different kinds of pharmaceutical frauds, but we have explained here 5 common types.

Best Price Fraud

The Medicare Rebate Program ensures that tax payers get to pay lowest prices on prescription drugs. However, under the Medicaid/Medicare rebate system, drug manufacturers are responsible for accurately reporting the best prices for all drugs. Once manufacturers give their best price for a drug, they are required to provide rebates to compensate for drugs purchased above the stated price. As such, there is great potential for fraud on the part of pharmaceutical companies.

Best prices are supposed to include grants, discounts, coupons, and other incentives originally meant for consumers. Drug manufacturers have a huge incentive to falsely report best prices and thus decrease their total rebate liability.

As much as it is a serious type of fraud, it is also difficult to discover and prosecute without the help of whistleblower lawsuits.

Off-Label Marketing Fraud

Pharmaceutical drugs are highly regulated by federal and state laws. In the US, drugs have to be approved by the FDA (Food and Drug Administration) before being marketed and sold to the public. The FDA determines which medical conditions a drug can be used to treat, and subsequently allots the drug a ‘label’ or ‘indication’. In accordance with federal law, pharmaceutical companies may only market or promote drugs for the specific uses approved by the FDA.

In simple terms, off-label marketing involves marketing drugs for uses other than those approved by the FDA (Food and Drug Administration). This type of fraud is actually misrepresentation of how a drug can be safely used. While this puts patients at risk, it is also a loss of taxpayer dollars.

Illegal Kickbacks Fraud

In this type of fraud, drug manufacturers bribe healthcare providers into prescribing particular medications to patients. Pharmaceutical companies may also offer financial incentives to hospitals so as to induce them to use their drugs. Check out the various forms of kickbacks:

• Free drug samples that are then sold by doctors to patients
• Bonus payments
• Joint business ventures between concerned parties
• Phony drug trials and research grants
• Payment for serving on advisory boards
• Payment for attending lectures, meetings, and conferences
• Expensive gifts
• Lavish meals
• Free vacations
• Tickets to entertainment events

Paying kickbacks to healthcare professionals is illegal under rules governing Medicaid and Medicare. Most importantly, this type of fraudulent behavior often persuades doctors to think of their financial needs first. As a result, they may prescribe drugs that are less effective or untested, putting the health of their patients at risk.

Note that either party might be falsely accused of this type of fraud. In such an event, it’s advisable to hire a Civil Investigative Demand defense lawyer in TX or practicing locally to guide you through everything.

Inflating Price Fraud

Based on information provided by pharmaceutical companies, state Medicaid and Medicare programs determine a figure known as AWP (Average Wholesale Price) for all drugs. The amount the government will actually pay for those drugs is further calculated based on the AWP.

A common type of fraud is for pharmaceutical companies to inflate the AWP and use the inflated costs to induce pharmacists, Pharmacy Benefits Managers, group purchasing organizations, and insurers into buying their products with the help of kickbacks. By doing so, drug manufacturers increase the difference between the actual price of a drug and the amount paid by the government for the same.

Pharmaceutical Benefits Manager Fraud

Pharmaceutical Benefits Manager (PBM) companies first started with the aim to help insurance companies manage claims for prescription drugs. PBMs have taken on other roles in recent years such as purchasing drugs from pharmaceutical companies in bulk, negotiating discounts and rebates with them, and cost-controlling drug formularies. Other services provided by PBMs include mail-order pharmacies and online refill requests.

PBMs have lucrative contacts with government healthcare insurance programs and rake in hundreds of millions of dollars through the varied services they provide. Again, the potential for fraud here is huge, and PBMs have been embroiled in False Claims cases for violating contractual responsibilities, offering kickbacks, illegal rebate and discount agreements, switching medications, and more.

Conclusion

Given that there are so many players in the pharmaceutical industry, the amount of fraudulent activity that goes on undiscovered is unfathomable! With this list, you now know of the most common types of pharmaceutical frauds, so watch out for them and do take the right action if you suspect anything wrong.