GlaxoSmithKline PLC’s $750 million settlement of federal civil and criminal charges involving adulterated drugs is the latest in a string of health care fraud settlements of at least a half-billion dollars during the past five years.
GlaxoSmithKline’s settlement with the Justice Department, announced Oct. 26, puts it at No. 4 on the list of top False Claims Act settlements involving health care or pharmaceuticals during that time frame. The company agreed to plead guilty to charges of introducing adulterated drugs for delivery into interstate commerce. Its subsidiary, SB Pharma Puerto Rico, made the drugs at a now-closed Cidra, Puerto Rico, facility from March 2003 to October 2004, according to the charges.
Pfizer Inc.’s $2.3 billion settlement in September 2009, which involved charges of off-label marketing of the painkiller Bextra, tops the list. Also in the billion-dollar club is No. 2-ranked Eli Lilly and Co., which agreed in January 2009 to plead guilty and pay $1.415 billion for off-label marketing of Zyprexa, an anti-psychotic drug. In June 2006, Tenet Healthcare Corp. agreed to the third-largest Justice Department settlement, $900 million, for fraudulent billing practices.
The top 10 settlement list ranges from a $515 settlement by Bristol-Myers Squibb Co. to Pfizer’s $2.3 billion deal, according to an analysis of Justice Department announcements and a database maintained by the False Claims Act Legal Center. The Taxpayers Against Fraud Education Fund runs the center.
“There’s an increased level of interest from both state and federal prosecutors,” in picking up health care and pharmaceuticals whistleblower cases, said Dan Miller, of counsel to Philadelphia’s Berger & Montague. Before joining the firm this year, Miller worked on numerous whistleblower cases while serving as a deputy attorney general for the Delaware Department of Justice for more than 16 years.
There’s a momentum in terms of the number and the size of the settlements and in terms of the willingness of the justice department to bring criminal charges against pharmaceutical companies, said Erika Kelton, a Washington and San Francisco lawyer at whistleblower firm Phillips & Cohen. Kelton was the lead attorney in the whistleblower case against Pfizer.
Kelton also noted that the major health care and pharmaceuticals whistleblower cases almost always end in settlements. “Most are resolved without trial,” she said.
Miller said pharmaceutical companies, in particular, engaged in more blatant kickback and off-label marketing at the start of the decade, but now they’re subtler.
“You have companies that have figured out that the government is watching,” Miller said. “Instead of blowing directly through a red light, they’re speeding through a yellow light. The conduct is still occurring, it’s just more subtle than it was.”
Five of the bottom six on the top 10 list of health care-related False Claims Act settlements of the past five years involve pharmaceutical companies. They are, in descending order of settlement amount:
• The former Serono S.A.’s (now Merck Serono S.A.) $704 million settlement in October 2005 to resolve criminal and civil charges concerning illegal promotion of its AIDS wasting drug Serostim.
• Merck & Co. Inc.’s $650 million deal in February 2008 for Medicaid pricing fraud and kickbacks to doctors. Several drugs were involved, including the arthritis pain drug Vioxx and the cholesterol drug Zocor.
• Allergan Inc.’s $600 million agreement this past September for off-label promotion of its biological product, Botox Therapeutic, which has U.S. Food and Drug Administration approval to treat certain muscular problems like involuntary eyelid muscle contraction.
• New York state and New York City’s joint $540 million settlement in July 2009, for Medicaid claim fraud.
• AstraZeneca’s $520 million agreement in April of this year to resolve charges that of off-label promotion of the anti-psychotic drug Seroquel.
• Bristol-Myers Squibb Co.’s September 2007 agreement to pay more than $515 million for off-label marketing kickbacks and pricing fraud for dozens of drugs.
Although Miller believes pharmaceutical companies are being more careful about their marketing practices, he sees a lot of potential for the type of adulterated manufacturing case that led to the GlaxoSmithKline settlement.”That’s an area that’s been a concern for state and federal prosecutors,” Miller said.
He also predicts that the settlement will encourage other potential whistleblowers to come forward with claims.
“People who work at these companies on the manufacturing side will become aware they can blow the whistle on their companies,” Miller said. “This is a groundbreaking settlement. Without a doubt, it opens up a whole new area that has previously not been heavily explored.”
Sheri Qualters can be contacted at [email protected].
