Thursday, December 23, 2010

Medicare billing confidentiality allows huge fraud to persist

A recent article in The Wall Street Journal suggests that the confidentiality of doctors’ Medicare billing practices has allowed for instances of enormous fraud and abuse to go unchecked. The article highlights a number of top billers of Medicare, many of whose opulent lifestyles have been substantially funded by fraudulently misallocated taxpayer dollars.

Among those profiled is Christopher G. Wayne, known as “Rock Doc” and seen posing with celebrities Paris Hilton and Steven Tyler on his Myspace page. Dr. Wayne received more than $2.6 million from Medicare between 2007 and 2009, largely from an unusual combination of physical therapies that he provided and billed for.

The Journal article provides a number of other examples of grossly above-average Medicare billers, some of whom have received figures in the tens of millions of dollars from the Medicare program. Tellingly, all of the names generated in the article resulted from just a small sample of Medicare billing information (only 5% from 2008) that was made available to the Journal and the Center for Public Integrity.

There are many who share the opinion that the extreme confidentiality doctors currently enjoy with regards to their Medicare billing creates an environment excessively conducive to fraud. Additionally, almost all claims are paid out within 30 days, making overpayments difficult to recover. However, the Centers for Medicare and Medicaid Services (CMS) is in position to make substantially more effective use its database to identify fraud. According to Peter Budetti, the head of CMS's new antifraud arm, “fraud prevention is our new emphasis.”

Tuesday, December 21, 2010

Dey is fourth drug maker to settle inflated price fraud this month

Dey, a pharmaceutical manufacturer, has become the fourth drug maker this month to settle allegations involving reporting false and inflated drug prices.

Payment from the Medicare and Medicaid programs was based on the false inflated prices and, as a result, the government paid millions of claims for far greater amounts than it would have if Dey had reported truthful prices.

Dey will pay $280 million to settle the False Claims Act suit. On Dec.7, 2010, the Department announced settlements totaling $421.1 million involving similar allegations against three other manufacturers: Abbott Laboratories Inc., B. Braun Medical Inc. and Roxane Laboratories Inc.

The difference between the inflated amount the government paid and the actual price paid by health care providers for a drug is referred to as the “spread.” The larger the spread on a drug, the larger the profit for the health care provider or pharmacist who is reimbursed by the government.

Monday, December 20, 2010

Three drug companies pay $421 million to settle FCA suits

December has been a significant month in terms of False Claims Act recoveries from pharmaceutical companies.

Three drug makers - Abbott Laboratories Inc., Roxane Laboratories Inc. and B. Braun Medical Inc. - agreed to pay $421 million to settle claims that they defrauded federal health care programs by inflating the price of their drugs.

Drug companies are required to report the Average Wholesale Price of their products to the government and that figure is used to set reimbursement by Medicare, Medicaid and other programs.

In the case of these companies the actual price was often a fraction of the reported price, the government alleged, allowing doctors and pharmacists to pocket the difference. The practice amounted to "a kickback scheme funded by taxpayer dollars," said Assistant Attorney General Tony West. The Justice Department said abuse of the Average Wholesale Price was rife within the industry.

But it's not the only drug industry practice that is costing taxpayers millions of dollars.

On the same day that the settlements with those three manufacturers was announced, the Justice Department also announced an unrelated $41 million settlement with Abbott subsidiary Kos Pharmaceuticals Inc. on charges that it paid kickbacks to doctors and other health professionals to encourage them to prescribe or recommend the cholesterol drugs Advicor and Niaspan.

And only a week later came news of another settlement: Irish pharmaceutical manufacturer Elan Corporation and its U.S. subsidiary Elan Pharmaceuticals Inc. agreed to pay more than $203 million to resolve criminal and civil charges that they illegally promoted the epilepsy drug Zonegran.

The drug had received FDA approval for the treatment of partial epileptic seizures in adults over the age of 16. Elan promoted the sale of Zonegran for a wide variety of improper off-label uses including mood stabilization for mania and bipolar disorder, migraine headaches, chronic daily headaches, eating disorders, obesity/weight loss and seizures in children under the age of 16.

"Off-label promotion of pharmaceutical products undermines the FDA’s important role in protecting the American public by determining whether a drug is safe and effective for a particular use before it is marketed," said Tony West, Assistant Attorney General for the Civil Division. "Such illegal conduct by pharmaceutical companies also costs the government billions of dollars, and these civil settlements and the criminal plea agreement by Elan demonstrate that such conduct will not be tolerated."

Thursday, December 16, 2010

Report documents extent of drug companies' frauds

Does it seem as though every day there's another report of a drug company paying millions to settle allegations of off-label promotion, poor manufacturing practices or overcharging the government? It may not be your imagination.

A report issued by Public Citizen's Health Resource Group documents the scope of payments by pharmaceutical companies to resolve such allegations. Among the report's main findings:

- During the past 20 years $19.8 billion in penalties has been collected, 75 percent of that in the past 5 years.

- Four large pharmaceutical companies (GlaxoSmithKline, Pfizer, Eli Lilly, and Schering-Plough) accounted for more than half (53 percent or $10.5 billion) of all financial penalties imposed over the past two decades.

- The pharmaceutical industry now tops not only the defense industry, but all other industries in the total amount of fraud payments for actions against the federal government under the False Claims Act.

- Illegal off-label promotion of pharmaceuticals accounts for the largest amount of financial penalties levied by the federal government over the past 20 years. It can also be prosecuted as a criminal offense because of the potential for serious harm to patients.

- Whistleblowers are responsible for bringing to light the most egregious violations and for initiating the largest number of federal settlements over the past 10 years. From 1991 through 2000, qui tam (whistleblower) cases made up only 9 percent of payouts to the government, but from 2001 through 2010, they comprised 67 percent of total payouts.

Among the reasons for the huge figures are the increase in U.S. healthcare spending (over $2 trillion a year) and, much more troubling, the fact that drug companies and their sales staffs can make more money by bending or breaking the rules on off-label marketing. The report notes that although financial penalties are increasing, they "remain a very small fraction of company net profits and therefore do not provide a sufficient deterrent against further violations. Increased punishments may be needed, such as significantly larger financial penalties and, if appropriate, felony prosecution—including jail—for company executives engaging in criminal behavior."

Will Wall St. undermine SEC whistle-blower program?

Business lobbyists are working overtime to kill the new Securities and Exchange Commission whistle-blower program in a tried-and-true Washington way: Convince the agency to issue regulations that render the program ineffective. This warning comes in an article by attorneys Erika Kelton and Eric Havian, published in the Washington Post.

Comments on the proposed rules are due by December 17th but even before they were released, defense firms were issuing dire warnings and meeting with SEC officials to try to eviscerate the whistle-blower provisions of the Dodd-Frank financial reform law.

In a separate article posted on Truth-Out, Mr. Havian details the history of the False Claims Act whistle-blower program, which has achieved enormous success by promoting a partnership between qui tam whistle-blowers, their attorneys and government lawyers. He contrasts this with the IRS tax whistle-blower program, which does not promote (or allow) collaboration. The tax whistle-blower program is awash in a backlog of cases and has yet to pay a single whistle-blower award, despite the filing of thousands of submissions in the past four years. These two models provide a stark choice for the SEC as it sets up its program.

Don't Let Wall Street Get Away With It: Protect and Reward SEC Whistleblowers notes that corporate lobbyists and bureaucrats have predicted woeful consequences for whistle-blower programs in the past. The proven success of whistle-blower cases under the FCA is more persuasive than their doomsday rhetoric.

Tuesday, December 14, 2010

Will GOP slow CFTC's efforts to transform derivatives market?

The Commodities Futures Trading Commission is facing a lot of hurdles, including a lack of resources. But it has been moving quickly to draft rules mandated by the Dodd-Frank law.

That law gave the CFTC the bulk of authority for dealing with over-the-counter derivatives and expanded the agency's jurisdiction from the $40 trillion futures market to include the nearly $300 trillion swaps market.

The CFTC is required to complete the rules mandated by the financial overhaul within one year of the law's passage. But Congressional Republicans are considering delaying the July 2011 deadline. They say the Commission is moving too quickly.

A former CFTC division director, Michael Greenberger, says that the complaints are an effort by Wall Street to delay implementation of rules that could have prevented the financial meltdown. He noted the irony of the complaints: "People are always making fun of bureaucracy as being slow-moving," he said. "This one isn't."

Monday, December 13, 2010

WikiLeaks cable shows surprising new lows in big pharma behavior

If you thought the depths of pharma corruption bottomed out at marketing fraud, pricing fraud or scientific fraud, you'll be interested in this stunning revelation: Pfizer hired investigators to dig up dirt on Nigeria's then-attorney general in an effort to pressure him to drop a $6 billion lawsuit against the company for experimenting on Nigerian children, according to secret U.S. diplomatic cables that WikiLeaks recently made public.

The lawsuit that Pfizer sought to have dropped stems from an experiment conducted on 200 children in a Nigerian epidemic hospital without the consent of the parents or guardians. Eleven children died during the experimental trail of an antibiotic drug called Triovan. It was later revealed that a key ethics approval document had been fabricated and backdated, allowing the illicit and allegedly lethal experiment to occur.

The lawsuit was settled in July 2009 for $75 million. Pfizer has insisted in a written statement last week that the confidential settlement with the Nigerian federal government was reached “in good faith” and that the government’s “conduct in reaching that agreement was proper.”

Saturday, December 04, 2010

SEC whistleblower office put on hold

A delay in funding for the Securities & Exchange Commission whistleblower program means that investors will continue to lose millions through undetected ponzi schemes and other securities fraud.

Citing "budget uncertainty" the agency said that the functions the whistleblower office would have assumed will be temporarily assigned to existing staff within the Division of Enforcement.

The new Dodd-Frank financial overhaul law requires the SEC to write more than 100 new rules and gives the agency new authority to police hedge funds and derivatives dealers. The SEC is also expecting a flood of tips about alleged corporate fraud from whistleblowers, both because of the expansion of fraudulent activities now covered and the increase in possible awards. The new whistleblower office will be responsible for deciding which claims have merit.

Dodd-Frank mandates an increase in the SEC's budget but that money must be appropriated by Congress. Most Republicans opposed the law and may not be inclined to allocate the funds.