Essay On Oig

As Daphna Renan and David Pozen note, Deputy Attorney General Rod Rosenstein’s memorandum to Attorney General Sessions on Comey’s action last summer, which was the ostensible basis for firing FBI Director James Comey, circumvented the ongoing investigation into Comey’s actions by DOJ Inspector General Michael Horowitz. That investigation, and Horowitz himself, are now about to assume center stage in the Comey firing drama.

Horowitz is a former prosecutor (an AUSA in SDNY from 1991 to 1999) who was nominated for the DOJ IG slot by President Obama and has served in that role for five years. He is the chairman of the Council of the Inspectors General on Integrity and Efficiency, which advises and develops standards for inspectors general across executive branch departments. He is probably best known to date for his highly critical 514-page report on the “Fast and Furious” program run by the Bureau of Alcohol, Tobacco, Firearms and Explosives.  

In January 2017, Horowitz announced that he was opening an investigation into Comey’s handling of the Clinton email investigation. According to the one-page OIG announcement, the investigation will include (among other topics) “[a]llegations that Department or FBI policies or procedures were not followed in connection with, or in actions leading up to or related to, the FBI Director’s public announcement July 5, 2016, and the Director’s letters to Congress on October 28 and November 6, 2016, and that certain underlying investigative decisions were based on improper considerations.”  

In response to the Horowitz investigation, Comey stated: “I want that inspection because I want my story told.” Comey has also described Horowitz as “professional and independent.” And that is his general reputation.

Horowitz’s investigation into Comey’s behavior is ongoing. It is bound to uncover a lot of facts we don’t yet know about, and to reach richer and more complex conclusions than the ones in Rosenstein’s slapdash memorandum. Since the Rosenstein memorandum was the supposed basis for the President’s firing of Comey, the Horowitz investigation has the potential to undermine, or call into question, the basis for that firing. The investigation thus raises a number of intriguing questions, including:

  • How might Attorney General Sessions and his Deputy Rosenstein react if Horowitz discerns facts or reaches conclusions about Comey’s behavior that are contrary to or in tension with Rosenstein’s memorandum? Might they try to shut down the investigation or prevent the release of its conclusions? The IG Act provides that “[n]either the head of the establishment nor the officer next in rank below such head shall prevent or prohibit the Inspector General from initiating, carrying out, or completing an audit or investigation, or from issuing any subpoena during the course of any audit or investigation.” But 5 U.S.C. app. § 8E also says that the Attorney General can assert supervision and control over DOJ IG “audits or investigations, or the issuance of subpoenas, which require access to sensitive information concerning,” among others, “ongoing civil or criminal investigations or proceedings,” “intelligence or counterintelligence matters,” or “other matters the disclosure of which would constitute a serious threat to national security.” Will Sessions or Rosenstein invoke these provisions to shut down Horowitz?  

  • How will President Trump react once he realizes that the reasons for his decision to fire Comey will potentially be second-guessed by an Obama appointee? Will he fire Horowitz as he did Obama appointees Sally Yates and James Comey? Three months ago Jeffrey Toobin worried that Trump might shut down the IG investigation. But now the stakes of the investigation, and the potential downsides of allowing it to reach completion, are much larger.

  • If Trump decides to fire Horowitz, will he abide by the IG statute’s requirement that he give Congress 30 days’ notice before doing so, during which period Horowitz could continue to gather facts on the matter?  Or will he follow the 1977 OLC opinion that concluded that the restriction was unconstitutional?

  • Will Horowitz accept House Oversight Chairman Jason Chaffetz’s request to investigate the firing of James Comey?  If he does, will Trump and Sessions allow it to continue? The Inspector General Statute authorizes the IG to investigate at least the DOJ side of the firing, which could reveal a lot of truthful detail about the President’s decision. Sessions, Rosenstein, or Trump might not like that.

  • Senator Grassley counseled critics of the Comey firing to “suck it up and move on.” But Senator Grassley is also a famous supporter of inspectors general. And indeed, on November 2, he wrote a letter to Horowitz calling on him to intercede in the investigation into Hillary Clinton. Grassley wrote: “The public’s lack of confidence in the Justice Department’s ability to handle investigations related to former Secretary of State Hillary Clinton impartially ought to be of grave concern for its leadership. The entire matter is in desperate need of independent, objective, non-partisan oversight. As the Inspector General, that is your statutory duty.” Will Senator Grassley stand by this position, or will he now counsel Horowitz to suck it up and move on?

These and many other questions are now in play in connection with the more-important-than-ever DOJ Inspector General.

A Failure of Remedies: The Case of Big Pharma (An Essay)
Paul J. Zwier,
Reuben Guttman

“The lower the rate of a fraud’s detection, the higher the multiplier required to ensure that crime does not pay.”

—Chief Judge Esterbrook

United States v. Rogan (7th Circuit 2008)


This Article examines the U.S. pharmaceutical industry and the harms imposed on individual patients and healthcare consumers—including private and government third party payers—from practices proscribed by Federal and State laws regulating marketing and pricing.

The Article pays particular attention to the False Claims Act (FCA), which has become the government’s primary civil weapon against fraudulent and/or wrongful conduct causing the expenditure of government dollars.

Passed by Congress in 1863, and amended most recently in 2010, the FCA allows the government to pursue an individual or entity that has filed, or caused to be filed, a “false or fraudulent” claim for payment with funds that in whole or in part came from the government. In addition to treble damages, the statute allows for civil penalties of between $5,000 and $11,000 for each “claim.” The FCA is unique in that it has a “qui tam” provision allowing private citizens to bring suit in the name of the government provided that their suit is not based on “public information” or, alternatively, that the individual bringing the suit is an “original source” of that information.

In United States v. Neifert-White Co., the Court explained that the FCA is a “remedial statute” which “reaches beyond ‘claims’ which might be legally enforced to all fraudulent attempts to cause the Government to pay out sums of money.” Yet, to the extent that common law fraud requires proving the element of “reliance,” the FCA is actually more expansive than a fraud statute because it captures claims or statements made recklessly in furtherance of government reimbursement; hence, the statute captures false or fraudulent claims.

Generally, where Medicare and Medicaid payers reimburse for drugs that are marketed through misrepresentations about safety, efficacy, quantity or pricing, or where sales have been tainted by “kickbacks,” the Government may be entitled to recovery under the FCA. In other words, to the extent that a drug is “misbranded” under the Food, Drug, and Cosmetics Act (FDCA), redress is available under the FCA where the wrongful conduct caused the expenditure of government monies.

In addition to treble actual damages, i.e. the amount of money expended for each prescription times three, the Government is entitled to a civil penalty for each prescription submitted or caused to be submitted for payment or approval.

Under the Park Doctrine, theoretically, the government can seek prison sentences for those who are in charge of companies when these illegalities occur, however, these remedies are almost never invoked. In 2015, Deputy Attorney General, Sally Yates, issued the much-publicized “Yates Memo” which encouraged a focus on the criminal and civil prosecution of corporate insiders who have steered their corporate ship on a criminal course.

Despite available remedies, the questions for legislators, regulators, candidates for office, and members of the media are: 1) whether available compliance enforcement mechanisms are being used and 2) whether proper remedies that have deterrent value are being imposed on both corporations and the individuals who run them. These are important questions because pharmaceutical fraud is a substantial drain on the economy and places citizens at physical peril.

Historically, the lion’s share of settlements with drug manufacturers have involved significant cash payments and the institution of Corporate Integrity Agreements (CIA), but no admission of wrongdoing, no loss of patents, and no restrictions on the particular company’s ability to sell its drugs in the marketplace. There is neither disclosure of core documents, nor evidence unearthed during the investigation, which may help reset the market for honest medical information about a pharmaceutical product. The Office of the Inspector General (OIG) of the Department of Health and Human Services (HHS) indicated that it will be more aggressive in imposing different remedies, including lifetime bans on individuals and companies that engage in off-label marketing or other kickback schemes. This has not occurred, even though OIG also has issued guidelines regarding when it might revoke a patent, sell it, or otherwise take profits from the big companies.

To be fair, the blame does not rest solely with the Department of Justice (DOJ). In civil enforcement, the DOJ acts as the law firm for client agencies, including the Centers for Medicare and Medicaid Services (CMS), which is a part of HHS. CMS implements the Medicare program through vendors and lacks the fundamental ability to directly and expeditiously track expenditures, or to monitor whether the vendors are making reimbursement payments in accordance with regulation. A glaring consequence of this inability is the payment for drugs for uses that are not medically supported. The question of whether the use—if not within the FDA approved indication—is medically supported, is another problem. CMS has by regulation identified private contractors—i.e. the ‘Compendia”—who are responsible for determining whether an off–label use is medically supported. These contractors often rely on industry paid doctors for guidance, as their conflicts of interest policies do not proscribe industry relationships. CMS has simply neglected to properly monitor Compendia publishers.

Without a CMS’ handle on expenditures, the DOJ seems to have entered settlements absent any transparent damage models with the litmus test for fairness seemingly hinging on whether the settlement has the optics of deterrence. Unfortunately, when viewed from an historical context, remedies have had little impact on the behavior of the big pharmaceutical companies in their pricing and marketing practices.

Big Pharma practices present a case study for determining whether agencies should use other remedies to bring about better behaviors and whether courts, in approving settlements, should exercise diligence in determining the applicability of remedies. The question is why traditional remedies have failed to provide the necessary deterrence and what practical solutions exist. This Article provides analysis of the problem and raises the prospect of long term and short term solutions which include:

  • The promulgation of formal DOJ guidance on settlements with pharmaceutical manufacturers and others in the stream of commerce, including a requirement that Civil Penalties under the FCA not be waived;

  • The issuance of DOJ reports, which make public the facts and documents unearthed during investigations that result in settlements of cases that lacked the transparency of formal litigation;

  • The release, under the Freedom of Information Act, of all documents maintained by the FDA with regard to a drug or product that was the subject of a settlement of misbranding or kickback allegations;

  • Legislation allowing CMS to bargain with manufactures or to use price referencing systems—as exists in Europe and Canada—to lower the cost of drugs;

  • The imposition of criminal and civil penalties on corporate officials who oversee marketing activities that have the potential to place patients at peril; and

  • Complete oversight of CMS to analyze whether inherently public functions are imprudently privatized and whether functions properly performed by private vendors are monitored for compliance with regulatory obligations.

Part 1 of this Article looks at the market for pharmaceuticals, its profitability, and its risks. It evaluates pricing of pharmaceuticals and the incentives in the market that seem to cause institutional behaviors that drive illegal conduct. In addition, it briefly examines why faith in the free market, which theoretically should moderate the behavior of actors out of fear that consumers will simply choose a different provider, fails in the case of pharmaceuticals.

Part 2 of this Article examines the failures of the existing traditional remedies in the FCA and the related actions to adequately compensate, deter, and punish for Big Pharma’s illegality. In particular, it examines repeat offenders in the pharmaceutical market, and notes that the problem may lie most with companies without either real competition for their particular drugs, or a diversified portfolio of generic products as part of their offerings. It also examines the promise of CIAs to bring more integrity into the relationship of manufacturers and consumers. It questions why such agreements that contain promises—including that a court can ban companies that persist if they engage in future off-label marketing—have not been enforced in settlements with the DOJ. It also demonstrates how revoking a company’s patent can disrupt future patients’ ability to get the appropriate drugs they need, and as a result make the remedy unattractive. At least until the generic market can meet this need, the court may be hesitant to revoke the patent. It examines whether as a matter of remedies, the court should be empowered to count as damages future sales of the patented drug as a basis for deterring the fraudulent behavior. It illustrates how such remedies may run afoul of the Constitution. As a result, the company may bet that its ability to continue to sell the drug in its markets will make up for the risks it incurs in engaging in deceitful behavior in establishing the market in the first place. Without the ability to confiscate future profits as a remedy, it is unlikely that the behavior of Big Pharma will be significantly deterred, as the gains are too tempting, and chances that any one individual gets caught are too low.

Finally, we conclude by proposing a combination of remedies and ask whether pricing regulation, either through CMS, or by allowing insurance companies to combine forces to negotiate lower price, needs to be a necessary part of these remedies to Big Pharma’s illegal practices.

I. Pharmaceuticals, Profits and Risks

Among corporations, pharmaceutical companies are unique. Their brand and reputation is premised on the notion that they cater to patients in perilous health by producing products that are safe and effective. Although not bound to the Hippocratic Oath taken by doctors who order their products through prescriptions, their brand implies the same level of obligation—“do no harm.” Yet the question of whether the patient is the customer is a murky matter; a doctor writes the prescription for a person whose bill is often paid by third parties, many of whom disperse federal and state health care dollars. Obligations to investors and efforts to maximize stock price for the benefit of corporate officers, desiring to cash in on stock options, are externalities driving unlawful behavior. And at an emotional level, there is undoubtedly the perception—on Wall Street and within the corporation itself—that no regulator is going to face the political backlash of jeopardizing the long-term viability of businesses manufacturing pills that prolong life.

Against this backdrop, Big Pharma was able to fly under the radar with business practices placing consumers’ safety in jeopardy, while causing the unnecessary expenditure of government health care dollars. The Federal Bureau of Investigation estimates that health care fraud costs American taxpayers $60 billion a year. Some estimates contend the Medicare program alone constitutes over $600 billion lost to fraudulent activity by the health care profession, generally, in the last ten years. Based on these numbers alone, it is astonishing that candidates for office and the journalists who pose the questions in debates have not made this a focal point for political discourse.

As part of the settlements, many companies are required to enter into self-policing agreements called CIAs. Notwithstanding their existence, repeat offenders are common, as in the case of companies including Abbott and Pfizer.

With fraud unchecked, medical costs continue to rise far in excess of inflation. More troubling is that the increase in the cost of health care is mostly attributable to rising pharmaceutical prices. Dan Muro, a frequent contributor to Forbes magazine who closely follows health care costs, noted the following:

An estimated 576,000 Americans spent more than the median household income on prescription medications in 2014. This population of patients grew an astounding 63% from 2013. Further, the population of patients with costs of $100,000 or more nearly tripled during the same time period, to nearly 140,000 people. The total cost impact to payers from both patient populations is an unsustainable $52 billion a year.

. . .Across the board increases in prescription drug costs were cited as the primary cause for the higher total percentage increase in health care costs (6.3% this year versus 5.4% in 2014).

The rate at which prescription drug costs increased this year doubled over the average increase of the prior five years. This was driven by a combination of factors, including the introduction of new specialty drugs, a continued increase in compound drugs, and price increases for both brand name and generic drugs.

There is no evidence of rising overhead or tightened profit margins as causes for price escalation. The World Health Organization estimates that, worldwide in 2014, pharmaceutical companies scored in excess of $300 billion in profits; with profits headed to $400 billion over the next three years.

A look at Medicare disbursements provides insight into the problem. The total amount of Medicare reimbursement for pharmaceuticals in 2015 is estimated at $85 billion, or 14% of the total Medicare health care expenditures. These include both Medicare B plan reimbursements, (for drugs administered in an outpatient or hospital setting), and Medicare D plans, (for drugs outside the hospital setting). In the U.S., the free market sets the price for drugs except that the largest payer, Medicare, lacks statutory authority to bargain, let alone bargain collectively with other payers. Although Medicare has some leverage over what it pays (Medicare will only pay the price of the lowest cost generic, where generics exist, unless doctor provides justification ), it has little ability to negotiate down the cost of drugs.

When one examines the costs by type of drug and compares this with what one who needs the drug has to pay outside the U.S., one can see how the unregulated market for drugs in the U.S. makes for run-away pricing. High prices are in place for most categories of drugs sold in the U.S. From cancer drugs to pain-killers, cholesterol lowering drugs to nasal sprays, drugs for impotence to asthma to diabetes, U.S. citizens pay much higher prices than Canadians and Europeans.

Although there are features of the production and patenting of pharmaceuticals that make drugs costly to produce, in contrast to publicly regulated utilities that also have a government sanctioned monopoly, the same transparency is lacking with regard to expenditures or stranded costs. Against this backdrop, the industry claims that the testing and FDA approval process often eats up 10-12 of the 20 years that the owner has the exclusive ability to sell the drug. This leaves 8 to 10 years for the owner to recoup costs before generic competition for a successful drug will start. One wonders why then that drug prices, even after generics hit the market, remain so high in the U.S. Why doesn’t competition from generics eventually moderate the cost of drugs? There are a number of reasons. Medicare Part B prescriptions make up a relatively small percentage of overall prescriptions in the U.S. Other prescriptions are covered by multiple plans and payers. The non-generic manufacturer also is taking advantage of the physician’s presumptive ethical responsibilities to prescribe without regard to price. In addition, with many pharmaceuticals, the patient has little say regarding what he or she pays. They may have little information as to the cost, or they may think they do not have a choice; with cancer drugs to heart medications, failure to take the drugs appears to be life threatening. Moreover, Big Pharma engages in repackaging its drugs in strategies that allow it to extend the life of its drug, often in collusion with some generic manufacturers.

Finally, antitrust law allows a certain amount of collusion among label and generic manufacturers of drugs. In order to incentivize the making of generics, a company can submit its application for a generic of a name brand drug to the FDA, subject to the Orange Book listing of the name brand drug, in the time leading up to name brand drug’s expiration. The name brand manufacturer must look at the formula and determine if it wants to attempt to extend the patent through a supplement or improvement to the existing patent. It can extend the life of the drug by adding features or new methods of delivery. In the process the two can agree to “split up the market” for the drug between them, to insure some spaces to continue to sell the drug under different advertising campaigns. As a result, generics end up costing more in the U.S. than elsewhere, where the price may be regulated and physicians continue to prescribe the name brand because they are either confused, worried about the generics being lower quality, or sticking with what works, as opposed to taking risks with the alternatives.

The combination of the uncertain line between extortion and free market pricing by supply and demand, the unique nature of the health care need for certain drugs, the ability of companies to get patents for their drugs, the collusive relationship between named brand manufacturers and generic manufacturers, the responsibility of doctors for prescribing the drug, and the inability of insurance companies to collectively bargain for price all adds up to a system that routinely gouges society in the prices it pays for its drugs.

II. Remedies Under the False Claims Act, Their Failure to Adequately Compensate and Deter Big Pharma’s Behavior

The need to deter Big Pharma’s fraud by actors cloaked by the cover of large institutional unanimity remains a major challenge for the U.S. brand of free market democracy where the government is a both a regulator and a payer for care. The temptation to commit fraud by big institutions that do business in mass markets for goods—while focusing on maximizing profits and growing shareholder value each year—has always been great, but it is particularly acute where that business provides life-saving drugs. Cost sensitivities of individual consumers are absent, the physician intermediary/pharmaceutical coinsurer is often forbidden by medical ethics to take account of the costs, and hospitals often are more than willing to mark-up costs as they also pursue bottom line profits.

Perhaps the reason is confusion in the actors’ mind between market place pricing that is set by supply and demand, and behavior that is condemned as extortion, or at the very least exorbitant in nature. Where someone extorts $1,000 for a loaf of bread to a starving person, or $500 for a glass of water to a person dying of thirst, the exorbitant nature of the pricing is plain. Where the price is $100,000.00 for a cancer saving drug, the outrage may be the same, but the nature of the market might cover its extortive characteristics in the language of supply and demand. The “free market” has a difficult time in restricting pricing that takes advantage of one’s illness. What further exacerbates the dilemma is that existence of insurance (and its mixed motive—the more it pays, the more it can charge ) often makes the cost of the drug hard to discover. Moreover, HHS is forbidden in the U.S. from bargaining collectively with pharmaceutical companies for lower costs for drugs. Despite the fact that Medicare and Medicaid at one time only reimbursed at the price point of the lowest priced generic, private insurers were incentivized against negotiating similar restrictions on what they/it pays. Individual insurers are immune from antitrust regulations for collusive bargaining over drugs and can engage in pricing agreements with pharmaceutical companies that result in higher prices of drugs on the market. Even though the Veterans Administration (VA) pays approximately 40 percent of what the private insurance companies pay for the same drugs, U.S. law is protective of its “free market” and forbids collective bargaining, out of fear that lower prices may restrict the research and development of new drugs.

Curiously, there is some question as to what Big Pharma actually means when it says it puts money into research and development. Is it putting money into studies or trials that will develop data to be submitted to the FDA to secure a new or expanded indications or to meet post marketing requirements, or is it developing data to be used to support journal articles that will be used to spin off label messages causing revenue to be secured from uses outside the FDA approved indication? In other words, are purported Research and Development monies really just expenditures in furtherance of illegal marketing goals as opposed to legitimate regulatory requirements?

The chance of making huge short-term profits with impunity seems to overwhelm a decision-maker’s calculation of the consequential harm his or her decision may cause and overwhelms his or her calculation of the risks of getting caught. The harm caused can be nonetheless significant and the need for strategies of adequate deterrence an important societal priority.

There are three areas in particular where the willingness of institutions to defraud by ignoring health care costs in their pursuit of profits seems to be on the rise. The first is in the area of misbranding and its subcategory, off-label marketing, which is a violation of the FDCA redressable under the FCA. The second is the provision of kickbacks to physicians for prescribing or recommending their drugs. The third are strategies with generic companies to enter into settlements that divide up the market for a particular drug and keep the overall cost of the drugs higher than what can be justified by the drugs’ benefits. In the first two cases, the institutions are engaged in Medicare fraud as they charge the public for products of questionable benefit or for uses that raise significant safety concerns. The number and size of these cases have increased to such an extent that the government itself seems almost complicit in the illicit behavior. The subject institutions pay enormous fines in settlement, so the government drops the cases. Most troubling, however, is that often the institutions continue their activities—defrauding the markets and the government and paying the fines simply as a cost of doing business.

The available data from the organization, the Project on Government Oversight,, supports the claim that pharmaceutical companies have not been deterred by the large fines imposed by the DOJ and perhaps consider any amount they might pay for liability as the cost of doing business.

A survey of settlements between the Justice Department and Big Pharma since 2009, in excess of $75 million, provides plenty of troubling examples. We take our reports of cases and settlements from the following sources: Justice News, Department of Justice,; and, Project on Government Oversight, (survey by research assistant of Justice Department reports, and POGO listings.)

Settlements between pharmaceutical companies and the Justice department since 2009 consisting—time of publication—of $75 million or more:

Company Name, Drug Name, Settlement, Date

1. GlaxoSmithKline, Paxil, and Wellbutrin, $3 billion, 2012

2. Pfizer, Bextra, $2.3 billion, 2009

3. Abbott Laboratories, Depakote, $1.5 billion, 2012

4. Eli Lilly, Zyprexa, $1.4 billion, 2009

5. Amgen, Aranesp, $762 million, 2012

6. GlaxoSmithKline, Kytril/Bactroban/Paxil CR/Avandamet, $750 million, 2010

7. Allergan, Botox, $600 million, 2010

8. AstraZeneca, Seroquel, $520 million, 2010

9. Ranbaxy Laboratories, Gabapentin, $500 million, 2013 (Indian)

10. Novartis, Trileptal, $423 million, 2010

11. Merck, Vioxx, $322 million, 2011

12. Forest Laboratories, Levothroid, Celexa, Lexapro, $313 million, 2010-off-label promotion

13. Dey Pharma, Albuterol Sulfate/Albuterol MDI, Cromolyn Sodium/Ipratropium Bromide, $280 million, 2010—False Claims Act over reported prices—or getter payment rates

14. Wyeth Pharmaceuticals, Rapamune, $256.4 million, 2013-off-label promotion

15. Johnson and Johnson, Topamax, $81 million, 2010

16. Johnson and Johnson, Risperdal/Invega/Natrecor, $2.2 billion, 2013-off-label promotion

17. Endo Pharmaceuticals, Lidoderm, $171.9 million, 2014

18. Sanofi, Hyalgan, $109 million, 2012 (French)

19. Elan, Zonegran, $203.5 million, 2010

20. Boehringer Ingelheim, Aggrenox, Atrovent/Combivent, Micardis, $95 million, 2012

A list of pharmaceutical companies that have been penalized multiple times by the DOJ since 2001 follows. This partial list includes information compiled from and POGO is an independent watchdog organization that describes itself as follows:


And Date of Settlement

Conduct Type


And net profit reported when known


Johnson & Johnson


Fraudulent Pricing



Off-label Marketing

$2.2 Billion

NP (2007-2012): $4,858,000,000 (Risperdal) + $424,000,000 (Invega) + $441,000,000 (Natrecor)

J&J and its subsidiaries, Janssen Pharmaceuticals and Scios Inc., paid $2.2 billion to resolve criminal and civil liability arising from allegations relating to the prescription drugs Risperdal, Invega and Natrecor, including promotion for uses not approved as safe and effective by the Food and Drug Administration (FDA) and payment of kickbacks to physicians and to the nation’s largest long-term care pharmacy provider. In addition to monetary sanctions, this settlement placed J&J under a five-year CIA.

Abbott Laboratories


Fraudulent drug pricing of Lupron and kickbacks

$568 million

Net profit was reported after the settlement payout. This amount was a 4% increase over the prior year (2000).

TAP Pharmaceutical, a subsidiary of Abbott Laboratories and Takeda Industries, set and controlled the price at which the Medicare program reimbursed physicians for the prescription of Lupron by reporting its average wholesale price (“AWP”). The AWP reported by TAP was significantly higher than the average sales price TAP offered physicians and other customers for the drug. The Government alleged that TAP marketed the spread between its discounted prices paid by physicians and the significantly higher Medicare reimbursement based on AWP as an inducement to physicians to obtain their Lupron business. The Government further alleged that TAP concealed the true discounted prices paid by physicians from Medicare, and falsely advised physicians to report the higher AWP, rather than their real discounted price for the drug. The Government further alleged that TAP set its AWPs of Lupron at levels far higher than the price for which wholesalers or distributors actually sold the drug, resulting in falsely inflated prices that were neither the physician’s actual cost nor the true wholesaler’s average price. As part of this settlement, TAP agreed to comply with the terms of a sweeping CIA which changes the manner in which TAP supervises its marketing and sales staff, and ensures that TAP will report to the Medicare and Medicaid programs the true average sale price for drugs reimbursed by those programs.


Fraudulent pricing of enteral feeding products

$382 million


In July 2003, Abbott Laboratories, Inc., entered into a $600 million combined criminal and civil resolution of allegations against its Ross Products division relating to the manner in which it marketed its enteral feeding products. According to the complaint, Abbott was counseling DME suppliers to submit “bundled” claims to the Medicare program for feeding pumps and tubing. The bundled claims resulted in two products being billed as a single product at a higher price than if billed separately. As part of the settlement, Abbott entered into a five-year CIA.


Fraudulent pricing of several drugs

$126 million

(2009): $7.86 Billion

Abbott agreed to pay $126,500,000 for reporting false and inflated prices for numerous pharmaceutical products. The actual sales prices for the products were far less than what Abbott reported. The difference between the resulting inflated government payments and the actual price paid by healthcare 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 gets reimbursed by the government. The government alleges that Abbott created artificially inflated spreads to market, promote and sell dextrose solutions, sodium chloride solutions, sterile water, vancomycin and erythromycin.


Off-label marketing of Advicor and kickbacks

$41 million

(2009): $7.86 Billion

Kos Pharmaceuticals, a subsidiary of Abbott Laboratories, paid more than $41 million to resolve criminal and civil liability arising from conduct relating to its drugs Advicor and Niaspan. Specifically, the civil settlement resolves allegations that Kos offered and paid doctors, other medical professionals, physician groups and managed care organizations, illegal kickbacks in the form of money, free travel, grants, honoraria and other valuable goods and services, in violation of the Anti-Kickback Statute to get them to prescribe or recommend Niaspan and Advicor.

In addition, the United States contends that Kos promoted the sale and use of Advicor for use as first-line therapy for management of mixed dyslipidemias (a disruption of the lipids in the blood). Such an off-label use was not approved by the Food and Drug Administration nor was it a medically-accepted indication for which the United States and state Medicaid programs provided coverage for Advicor. As part of the settlement, Kos has entered into a deferred prosecution agreement. The DOJ agreed to enter into a deferred prosecution agreement with Kos based in part on the company’s undertaking of a thorough internal investigation of misconduct; its reporting of information from the investigation to the department on a regular basis; its continued and ongoing cooperation with the department’s investigation of the matter; and in recognition of the remedial measures undertaken by the company.


Off-label marketing of Depakote

$1.5 Billion

$5. 12 Billion

Abbott agreed to pay $1.5B to resolve its criminal and civil liability arising from the company’s unlawful promotion of the prescription drug Depakote for uses not approved as safe and effective by the Food and Drug Administration (FDA). The company misbranded Depakote by promoting the drug to control agitation and aggression in elderly dementia patients and to treat schizophrenia when neither of these uses was FDA approved. In addition to the criminal and civil resolutions, Abbott also executed a CIA. The five-year CIA requires, among other things, that Abbott’s board of directors review the effectiveness of the company’s compliance program, that high-level executives certify to compliance, that Abbott maintain standardized risk assessment and mitigation processes, and that the company post on its website information about payments to doctors. Abbott is subject to exclusion from federal healthcare programs, including Medicare and Medicaid, for a material breach of the CIA and subject to monetary penalties for less significant breaches




2013 2.6 Billion

Abbott knowingly paid prominent physicians for teaching assignments, speaking engagements and conferences with the expectation that these physicians would arrange for the hospitals with which they were affiliated to purchase Abbott’s carotid, biliary and peripheral vascular products.

Glaxo Smith Kline


Fraudulent Pricing

87.6 million

GSK agreed to pay the government a civil fine of $87.6 million for failing to give the Medicaid program the lowest price charged to any consumer for anti-depressant Paxil and nasal allergy spray Flonase. GSK was accused of hiding its lowest prices from Medicaid by repackaging or relabeling its products under a middleman’s name, who then sold them at a deep discount not reported to the government.


Failure to disclose side effects

2.5 million

GSK suppressed the results of studies which failed to prove Paxil’s effectiveness and which suggested a possible increased risk of suicidal thoughts and acts in certain individuals. GSK was further alleged to have failed to disclose this information in medical information letters it sent to physicians.


Fraudulent Pricing

150 million

GlaxoSmithKline paid over $150 million to settle allegations of fraudulent drug pricing and marketing of the anti-emetic drugs Zofran and Kytril. GSK allegedly engaged in a scheme to set and maintain inflated prices for Zofran and Kytril. The government also alleged GSK engaged in a “double dipping” billing scheme with respect to Kytril by encouraging customers to pool leftover vials of Kytril to create an extra dose, which would then be administered to a patient and re-billed to government healthcare programs.


Fraudulent marketing of Avandia

Settlement amount: pending

GlaxoSmithKline marketed its Avandia diabetes drug as a new “wonder drug” that would reduce cardiovascular risks for diabetics at a time when studies found that Avandia significantly increased cardiovascular risks.


Fraudulent Pricing

10 Million

The state of Hawaii settled with dozens of pharmaceutical companies, including GlaxoSmithKline, which were accused of gouging Hawaii’s Medicaid program for more than a decade by fraudulently inflating their prescription drug prices.


Deceptive Marketing


GlaxoSmithKline agreed to pay $3,750,000 to settle allegations of deceptive or false marketing of the anti-nausea drugs Kytril and Zofran. The complaint alleged that GSK improperly inflated the average wholesale price (AWP) for the drugs.


Manufacturing of adulterated drugs

750 million

SB Pharmco Puerto Rico Inc., a subsidiary of GlaxoSmithKline, agreed to plead guilty to felony charges relating to the manufacture and distribution of certain adulterated drugs made at GSK’s, now closed, Cidra, Puerto Rico, manufacturing facility. The resolution included a criminal fine and forfeiture totaling $150 million and a civil settlement under the FCA for $600 million. The drugs, manufactured at the plant between 2001and 2005, included Kytril, Bactroban, Paxil CR and Avandamet.


Attempt to sell adulterated drugs

$40.75 million

GlaxoSmithKline agreed to pay nearly $41 million to settle charges that the company tried to sell drugs made in a Puerto Rican plant that failed to meet manufacturing standards. The attorneys general alleged that, between 2001 and 2004, GlaxoSmithKline and its SB Pharmco Puerto Rico subsidiary engaged in unfair and deceptive practices when they manufactured and distributed certain lots of Kytril, Bactroban, Paxil CR, and Avandamet, produced in a plant in Cidra, Puerto Rico.


Fraudulent Marketing of Paxil, Wellbutrin, and failure to disclose safety data, and fraudulent pricing

$3 Billion

GlaxoSmithKline agreed to plead guilty and to pay $3 billion to resolve its criminal and civil liability arising from the company’s unlawful promotion of Paxil, Wellbutrin and Avandia, its failure to report certain safety data, and its civil liability for alleged false price reporting practices. From April 1998 to August 2003, GSK unlawfully promoted Paxil for treating depression in patients under age 18, even though the FDA has never approved it for pediatric use. From January 1999 to December 2003, GSK promoted Wellbutrin, approved at that time only for Major Depressive Disorder, for weight loss, the treatment of sexual dysfunction, substance addictions and Attention Deficit Hyperactivity Disorder, among other off-label uses. Between 2001 and 2007, GSK failed to include certain safety data about Avandia, a diabetes drug, in reports to the FDA that are meant to allow the FDA to determine if a drug continues to be safe for its approved indications and to spot drug safety trends. Between 1994 and 2003, GSK and its corporate predecessors reported false drug prices, which resulted in GSK’s underpaying rebates owed under the Medicaid Drug Rebate Program. GSK also executed a five-year CIA.



Fraudulent Pricing

$49 Million

In October 2002, Pfizer and its subsidiaries Warner-Lambert and Parke-Davis paid $49 million to resolve FCA charges that it had fraudulently avoided paying rebates owed to state and federal health programs by failing to report best prices for its cholesterol drug Lipitor.


Off-label marketing of Neurontin

$420 million

In 1993, the FDA approved Neurontin solely for anti-seizure use by epilepsy patients. However, Warner-Lambert, a Pfizer subsidiary, aggressively marketed Neurontin for a variety of other treatments, including bipolar disorder (even though scientific studies had shown that a placebo worked better for this disorder), none of which had been approved by the FDA. As part of the settlement agreement, Pfizer also agreed to enter into a CIA with the Department of Health and Human Services.


Off-label marketing of Bextra

$2.3 Billion

Pfizer and its subsidiary Pharmacia & Upjohn (Pharmacia) promoted the sale of Bextra for uses and at dosages the FDA specifically declined to approve for safety reasons. Under the terms of this settlement, Pfizer entered into a five-year CIA.


Fraudulent Pricing

$8.2 million

The state of Hawaii settled with dozens of pharmaceutical companies, including Pfizer, which were accused of gouging Hawaii’s Medicaid program for more than a decade by fraudulently inflating their prescription drug prices.


Off-label marketing of Detrol

$14.5 Million

Pfizer illegally marketed Detrol, a drug for the treatment of overactive bladder, for use in male patients suffering from benign prostatic hypertrophy and several allied conditions, notably lower urinary tract symptoms and bladder outlet obstruction—all uses for which the FDA had not approved the drug as safe and effective. Since August 2009, Pfizer has been under a CIA with the Department of Health and Human Services, which remains in effect.


Foreign Bribery

$15 Million

Pfizer agreed to pay a $15 million penalty to resolve an investigation of Foreign Corrupt Practices Act (FCPA) violations. Pfizer admitted that between 1997 and 2006, it paid more than $2 million of bribes to government officials in Bulgaria, Croatia, Kazakhstan and Russia in order to improperly influence government decisions in these countries regarding the approval and registration of Pfizer Inc. products.


Off-label marketing of Protonix

$55 million

Protonix is a proton pump inhibitor (PPI) that was used by physicians to treat various forms of gastro-esophageal reflux disease (GERD). Wyeth, a Pfizer subsidiary, sought and obtained approval from the FDA to promote Protonix for short-term treatment of erosive esophagitis—a condition associated with GERD that can only be diagnosed with an invasive endoscopy. However, the government alleges that Wyeth fully intended to, and did, promote Protonix for all forms of GERD, including symptomatic GERD, which was far more common and could be diagnosed without an endoscopy. In addition, Wyeth allegedly promoted Protonix as the “best PPI for night-time heartburn.” even though there was never any clinical evidence that Protonix was more effective than any other PPI for night-time heartburn. Since August 2009, Pfizer has been under a CIA with the Department of Health and Human Services, which remains in effect.


Off-label marketing of Rapamune

$490.9 million

Wyeth Pharmaceuticals Inc., a pharmaceutical company acquired by Pfizer Inc. in 2009, agreed to pay $490.9 million to resolve its criminal and civil liability arising from the unlawful marketing of the prescription drug Rapamune for uses not approved as safe and effective by the U.S. FDA. Rapamune is an immunosuppressive drug that prevents the body’s immune system from rejecting a transplanted organ. In 1999, Wyeth received approval from the FDA for Rapamune use in renal (kidney) transplant patients. However, Wyeth encouraged sales force members, through financial incentives, to target all transplant patient populations to increase Rapamune sales.



Fraudulent pricing

$190.4 million

Aventis Pharmaceuticals agreed to pay $190.4 million “to resolve allegations that the company caused false claims to be filed with Medicare and other federal health programs as a result of the company’s alleged fraudulent pricing and marketing of drugs.” The case involved the pricing between 1997 and 2004 of Anzemet, a treatment given to cancer patients after chemotherapy. The government alleged Aventis engaged in a scheme to set fraudulent and inflated prices for Anzemet. As part of the settlement, Aventis agreed to enter into a CIA that will require the company to report accurate average sales prices and average manufacturers’ prices for its drugs.


Fraudulent pricing

$95 million

Aventis Pharmaceutical Inc., a wholly owned subsidiary of Sanofi-Aventis, agreed to pay the United States $95.5 million to settle allegations that it violated the FCA by misreporting drug prices in order to reduce its Medicaid Drug Rebate obligations. The settlement resolves allegations that between 1995 and 2000, Aventis and its corporate predecessors knowingly misreported best prices for the steroid-based anti-inflammatory nasal sprays Azmacort, Nasacort and Nasacort AQ. In order to avoid triggering a new best price that would obligate it to pay millions of dollars in additional drug rebates to Medicaid, Aventis entered into “private label” agreements with the HMO Kaiser Permanente that simply repackaged Aventis’ drugs under a new label. As a result, Aventis underpaid drug rebates to the Medicaid program and overcharged certain Public Health Service entities for these products.



$109 million

Sanofi-Aventis agreed to pay $109 million to resolve allegations that Sanofi US violated the FCA by giving physicians free units of Hyalgan, a knee injection, in violation of the Anti-Kickback Statute, to induce them to purchase and prescribe the product. The settlement also resolves allegations that Sanofi US submitted false average sales price (ASP) reports for Hyalgan that failed to account for free units distributed contingent on Hyalgan purchases.



Off-label marketing of Aranesp

$762 million

Aranesp is an erythropoiesis-stimulating agent (ESA) that was approved by the FDA at certain doses for certain patient populations suffering from anemia. Amgen illegally misbranded Aranesp by promoting it for “off-label” doses that the FDA specifically rejected and for an “off-label” treatment that the FDA never approved. For example, Amgen illegally promoted Aranesp to treat anemia caused by cancer, irrespective of whether the patient had been prescribed chemotherapy—a use for which Aranesp was never approved. In fact, in 2007, the FDA mandated that a “black box” warning be added to Aranesp’s label stating that when administered to certain target levels Aranesp “increased the risk of death” in patients with cancer who were not receiving chemotherapy or radiation. Further, Amgen offered illegal kickbacks to a wide-range of entities in an effort to influence health care providers to select its products for use, regardless of whether they were reimbursable by federal healthcare programs or were medically necessary. As part of the global settlement, Amgen also agreed to enter into a CIA.



$24.9 million

The settlement resolves allegations that Amgen paid kickbacks to long-term care pharmacy providers Omnicare Inc., PharMerica Corporation and Kindred Healthcare Inc. in return for implementing “therapeutic interchange” programs that were designed to switch Medicare and Medicaid beneficiaries from a competitor drug to Aranesp. The government alleged that the kickbacks took the form of performance-based rebates that were tied to market-share or volume thresholds. The government further alleged that, as part of the therapeutic interchange program, Amgen distributed materials to consultant pharmacists and nursing home staff encouraging the use of Aranesp for patients who did not have anemia associated with chronic renal failure.



$15 million

Xgeva, which is the brand name of the drug Denosumab, was approved by the FDA in late 2010 for use with certain cancer patients undergoing chemotherapy. It is most commonly prescribed for patients with metastatic bone disease in order to prevent skeletal-related adverse events.

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