Pfizer corporate headquarters
Prescription drug companies like Pfizer and Merck are costing taxpayers billions in Medicare and Medicaid fraud. Image from Wikimedia Commons.

The pharmaceutical industry is often lauded for medical advances, creating drugs that save lives. However, it is equally lambasted for corrupt practices such as Medicare and Medicaid fraud, which large pharmaceutical companies are perpetrating to the tune of billions of dollars per year.

The omelet defense

Fresh allegations of wrong-doing by drug companies are all too common, but they also provide valuable services that deserve compensation, as drug companies develop and manufacture necessary medications that improve the quality of life or save the lives of millions, which justifies their existence. If one wants an omelet, one has to break some eggs. A lot of eggs are being broken, and the taxpayers are on the hook. The largest drug companies in the nation have paid more than $8 billion in fines for Medicare and Medicaid fraud, according to USA Today.

History of misbehavior

Most people have seen advertisements for prescription or over-the-counter medications from major pharmaceutical companies like Pfizer, Merck, Abbott Laboratories and Eli Lilly, all of which have paid at least $1 billion each for ripping off Medicare and Medicaid since the year 2000.

Pfizer, according to USA Today, has paid more than $3 billion for fraud, including a $2.3 billion settlement in 2009, which according to the New York Times was the largest penalty ever imposed on a drug company for any offense, until 2011. In October of that year, the record was shattered by GlaxoSmithKline, which settled with the Justice Department for fines of $3 billion, an undisclosed portion of which was for Medicare and Medicaid fraud.

Since 2008, Merck has paid $1.8 billion in fines for kickbacks to doctors, who prescribed Merck products to Medicare and Medicaid patients, which costs taxpayers more for the brand-name medications. Eli Lilly was fined $1.4 billion in 2010 and between 2001 and 2010, Abbott paid more than $1.5 billion in fines for defrauding Medicare and Medicaid.

Rampant abuse

Between 2009 and 2010, according to Forbes, the Justice Department and Department of Health and Human Services recovered more than $4 billion in money lost to Medicare fraud. Though much was from criminals, roughly half of the money was recovered from major pharmaceutical companies who were, among other things, marketing drugs for non-FDA approved uses and giving kickbacks to doctors, who were billing Medicare and Medicaid in violation of the False Claims Act.

Medicare fraud, according to CBS, is estimated to cost the government, and thus taxpayers, $60 billion per year, of which only a fraction is recovered. Fraud charges apparently have become so common for drug companies that a joint venture between Marsh and Allied World Insurance Co., a corporate insurance broker and insurance company, is now offering fraud prosecution insurance to pharmaceutical company executives, according to the Philadelphia Inquirer.

Sources

USA Today

New York Times

Forbes

CBS: http://www.cbsnews.com/2100-18560_162-5414390.html

Philadelphia Inquirer: http://articles.philly.com/2012-03-04/business/31121658_1_health-care-fraud-fraud-cases-focus-on-health-care

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