Announcement Highlights Growing Fraud Prosecution Risks of Health Industry Businesses
Today’s announcement that Pfizer Inc. and its subsidiary Pharmacia & Upjohn Company Inc. (collectively “Pfizer”) will pay $2.3 billion, the largest health care fraud settlement in the history of the Department of Justice, to resolve criminal and civil liability for alleged illegal promotion of certain pharmaceutical products and other stepped up oversight and enforcement activities make it critical that all health industry organizations strengthen their internal controls, compliance and audit activities as well as be prepared to defend their actions against the rising tide of federal and state oversight and enforcement.
The pharmaceutical giant Pfizer Inc. and its subsidiary Pharmacia & Upjohn Company Inc. have agreed to pay $2.3 billion, the largest health care fraud settlement in the history of the Department of Justice, to resolve criminal and civil liability arising from the alleged illegal promotion of certain pharmaceutical products, the Justice Department (DOJ) announced today (September 2, 2009).
According to DOJ, Pharmacia & Upjohn Company agreed to plead guilty to a felony violation of the Food, Drug and Cosmetic Act for misbranding Bextra with the intent to defraud or mislead. Bextra is an anti-inflammatory drug that Pfizer pulled from the market in 2005.
The Food, Drug and Cosmetic Act requires that a company specify the intended uses of a product in its new drug application to FDA. Once approved, the drug may not be marketed or promoted for so-called “off-label” uses – i.e., any use not specified in an application and approved by FDA. DOJ charged Pfizer promoted the sale of Bextra for several uses and dosages that the FDA specifically declined to approve due to safety concerns. Under the announced settlement, Pfizer will pay a criminal fine of $1.195 billion, the largest criminal fine ever imposed in the United States for any matter. Pharmacia & Upjohn will also forfeit $105 million, for a total criminal resolution of $1.3 billion.
In addition, Pfizer agreed to pay $1 billion to resolve allegations under the civil False Claims Act that the company illegally promoted four drugs – Bextra; Geodon, an anti-psychotic drug; Zyvox, an antibiotic; and Lyrica, an anti-epileptic drug – and caused false claims to be submitted to government health care programs for uses that were not medically accepted indications and therefore not covered by those programs. The civil settlement also resolves allegations that Pfizer paid kickbacks to health care providers to induce them to prescribe these, as well as other, drugs. The federal share of the civil settlement is $668,514,830 and the state Medicaid share of the civil settlement is $331,485,170. This is the largest civil fraud settlement in history against a pharmaceutical company.
As part of the settlement, Pfizer also has agreed to enter into an expansive corporate integrity agreement with the Office of Inspector General of the Department of Health and Human Services. That agreement provides for procedures and reviews to be put in place to avoid and promptly detect conduct similar to that which gave rise to this matter.
Whistleblower lawsuits filed under the qui tam provisions of the False Claims Act that are pending in the District of Massachusetts, the Eastern District of Pennsylvania and the Eastern District of Kentucky triggered this investigation. As a part of today’s resolution, six whistleblowers will receive payments totaling more than $102 million from the federal share of the civil recovery.
Today’s announcement of this historic settlement emphasizes the continuing and growing government commitment to, coordination and sophistication in the investigation and prosecution of health care crimes by pharmaceutical industry and other health care providers. The Obama Administration has made investigation and prosecution of health care fraud laws a key element of its strategy to manage U.S. health care program costs. Recently enacted changes in the False Claims Act and other laws are making it easier for federal prosecutors to successfully prosecute these and other health care fraud cases.
The enhanced coordination among agencies central to this strategy is reflected in the collaboration among the many agencies involved in the investigation leading to these charges. The U.S. Attorney’s offices for the District of Massachusetts, the Eastern District of Pennsylvania, and the Eastern District of Kentucky, and the Civil Division of the Department of Justice handled these cases. The U.S. Attorney’s Office for the District of Massachusetts led the criminal investigation of Bextra. The investigation was conducted by the Office of Inspector General for the Department of Health and Human Services (HHS), the FBI, the Defense Criminal Investigative Service (DCIS), the Office of Criminal Investigations for the Food and Drug Administration (FDA), the Veterans’ Administration’s (VA) Office of Criminal Investigations, the Office of the Inspector General for the Office of Personnel Management (OPM), the Office of the Inspector General for the United States Postal Service (USPS), the National Association of Medicaid Fraud Control Units and the offices of various state Attorneys General.
These and other stepped up oversight and enforcement activities make it critical that all health industry organizations strengthen their internal controls, compliance and audit activities as well as be prepared to defend their actions against the rising tide of federal and state oversight and enforcement.
Register Now For Upcoming September Health Industry Update Programs
If you found this information of interest, you also may be interested in one of the following upcoming health industry programs to be presented by Ms. Stamer during September:
- HITECH ACT Health Data Security & Breach Update on September 9, 2009 hosted live or via teleconference by Curran Tomko Tarski LLP
- How to Ensure That Your Organization Is In Compliance With Regulations Governing Discrimination — What You Should Be Doing To Be Prepared for the New, Stepped Up Enforcement Actions on September 10, 2009 hosted via teleconference by Health Resources Publishing
- Health Information Security & Data Breach Under HITECH Act on September 17, 2009 hosted via teleconference by the Health Care Compliance Association
To register or for other details about these and other upcoming programs and presentations by Ms. Stamer and other Curran Tomko Tarski members, see here.
Other Recent Developments
If you found this information of interest, you also may be interested in reviewing some of the following recent Curran Tomko Tarski LLP Latest in Health Care Updates available online by clicking on the article title:
- Maximum Penalty For Patient Protection Act Confidentiality Breaches To Rise To $11,000
- Health Care Providers & Other HIPAA Covered Entities Must Comply With New Data Breach Rules By September 24
- CDC Healthcare Infection Control Practices Advisory Committee Schedules Teleconference on Draft Guideline for Prevention of Catheter-Associated Urinary Tract Infections 2008
- HHS Secretary Sebelius Announces Intent to Appoint Dr. Helene Gayle as Chair of the Presidential Advisory Council on HIV/AIDS
- Border Health Care Study Sheds Some Light of Health Care Utilization, Needs & Costs
- Health Care Providers & Other HIPAA-Covered Entities & Their Business Associates Must Comply With New HHS Health Information Data Breach Rules By September 24
- HHS Issues Interim Final Requiring Health Care Provider, Health Plans & Other Covered Entities To Give Breach Notifications When Certain Personal Health Information Breached Beginning In September; Register to Participate In September 10th Briefing on New Rules In Person or Via Telephone
- CMS Publishes Updated FY 2010 Inpatient Rehabilitation Facility Prospective Payment System Final Rule
- House Democratic Leaders Work To Resolve Differences In Committee Versions of Health Care Reform Legislation and Build Public Support During August Recess
- HHS Hiring to Expand its Health Information Enforcement Team Again
- Reassignment of HIPAA Security Rule Enforcement Signals Growing Seriousness About Enforcing HIPAA
- Where To Read & Share Your Feedback About The Health Care Reform Legislation
- 25 States Awarded Grants Totaling $190 Million For Strategic Substance Abuse & Mental Health Strategic Prevention Planning
- Blue Dog Democrats Hold Key Voice On House Democrats Proposed Health Care Reform Plan; Contact Numbers Here
- August 31 Deadline To Comment On CMS Proposed Changes To Hospital, ASC Payment Rules
For More Information
We hope that this information is useful to you. If you need assistance with auditing or defending health care fraud concerns or other health care compliance, risk management, transaction or operation concerns, please contact the author of this update, Curran Tomko Tarski LLP Health Practice Group Chair, Cynthia Marcotte Stamer, at (214) 270‑2402, firstname.lastname@example.org, Edwin J. Tomko at (214) 270-1405 or another Curran Tomko Tarski LLP Partner of your choice. Ms. Stamer has extensive experience advising clients and writes and speaks extensively on these and other health industry and other internal controls and risk management matters.
You can review other recent health care and internal controls resources and additional information about the health industry and other experience of Ms. Stamer here. If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile at here or e-mailing this information to email@example.com.
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