Fraud Rampant in the Pharmaceutical Industry

Posted On March 4th, 2011 By CSSFIRM.COM

A new Public Citizen study shows some statistics that come as little surprise to us. The pharmaceutical industry has now far surpassed the infamous defense industry as the biggest defrauder of the federal government. The report reveals that 25 percent of the total federal False Claims Act (FCA) payouts over the past 10 years have originated in the pharmaceutical industry. The defense industry, once the biggest defrauder of government, accounted for only 11 percent.[1]

Fines Appear Ineffective

In cases taken from as early as 1991, the study found that the pharmaceutical industry knowingly violated state and federal laws in marketing their products in ways that allowed them to collect funds from government programs. The rate at which the industry defrauded the government has been increasing drastically over the past few years, with a total of $19.8 billion in penalties occurring during the last 20 years, with $14.8 billion occurring in the last five years alone.

The study found 165 settlements spanning the last 20 years. An alarming 73 % of these settlements (121) and 75 % of the fine values ($14.8 billion) occurred in the past five years. Four major companies accounted for more than half of the fines charged in the past 20 years: Eli Lilly, Pfizer, Schering-Plough and GlaxoSmithKline. These four companies collectively paid over $10.5 billion in fines.

Off-Label Marketing

The greatest segment of penalties stemmed from the industry’s failure to comply with Food and Drug Administration’s regulations for marketing and promoting their products. Manufacturers promoted their drugs for “off-label” purposes, without FDA approval. This behavior is so dangerous to the public that the FCA is filing criminal charges against offenders. The FDA must review and approve drugs for each purpose for which they might be prescribed before drug makers can market them for those purposes. No drug should be marketed for any medical condition until thorough testing shows it is safe.

At the state level, the largest segment of fines came from deliberately overcharging programs like Medicaid to enhance profits. These violations also occurred at the federal level.

Reasons for the Surge in Pharmaceutical Fraud

The increased rates of fraud most likely stem from the constant pressure from stockholders to maintain high profits, even in a harsh economic climate. Because fewer Americans are working, fewer individuals have health insurance.  This results in sharply decreased drug sales.

This study is the first to compile data from all civil and criminal settlements pertaining to the pharmaceutical industry. The information included fines from both state and federal agencies. The staggering numbers found in the study suggest that the fines imposed on these companies are inadequate. Only when fines outpace profits will these companies begin to market their drugs safely.

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If a dangerously marketed drug injured you or someone you love, contact our office. Our expert lawyers will offer a free consultation and work with you to make sure you are justly compensated for your injuries.


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