Over the past decade, the drug industry has paid tens of billions of dollars to settle state and federal lawsuits involving
the False Claims Act—which covers defrauding Medicare and Medicaid, promoting drugs for unapproved uses, paying kickbacks
to doctors and pharmacies, and the like. Most of the top 100 pharmas have been nailed at one time or another. The Justice
Department is currently investigating nearly 200 pharma fraud cases involving more than 500 drugs. In 2009 alone, 16 cases
were settled, netting Uncle Sam more than $4 billion.
Yet while industry leaders like Pfizer, AstraZeneca, and Lilly have paid some of the biggest settlements, they are also some
of the worst recidivists—evidence that the current system is failing. Major drugmakers now set aside hundreds of millions
of dollars to settle False Claims Act charges, and contrary to official statements of contrition, these reserves are viewed
as merely the cost of doing business.
Still, record-breaking settlements make the news, attracting the notice of Congress and regulators. Stories about off-label
promotion of drugs with serious adverse effects to children, the elderly, prisoners, and the mentally ill have sparked a demand
for justice. Now the Obama administration has announced a new enforcement strategy that will take full advantage of the False
Claims Act's provisions. Offending drugmakers will increasingly be forced to relinquish product exclusivity. More stunning,
the executives under whose watch serious violations occur will be banned from doing business with the government—effectively
booting them out of the industry.
Sound harsh? Lewis Morris, a 29-year veteran of the Office of the Inspector General at HHS—and its top lawyer—was more than
happy to make the "responsible corporate official" case to Pharm Exec. —Walter Armstrong
Pharm Exec: Can you begin by explaining what you do as the counsel to the Office of the Inspector General?
Lewis Morris: Over the last decade, the Department of Justice and the Inspector General's Office have been pursuing a significant
number of cases involving the pharmaceutical industry, as well as device manufacturers, hospitals, and doctors. Under the
civil False Claims Act, a company can be liable for promoting the off-label use of a drug, for misrepresenting the pricing
of a drug to Medicaid or Medicare, or for other fraudulent conduct. In addition, a pharmaceutical manufacturer can be liable
under our criminal authority for submission of fraudulent claims, paying kickbacks to doctors, or other activities. After
a case has been thoroughly investigated by our agents and partners in law enforcement, the question becomes how to structure
a global settlement that puts the matter to rest in the best interests of the American people. That's where our Office of
Counsel comes in.
The OIG has a unique authority to exclude from Medicare and Medicaid any individual or entity that has been convicted of healthcare
fraud, abuse, or related offenses. If a company has engaged in, say, a $100 million fraud—that's a pretty modest sum these
days—we have to make a decision whether or not to throw them out of the Medicare and Medicaid programs. If they've been convicted
of Medicare fraud, their exclusion is mandatory. More likely than not, that would be a back-breaker for any company [because
most of its profits come from sales to the federal government]. It's not going to voluntarily commit suicide by pleading to
a criminal charge.
Lewis Morris, Chief Counsel, OIG, HHS
So they're likely to have brought their high-priced lawyers into the act and negotiated a settlement. What they then have
to do is come to the office and convince us that it's better for the company to stay in business. We take a number of considerations
into account, including whether the company is making critical or life-saving drugs, or if the company has a lot of innocent
employees who knew nothing of the fraudulent conduct. Also, we consider whether or not the company has a good track record
of treating the Medicare program fairly. If the answer to all those questions is yes, we'll generally negotiate a corporate
integrity agreement [CIA].