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Penalties on drug companies for fraud shrinking

Written by Diane Archer

A new Public Citizen report, 25 Years of Pharmaceutical Industry Criminal and Civil Penalties, 1991-2015, reveals that over the last 25 years government has been reducing the penalties it imposes on drug companies for fraud, from billions in fines to what appears like a spanking.  All told, financial penalties comprise only five percent of drug company profits, seemingly making the penalties worth the crimes.

Between 1991 and 2015, the penalties on 373 settlements totaled $35.7 billion. One in eight of the settlements, around 45 of them, were for criminal activities.  Almost no senior executive went to jail for any of these violations. And, the government has never kept drug companies from participating in Medicare and Medicaid or required drug companies to reduce drug prices for these programs, as a penalty for the fraud.

Profits for the top eleven drug companies totaled $711 billion over the ten years between 2002 and 2015.  Public Citizen argues that so long as drug companies continue to profit handsomely from their crimes and misdemeanors, we can be sure they will persist.  And, they are costing taxpayers and people with Medicare billions of dollars.

Of the drug company violations, the most frequent violation has been overcharging Medicare and Medicaid. Off-label marketing is the violation for which the drug companies have paid the steepest fines. Pfizer, Johnson and Johnson, Novartis and GlaxoSmithKline have been among the biggest violators.

Public Citizen found that the total number of fraud violations has not decreased significantly in the last three and a half years. But, the federal civil penalties for unlawful promotion of off-label drugs has shrunk by 90 percent.

Criminal penalties dropped even more significantly in the last two years.  In 2012 and 2013, criminal penalties totaled $2.7 billion.  On 2014 and 2015, they totaled $44 million, only 2 percent of the penalties from the two prior years.

What explains this drop in penalties?  Public Citizen has no answer but thinks perhaps that the U.S. Department of Justice is focusing on other industries. It recommends that government act to deter drug company frauds through far stiffer penalties.

Here’s more from Just Care on drug companies and drug policy:

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