Study Highlights Recent Drug Lawsuit Trends, Proposes Fraud Fixes

A recent study published by Public Citizen on their website explains that in the last 20 years, “U.S. spending on prescription drugs has increased from $40 billion in 1990 to $234 billion in 2008.” According to the site, “the illegal pharmaceutical company activities that have contributed to such inflated spending have garnered a significant amount of media attention.”

Public Citizen says that the risks “to public safety and the loss of state and federal dollars that comes with these violations require a more robust response than the government’s current practices.” The site alleges that “Over the past two decades, especially during the past 10 years, there has been a marked increase in both the number of government settlements with pharmaceutical companies and the size of the accompanying financial penalties.”

The site goes on to argue that the source of these increasing settlements and penalties are “likely related to a combination of increased violations by companies and increased enforcement on the part of federal and state governments.”

Public Citizen explains this study is meant to examine “the total size, varied nature, and potential impact of these illegal and potentially dangerous activities” because these trends have not previously been studied. The health and safety organization explains they undertook this study to create a “comprehensive database of all major criminal and civil settlements between federal and state governments and pharmaceutical companies.”

The organization says that “Press releases from both federal and state governments, in addition to existing online databases, were used to identify all settlements of at least $1 million during the past 20 years.”

According to the findings from the study, Public Citizen explains that “Of the 165 settlements comprising $19.8 billion in penalties during this 20-year interval, 73 percent of the settlements (121) and 75 percent of the penalties ($14.8 billion) have occurred in just the past five years (2006-2010).”

Furthermore, the organization alleges that just four pharmaceutical companies “accounted for more than half (53 percent or $10.5 billion) of all financial penalties imposed over the past two decades,” with these violators also being some of the largest drug manufacturers today.

The organization’s study explains that this industry “now tops not only the defense industry, but all other industries in the total amount of fraud payments for actions against the federal government under the False Claims Act,” which was an 1863 U.S. law enacted to “prevent defense contractor fraud.”

More disturbingly still, the organization alleges that former employees of these companies, in addition to other whistleblowers, account for “the largest number of federal settlements over the past 10 years.” Although the study explains that these whistleblower cases “made up only 9 percent of payouts to the government,” they go on to explain that “from 2001 through 2010, they comprised 67 percent of total payouts.”

The study concludes, proposing the idea that when considering “the relatively small size of current financial penalties when compared to the perpetrating companies’ profits, both increased financial penalties and appropriate criminal prosecution of company leadership may provide a more effective deterrent to unlawful behavior by the pharmaceutical industry.”

References:

Public Citizen’s Health Research Group. (December 16, 2010) “Rapidly Increasing Criminal and Civil Monetary Penalties Against the Pharmaceutical Industry: 1991 to 2010.” Retrieved on January 3, 2011 from Public Citizen.