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Seven Common Types of Pharmaceutical Fraud

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The pharmaceutical industry is one of the most lucrative and fastest growing healthcare sectors in the world. With a value topping billions of dollars each year, it is little wonder that some people associated with it seek out ways to defraud insurers and patients alike. These seven crimes are among the most common types of pharmaceutical fraud committed today.

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1. Best Price Fraud

Drug manufacturers that participate in the Medicare Rebate Program are required by law to accurately report their lowest available prices for the medicines they make and sell. They also must give rebates to patients who purchase medicines above these reported prices. These aspects of the program help people who are retired and disabled pay the lowest prices on their prescriptions.

The best prices reported by drug manufacturers take into consideration details like:

  • Discounts
  • Coupons
  • Grants
  • Other incentives

Even so, there is ample opportunity for drug manufacturers to commit fraud.

Primarily, they can report higher prices for the medications they make and sell. This reporting allows them to take advantage of the rebate program while decreasing their own liability.

This type of pharmaceutical fraud is also one of the most difficult to uncover. Most cases are only prosecuted thanks to the assistance of whistleblower lawsuits.

2. Medicare Part D Fraud

Pharmacies that accept Medicare Part D are supposed to provide medications either directly or through Pharmacy Benefit Managers or PBMs to eligible beneficiaries and then submit claims to the Part D program. However, some pharmaceutical professionals have found ways to defraud Medicare Part D by billing for:

  • Medications not actually provided to beneficiaries
  • Medicines not covered by Medicare
  • Name brand drugs when generics were available
  • Opioids and other controlled substances used for illicit purposes
  • Expired drugs
  • Drugs provided without a prescription or one that was falsified
  • Medications dispensed by unauthorized, excluded, or non-existent medical providers
  • Medications provided in quantities that exceed the approved limit

These examples of Medicare Part D fraud not only put the health of patients at risk but also cost taxpayers millions of dollars each year.

3. Off-Label Marketing Fraud

Medications marketed and sold today are highly regulated by both state and federal laws. Before they can be sold to patients, they first must be studied, inspected, and approved by the Food and Drug Administration. The FDA has the duty of determining for what purposes medications can be used and for what health conditions they can be prescribed.

Drug manufacturers can then only market and sell medications for those specific purposes. If they promote or sell the drugs for any other reason, they are committing off-label marketing fraud, another common type of pharmaceutical fraud.

This crime misrepresents how the medication can be taken and used. It not only puts the health of patients at risk. It also causes taxpayers to lose millions of dollars each year.

4. Drug Switching Fraud

As this offense’s name implies, drug switching involves switching and billing Medicare, Medicaid, and other government health insurance programs for different drugs than the ones prescribed. Pharmacies profit from drug switching at the expense of taxpayers by filling prescriptions with inexpensive medications. They then bill the health insurance programs for more expensive medicines in return.

This type of fraud takes millions away from taxpayers because they are paying for expensive drugs that were not actually prescribed. Drug switching many times can only be prosecuted because of whistleblowing lawsuits in the industry.

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5. Illegal Kickbacks

Illegal kickbacks put the health of patients at risk when doctors or healthcare providers prescribe drugs that may not be as effective or even recommended for certain health conditions. With illegal kickbacks, pharmaceutical companies offer financial incentives or even bribe healthcare providers and hospitals into prescribing the medicines they make.

This type of fraud also can involve:

  • Doctors selling free drug samples to patients
  • Bonus payments made to healthcare providers by drug manufacturers
  • Joint ventures between doctors and drug makers
  • Fake drug trials and research grants
  • Paying doctors to serve on advisory boards
  • Paying doctors and providers to attend drug conferences, meetings, and lectures
  • Expensive gifts to doctors and providers
  • Lavish meals
  • Free vacations
  • Tickets to entertainment events

Illegal kickbacks violate the rules that govern Medicare and Medicaid. They also compel doctors to think about their own financial needs rather than the well-being of their patients. Doctors may prescribe medications that are less effective or perhaps even not tested yet, compromising the safety and risk of the patients they are treating.

6. Good Manufacturing Practice Violations

The federal government requires drug manufacturers to abide by numerous stringent rules for the safety of the public. Among them, these companies must ensure that their manufacturing facilities are fully equipped and in good working order.

They also must have fully trained personnel on staff and maintain stringent control over every step of the manufacturing process. Drug makers are obligated to have laboratory controls in place and keep complete and accurate records for inspectors. They also must submit to all appropriate examinations of their finished products.

If they overlook or purposely skip over some or all of these requirements, they are in violation of the Good Manufacturing Practice. They also could be fined or shut down for committing this common type of healthcare fraud.

7. Auto-Refilling Fraud

Patients who have chronic health conditions like asthma or diabetes sometimes participating in the auto-refilling programs available from their pharmacies. These programs allow patients to get their prescriptions refilled automatically each month without them having to call in, visit, or go online to order new refills.

When pharmacies continue to refill these prescriptions even after patients stop taking their auto-refill medications, they commit what is known as auto-refilling fraud. In this offense, pharmacies bill insurers like Medicare or Medicaid for the auto-refill. They then sell the prescription to another patient at a profit.

Many pharmacies that engage in this type of fraud do so until they reach the maximum number of refills for a prescription or until the prescription expires. This crime is a violation of the False Claims Act.

These seven crimes are among the most common examples of pharmaceutical fraud. They put the health and safety of patients at risk. They also are expensive and cost taxpayers millions of dollars on an annual basis.


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