Pharmaceutical companies have great discretion over the price of drugs. Many of these companies engage in price gouging or best price fraud for prescription and generic medications and could face liability in a successful drug pricing qui tam lawsuit.
Anyone with knowledge of conduct by pharmaceutical companies and other healthcare organizations that contribute to rising drug prices should consider blowing the whistle on the activity with the help of an attorney. Do not stay silent on healthcare fraud, speak up with a lawyer’s help.
What is Price Fixing in the Pharmaceutical Industry?
Price fixing in the pharmaceutical industry refers to when competing parties agree to buy or sell drugs and medications at a fixed price, or maintain the market conditions so the price stays the same. These agreements give drug companies free range to demand virtually any price for prescription medication and opens the door for price gouging. For this reason, price fixing is almost always illegal.
How are Pharmaceutical Prices Set?
The government does not regulate how drugs are priced. Instead, pharmaceutical companies set their own prices on the basis of a drug’s estimated value or what they “believe the market will bear,” according to associate professor of medicine at Harvard Medical School Dr. Aaron Kesselheim. The truth is that conversations about what a drug’s price should be happen behind closed doors, and the reasons that go into these decisions are kept from the public. In fact, even physicians are kept in the dark about when drug prices will change.
Examples of Drug Pricing Fraud
Medicaid Best Price Fraud
Pharmaceutical companies looking to gain Medicaid coverage for certain medications must provide the lowest price available to buyers (known as the “best price”). The reimbursement they receive for covered drugs will be based on that reported price.
Pharmaceutical companies are responsible for paying Medicaid back in rebates for any amount the program paid in excess of a drug’s best price. These companies may defraud Medicaid by claiming a false best price to reduce the amount they must pay back to Medicaid. This violates the False Claims Act and could give rise to a valid qui tam whistleblower lawsuit.
Medicaid Rebate Fraud
In the pricing context, the Department of Justice has pursued lawsuits against pharmaceutical companies for failing to report accurate information to the Medicaid program under the Drug Rebate Statute in order to underpay rebates that they owe – a practice known as Medicaid rebate fraud. For example, one drug company paid $465 million to resolve allegations that it knowingly misclassified one of its drugs as a generic drug to avoid paying Medicaid rebates.
In this case, the whistleblower who reported the fraud to the Department of Justice was a competitor of the pharma company that paid the $465 million. This qui tam relator received $38.7 million as their share of the federal recovery, plus a share of the states’ recovery.
In another case, the Department of Justice sued a pharmaceutical company under the False Claims Act, alleging that it knowingly underpaid Medicaid rebates that it owed because of its large increases in the price of one of its drugs. This alleged Medicare rebate fraud was brought to the attention of the Department of Justice by an individual with knowledge of the fraud. The individual will be entitled to a share of the Government’s recovery once the lawsuit has ended.
Another type of drug pricing fraud that the Department of Justice has focused on involves pharmaceutical companies improperly using so-called “foundations” to help patients pay their copays to the Medicare program. There is an important purpose to the copay for patients. It is a form of cost-sharing between the patient and Medicare and helps prevent over-prescribing and over-billing for unnecessary drugs.
While shifting copays from patients to a third party may sound like a charitable idea, it is not. It is the opposite of charitable, and it is illegal. Shifting copays from patients to third parties has negative consequences, including illegally inducing more drug prescriptions, giving the pharma company’s drugs a competitive advantage, and undermining a key safeguard to prevent rising drug costs. In 2020, the Justice Department reported that it has so far collected more than $1 billion for these schemes.
What Should I Do if I am Aware of Pharmaceutical Price Fixing?
If you witnessed or are otherwise aware of pharmaceutical price fixing, do not hesitate to seek legal advice. If you witnessed such activity at work, reporting it to your supervisor(s) could lead to the destruction of evidence and workplace retaliation against you.
Furthermore, the False Claims Act allows you to become a whistleblower for generic drug manufacturers price fixing and Medicaid rebate fraud and allows you to sue pharmaceutical companies on behalf of the U.S. government. However, this law requires you to retain legal representation to become a whistleblower.
It is therefore in your best interests to work with an attorney who is familiar with report rebate fraud and price gouging. Our lawyers can help you understand how these practices violate the False Claims Act and file a whistleblower claim on your behalf.
Am I Eligible for a Whistleblower Reward if I Report Drug Pricing Fraud?
Whistleblowers who file qui tam lawsuits under the False Claims Act for drug price fixing may be entitled to substantial financial awards. The False Claims Act entitles whistleblowers whose information leads to the successful recovery of defrauded funds to 15-30 percent of the government’s total recovery. In pharmaceutical company scandals where a drug pricing class action lawsuit may be filed, the total amount recovered from a price gouging scheme could range in the millions, making it advantageous for anyone with insider information to blow the whistle on drug manufacturers’ price fixing.