Federal authorities targeting top execs for health fraud

June 1, 2011

In recent years, there has been a dramatic increase in the number of pharmaceutical companies investigated for fraud against state and federal governments.  The worst example of this would have to be Pfizer, who paid $2.3 billion in September 2009 to settle federal civil and criminal allegations the company marketed several of its drugs (including the antipsychotic drug Geodon) illegally.  It was the largest health care fraud settlement and the largest criminal fine of any kind ever.  

But it was not an isolated case for Pfizer.  A the same time that the federal government was investigating Pfizer on the charges which resulted in this settlement, Pfizer was in the midst of resolving earlier allegations that it had done the same kind of illegal marketing of its drug Neurontin. It paid a $430 million fine in that case and signed a corporate integrity agreement (a company-wide promise to not break various laws, rules, regulations, etc.).

Oh, but wait--there's more:  In 2002, the company paid $49 million to settle charges it defrauded Medicaid by overcharging for cholesterol drug Lipitor.  It signed a corporate integrity agreement at that time as well.

The foregoing was presented for the purpose of making sense of the following:

Federal investigators say they are starting to target individual executives in health care fraud cases previously aimed at impersonal corporations.

It's raising the stakes for corporate honchos at drug companies, medical device manufacturers, nursing home chains and others who deal with Medicare and Medicaid.

Previously, if a company got caught, its lawyers in many cases would be able to negotiate a financial settlement. The company would write the government a big check and promise not to break the rules again.

Now, on top of fines paid by a company, senior executives can face criminal misdemeanor charges even if they weren't involved in the scheme but could have stopped it.  And they can also be banned from doing business with the federal program, a career-ending consequence.

Source: Ricardo Alonzo-Zaldivar, "In shift, feds target top execs for health fraud," The Associated Press, May 31, 2011.