Drug companies dodge ban from Medicare, Medicaid

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Drug companies dodge ban from Medicare, Medicaid

By Julie Schmit, USA TODAY

 

 

http://www.usatoday.com/news/health/2004-08-15-pleas_x.htm

 

 

The government has yet to use its power to bar major

drug companies that

commit fraud from doing business with federal

programs such as Medicaid and

Medicare.

A 1996 law mandates exclusion from federal health

care programs for those

who plead guilty to, or are convicted of, felony

health care fraud after

Aug. 21, 1996. But since 2001, at least four major

drug companies, including

two recently, avoided that penalty under settlements

with prosecutors.

..In July, the government reached a $345 million

settlement with

Schering-Plough over charges that private insurers

were charged much lower

prices on Claritin than the government was. The

guilty plea was entered by

an inactive Schering-Plough sales subsidiary with no

employees where the

fraud occurred. It's excluded from federal programs,

but the parent

company's products are not.

..In May, Pfizer's Warner-Lambert division agreed to

$430 million in fines

and pleaded guilty to illegally marketing the drug

Neurontin "through at

least August 20, 1996" - one day shy of the law's

trigger date for mandatory

exclusion. Prosecutors alleged the misconduct

occurred later, too.

..TAP Pharmaceuticals in 2001 and Bayer in 2003

pleaded guilty to illegal

acts before August 1996, although prosecutors also

alleged later misconduct.

If the pleas had covered that, the companies "likely

would" have been

subject to exclusion, the Department of Health and

Human Services says.

"The settlements are structured very carefully to

avoid mandatory

exclusion," says John Bentivoglio, a former Justice

Department lawyer who

represents health care companies.

The argument is that 80 million poor and elderly

clients in Medicaid and

Medicare would suffer by losing needed drugs,

especially those made by just

one company.

"We cannot exclude them, we're dependent on them,"

says Timothy Jost, health

law professor at Washington and Lee University. He

says big fines might be a

better way to punish wrongdoing.

But prosecutors can unfairly threaten to use the

penalty to win big

settlements because exclusion from the huge federal

programs "is a death

sentence," says attorney C. Boyden Gray, partner at

Wilmer Cutler Pickering

Hale and Dorr.

The 2003 settlement of medical device maker Abbott

Laboratories shows how

creative settlements can be. Abbott, as did the

other companies, denied the

civil charges in its fraud case. But it agreed to a

$600 million in fines

and one of its units, CG Nutritionals, pleaded

guilty to obstructing a

federal probe. CG was excluded from federal

programs. But the manufacturer

of infant formula never did business with them.

The exclusion law has largely been used against

direct providers of health

care, such as doctors and nurses, since its adoption

in 1977. It was amended

in 1996.

The exclusion penalty might be harder to avoid as

prosecutors dig into

post-1996 conduct. "At some point, they're going to

have to pull the trigger

to show they'll do it," says Patrick Burns of

Taxpayers Against Fraud.

http://www.usatoday.com/news/health/2004-08-15-pleas_x.htm