Government Recovers $4 Billion from Health Care Fraud Cases

HHS, Justice Recover $4 Billion from Health Care Fraud Cases
HHS, Justice Recover $4 Billion from Health Care Fraud Cases

The government recovered a staggering $4 billion in fiscal 2010 that was stolen from federal health care programs, the U.S. departments of Justice and Health and Human Services announced Monday -- the highest annual amount ever.

Yet another record was set as more than $2.5 billion came from recoveries obtained in civil health care matters brought under the False Claims Act, according to a new report from the Health Care Fraud and Abuse Control Program. Also, federal prosecutors opened 1,116 criminal health care fraud investigations in fiscal 2010, and a total of 726 defendants were convicted.

HHS Secretary Kathleen Sebelius (pictured) and Associate Attorney General Thomas Perrelli attributed much of the success to the Health Care Fraud Prevention & Enforcement Action Team (HEAT), which was created in 2009. HEAT filed 140 charges against 284 defendants who billed Medicare more than $590 million. Of those, 146 defendants were sentenced to an average of more than three years of jail time.

Sebelius added that the focus is shifting to preemptive measures. "[F]or too long, our fraud prevention efforts have focused on chasing after taxpayer dollars after they have already been paid out," she said. "Thanks to the President's leadership and the new tools provided by the Affordable Care Act, we can focus on stopping fraud before it happens."

Indeed, the Affordable Care Act authorizes new rules to help prevent health care fraud, including rigorous screening and new enrollment processes. The final rule will also allow agencies to stop enrollment and suspend payments when a fraud allegation is being investigated.

Drug Companies Were Major Offenders

The report also boasts a return on investment of $6.8 for every dollar spent in the last three years -- an ROI to which many drug companies contributed. "In recent years, pharmaceutical fraud cases have constituted a significant part of the Civil Division's efforts," the report notes. These cases are usually nationwide in scope, quite complex and require significant resources. But the payouts are worth it as they "involve schemes that cost federal payers billions of dollars and affect public health."

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For example, just three cases against Allergan (AGN), Novartis (NVS), and AstraZeneca (AZN) in 2010 resulted in civil recoveries of $225 million, $237.5 million, and $520 million, respectively. (There were also criminal components to the Allergan and Novartis settlements, of $375 million and $185 million, bringing the total penalties paid to $600 million and $422.5 million, respectively.) In all, more than half of the health care fraud money recovered came from drug companies.

Usually, cases involving pharmaceuticals relate to off-label marketing -- promoting a drug for unapproved uses -- but those are by no means all the cases. Pharmaceutical companies weer also fined for paying kickbacks to physicians, as well as various types of pricing schemes designed to cause federal programs to overpay for drugs.

The findings in Monday's report are not surprising, as it comes on the heels of a recent study that found that pharmaceutical companies have become the biggest defrauders of the federal government, surpassing the defense industry.

While the HHS and DOJ may give themselves a pat on the back for the billions they have brought in, some say their efforts are not enough. The size of the penalties pales in comparison to pharmaceutical industry profits. Some activists and watchdogs are calling not only for much steeper financial penalties, but for criminal prosecutions of company leadership, with the possibility of jail sentences, if warranted.

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