Regulatory Focus™ > News Articles > OIG Report Details Scope of Fines Levied on Pharmaceutical Manufacturers in 2012

OIG Report Details Scope of Fines Levied on Pharmaceutical Manufacturers in 2012

Posted 29 November 2012 | By

The US Department of Health and Human Services' (DHHS) Office of the Inspector General (OIG), the office charged with investigating potential legal violations and recovering funds for taxpayers, has had a busy year.

In a report submitted to Congress this week detailing the agency's actions for the second half of the fiscal year (April through September), Inspector General Daniel Levinson said his agency had recovered just shy of $7 billion for taxpayers-nearly three times the US Food and Drug Administration's (FDA) congressionally appropriated budget ($2.5 billion).

It's a curious statistic given the source of most of those recovered monies: pharmaceutical and medical device companies regulated by FDA.

Nearly half of the funds recovered by OIG came from a single, $3 billion settlement involving UK pharmaceutical manufacturer GlaxoSmithKline, which agreed to settle charges that the company has illegally promoted several of its drugs during the past decade.

A further $628 million was recovered from Merck, Sharp & Dohme for similar marketing violations allegedly perpetrated between 1999 and 2004.

Prescription drug wholesaler McKesson, meanwhile, paid $187 million to settle allegations that it had improperly marked up drug products as high as 25% above allowable amounts.

Medical Devices and FDA

Other OIG activities were also related to regulated healthcare products. The agency found that Medicare overpaid by 53% for Avastin, an anti-cancer drug often used to treat wet age-related macular degeneration (AMD).

"Wasteful spending has occurred because Medicare does not have a national payment amount for such use of Avastin.  Medicare's payment contractors independently set the payment amounts, which differed as much as 28 percent," the report explains. The agency said it is in favor of moving toward a single payment system for drug products in federal programs, which are now administered by a patchwork of federal, state and private organizations and agencies.

Medical devices were also honed in on in the OIG report. Durable medical equipment (DME), a class of long-lasting medical equipment most often used by Medicare recipients (think wheelchairs and diabetes-related supplies), are a common area for fraud. OIG estimated that hundreds of millions of dollars in claims were improperly paid out to companies with insufficient documentation on whether or not they met Medicare requirements.

And even though they did not recover money, OIG also investigated several FDA programs during the second half of fiscal year 2012, finding that the agency's regulation of the supplement industry is sorely lacking and its medical device disagreement policies are in need of reform.

The agency has said previously that it intends to investigate several other FDA work areas in fiscal year 2013, including its risk evaluation and mitigation strategies (REMS) plans, the investigational new drug application (IND) process, the 510(k) substantial equivalence clearance process for medical devices, and a follow-up report to the medical device disagreement policies.

OIG: Semiannual Report to Congress (1 April 2012 - 30 September 2012) (PDF)

Regulatory Focus newsletters

All the biggest regulatory news and happenings.