Different Types Of Pharmaceutical Fraud You Need To Watch Out For [sponsored]

July 3, 2019

While the pharmaceutical industry is a fast-growing sector of healthcare, different types of fraud are committed and reported to the government. Pharmaceutical fraud and abuse is a growing concern, which also involves prescription drug abuse and drug misuse with millions of lives at stake. It is the responsibility of employees in the pharmaceutical industry to look out for fraudulent practices within their own companies.

What are the effects of pharmaceutical fraud on patients, doctors, other medical providers, and the federal funds? How are these drug manufacturers caught for such ill practices? What does the government do to regulate the production of medicine and medical supplies, and punish fraudulent drug manufacturers?

Check out these crimes involving pharmaceutical fraud you need to watch out for:

Best Price Fraud

The law mandates pharmaceutical companies to report the lowest prices for medicines to help patients who are disabled and retired to have access to quality and affordable medications. Under the Medicare Rebate Program, drug manufacturers should give rebates to patients who have purchased medicines above the reported prices.

The reported best prices by drug manufacturers should take into consideration grants, coupons, discounts, and other incentives. However, some drug manufacturers take advantage of the Medicare Rebate Program by reporting higher prices of medicines while decreasing their liability.

This type of pharmaceutical fraud is usually difficult to uncover and, in most cases, only progresses and becomes prosecuted with the help of whistleblower lawsuits.

Off-Label Marketing Fraud

Any form of medication should undergo testing and regulation of the Food and Drug Administration (FDA) to ensure that is is safe to use for the intended medical condition it claims to treat or cure. The FDA is responsible for determining the purposes of medications and whether the recommended dosage set by a pharmaceutical company is safe to consume.

In order to get rid of the strict testing, inspection, and approval of the FDA, some drug manufacturers misrepresent how a medicine can be used. A drug manufacturer that is promoting or selling drugs for any other reason is committing pharmaceutical fraud, specifically off-label marketing fraud.

Drug Switching Fraud

Drug switching fraud involves billing and switching government health insurance programs, such as Medicaid and Medicare, for different drugs other than the ones prescribed. Many pharmacies are enticed to commit this type of fraud because of the large amount of profit involved. However, many drug switching cases are only prosecuted because of whistleblowing lawsuits.  

However, drug switching costs taxpayers millions of dollars every year because of the replacement of branded prescriptions with generic or inexpensive medications, wherein pharmacies bill health insurance programs for expensive medicines to gain more profit.

Here are the effects of drug switching according to the survey conducted by Harris Interactive and commissioned by Project Patient Care: 

  • Drug plan formularies (lists of prescription drugs covered on favorable terms for the enrollee) may cause a negative impact on the health of patients who are relying on prescription drugs.
  • Drug switches cost patients an average of $58.50 each in addition to out-of-pocket costs associated with higher drug costs and additional medical follow-ups.
  • About 22% of the estimated 9 million adults aged over 50 years old have experienced side effects from the new medications.

pharmaceutical fraud

Auto-Refilling Fraud

Auto-refilling programs help increase patient adherence, most especially among patients with chronic conditions, such as diabetes or asthma. These programs were designed and developed to enable patients to get prescriptions automatically refilled each month without calling in, visiting doctors, or going online every time to order new refills.

However, auto-refilling programs are sometimes abused by pharmacies that continue to refill prescriptions. It happens even if patients stop taking auto-refill medications, thus committing auto-refilling fraud. Pharmacies bill insurers, such as Medicaid or Medicare, for these auto-refills, and sell the prescription to other patients to earn more profit.

 Here are the reasons why regulators try to prohibit automatic refill programs:

  • Many pharmacies engage in this type of pharmaceutical fraud until the maximum number of refills is reached for a prescription or until it expires. It’s a clear violation of the False Claims Act, punishable by the law.
  • Regulators argue that auto-refilling programs result in stockpiling, waste to the system, and substantial federal program payments for unnecessary prescriptions.
  • Pharmacies tend to bill for “non-covered services,” which represent false claims. It is because many auto-refilling practices bill Medicaid or Medicare for prescriptions without authorization from the patient or the representative of the patient.
  • Large settlements for automatic refill programs violations are only a handful, and the costs of prescriptions are increasing. Government budgets tighten, so regulators see these violations as an excellent opportunity to recoup the money. 

Illegal Kickbacks

Physicians or other healthcare providers are not allowed to encourage or induce referrals for medicines and medical services paid by Medicare, Medicaid, and other federal health programs, which are paid for by federal funds.  

There has been a common internal practice among pharmaceutical companies to bribe healthcare providers and facilities to prescribe medicines even if these are not recommended or proven effective. If a doctor or healthcare worker uses any compensation or payment to prescribe drugs or encourage a patient to come to the facility to avail medical services, it is considered a kickback.

Medical or sales representatives sometimes bribe doctors and other healthcare professionals, who are licensed to prescribe medicines, into prescribing the medication they sell. Pharmaceutical companies involved in this pharmaceutical fraud often give commissions and incentives for reaching a sales quota monthly.

Here are some other examples of illegal kickbacks:

  • Bonus payments accepted by healthcare providers by pharmaceutical companies
  • Joint ventures or collaboration between drug makers and doctors
  • Giving expensive gifts to healthcare providers
  • Giving free out of town vacations, lavish meals, or expensive travel and tours abroad
  • Paying healthcare providers to attend drug lectures, meetings, and conferences
  • Doctors who sell free drug samples to patients without proven clear benefits
  • Fake research grants and drug trials in favor of drug manufacturers
  • Paying healthcare professionals to serve on advisory boards or as product ambassadors or authorities to prove the claims of pharmaceutical companies

These activities compel healthcare providers to prioritize financial needs instead of the well-being of patients. That’s why such forms of bribery violate the rules governing Medicare and Medicaid, and the federal law. Most of all, prescribing less effective medications or drugs that aren’t tested can compromise the health and safety of the public.

Medicare Part D Fraud

Drug pharmacies that are accepting Medicare Part D should provide medications through Pharmacy Benefit Managers (PBMs) or directly to eligible beneficiaries. After which, claims are submitted to the Part D program. The source of fraud in this program stems from some pharmaceutical professionals who unjustly bill the price of medications.

Here are some examples of Medicare Part D fraud, which costs taxpayers millions of dollars and put the health of patients at risk:

  • Expired drugs
  • Medications not provided to beneficiaries
  • Name branded drugs, which are far more expensive, instead of prioritizing available generics
  • Medicines not covered by Medicare
  • Falsified prescription, or drugs supplied without a prescription
  • Controlled substances, like opioids, used for illicit purposes
  • Medications dispensed by non-existent or unauthorized medical providers
  • Quantities of medications provided exceeding the approved limit 

Good Manufacturing Practice Violations 

Drug manufacturers should comply with the stringent rules of the government on the maintenance of good working order of manufacturing facilities, like the Good Manufacturing Practice or GMP. This system ensures that products, like medicines and medical supplies, are consistently produced, tested, and controlled according to international quality standards.

Here are the facts about GMP:

  • GMP has been designed to minimize the risks involved in pharmaceutical production that can’t be eliminated through final product testing.
  • GMP covers all aspects of pharmaceutical production, from the inspection and testing of starting materials, equipment, and premises, to sanitary practices and staff training.
  • It is crucial to have detailed written procedures for each process that could affect the quality (effectiveness and efficiency) of the finished product.
  • Pharmaceutical companies or drug manufacturers should provide documented proof showing that correct procedures are followed at each step every time a medicine is made.
  • Drug makers are obligated to have laboratory controls in place, and keep complete and accurate records for inspectors. All appropriate examinations of their finished products must be submitted.
  • Pharmaceutical companies must have adequately trained personnel or staff to maintain stringent control over every step of the manufacturing process.

However, some pharmaceutical companies neglect and even purposely miss the requirements to abide by the rules and laws of good manufacturing practices, thus committing violation. A drug manufacturer proven to commit this type of fraud could be either fined or shut down, or both.


These types of fraudulent pharmaceutical practices put the health and safety of millions of patients at risk. Also, taxpayers pay millions of dollars on fraudulent claims every year, which are supposedly intended for disabled, elderly, and low-income patients. Pharmaceutical fraud ruins the lives of many people due to ineffective, unreliable, misuse, and abuse of medications caused by corrupt pharmaceutical practices.  




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