Thank you. Let me express my thanks to the Pharma Congress Co-Chairs, Gary DelVecchio, Margaret Feltz, Kelly Freeman, and Michael Shaw for inviting me to speak today. And thank you, Kelly, for that introduction.
I am pleased to be with you this afternoon at the twelfth annual gathering of this Pharma Congress. This is the third time I’ve had the privilege of addressing this group and it’s a pleasure to be here with my law enforcement partner, Mary Riordan, from the Health and Human Services Office of Inspector General, as well as several of my Civil Division colleagues, including Joyce Branda and Michael Blume, who will be on one of the panels later today.
But I’m particularly pleased to be here with all of you: compliance officers, pharmaceutical and health care executives, physicians, nurses, legal counsel and other industry professionals – all of you play an integral role in ensuring that the medicines we rely on to ease pain, heal sickness and improve lives are the safest in the world.
You make good companies better by your advice and guidance; by your commitment to a level playing field that recognizes that fair competition and ethical compliance are the foundation of a vibrant, successful pharmaceutical industry.
You know it’s not enough to have a compliance program in name only, and you appreciate that the best compliance policies are wasted if a company lacks the corporate culture and the employee support system to encourage self-reporting and honest self-assessment.
And you know that in a country where nearly one in every ten health care dollars is spent on your products, reducing fraud is not only good for business, it’s essential to the sustainability of a sound, efficient health care system on which millions of Americans depend.
So when we talk about health care fraud and ways to curb it, I feel as though I’m talking to partners with whom I share a common goal.
Now, the work of the Justice Department on health care fraud is part of a comprehensive approach this Administration has taken toward improving the Nation’s overall health care delivery system; an approach that aims to secure better, quality coverage at lower costs for all of us: patients, health care providers, businesses and taxpayers.
The Administration’s Affordable Care Act---with its innovative reforms, anti-fraud measures, and improvements to the overall health care process---is part of that comprehensive approach; as is the President’s Executive Order, announced on Monday, which focuses on better managing prescription drug shortages to ensure that patients get the medicines they need in the event of low supply. These efforts aim to reduce the costs of delivering quality health care while extending coverage by achieving efficiencies and implementing key reforms.
And since May 2009, when the President formed the Health Care Fraud Prevention and Enforcement Action Team, or “HEAT,” aggressively battling health care fraud has been a cabinet-level priority. As most of you know, HEAT is an effort led by Attorney General Eric Holder and Health and Human Services Secretary Kathleen Sebelius that has, over the last two years, synergized the health care fraud prevention and enforcement efforts of HHS and DOJ as never before. My colleague, Criminal Division Assistant Attorney General Lanny Breuer, and I have dedicated much of our time and attention to HEAT, and today, when it comes to health care fraud, there is unprecedented coordination, greater information- and data-sharing, and closer collaboration between these two key federal agencies.
And the results prove it: For every dollar Congress has provided for health care enforcement over the past three years, we have recovered nearly seven. And since HEAT’s inception, the Justice Department’s Civil Division has worked with our partners at HHS, as well as our colleagues in U.S. Attorneys’ Offices and state law enforcement offices around the country, to open more health care fraud investigations, charge more criminal health care fraud defendants, and obtain more money on behalf of taxpayers – over $8 billion in settlements, judgments, penalties and fines – than ever before.
That record-breaking recovery reflects the broad approach we in the Civil Division have taken with respect to health care fraud enforcement over the last two-and-a-half years—an approach that includes not only the off-label marketing and False Claims Act cases with which many of you are familiar, but other, equally important enforcement efforts, as well.
Our effort against counterfeit drugs, for example. The World Health Organization estimates that more than half of the drugs sold online are counterfeit and contain useless or even harmful ingredients—something that poses a real threat to the approximately 36 million Americans who purchase their medication through online pharmacies. So our newly-reorganized Consumer Protection Branch has dedicated a team of DOJ professionals to pursue counterfeit pharmaceutical fraud.
We are also pursuing drug diversion schemes that undermine the integrity of the legitimate drug supply chain and threaten the safety and quality of pharmaceuticals we’ve come to trust. Our success there heavily depends on the partnerships we have formed with the companies represented here today, and we look forward to continuing that collaboration so that the medicines this industry produces reach American consumers unadulterated and uncompromised.
Our comprehensive approach to health care fraud also includes prosecuting providers that pay illegal kickbacks. Patients have a right to judgments made in their best medical interests, untainted by illegal incentives. Kickbacks can damage the trust relationship between doctor and patient by creating an unwelcome conflict of interest.
So we’ve not hesitated to bring cases like the ones involving St. Jude Medical, a heart device manufacturer in Minnesota. There, the allegations involved unlawful payments to hospitals intended to secure a greater share of the heart-device business, as well as a second matter involving kickbacks to physicians to induce them to implant the company’s pacemakers and defibrillators into heart patients. St. Jude has since settled with the Justice Department for a combined $20 million to resolve those allegations.
We are also taking a close look at fraud in the home health care industry. This past September, I, along with the New Jersey U.S. Attorney’s Office, announced a $150 million civil and criminal settlement with Maxim Healthcare Services, which used patients as pawns in a fraudulent scheme to bill the government for services that were never rendered.
And I have taken a particular interest in cracking down on elder abuse in nursing homes. These cases, like many of our health care fraud matters, are about more than just dollars and cents, because when a nursing home bills our public health care programs for grossly deficient services, it not only wastes taxpayer dollars but often conceals heartbreaking tales of elder neglect.
Real-life stories we’ve uncovered in our cases include nursing homes that failed to dispense prescribed medications; facility residents whose basic needs were so neglected they suffered from dehydration and malnutrition; bed-ridden patients who were so long ignored by nursing home staff that they developed bed sores infected by maggots, leading to amputations.
These and other unsettling accounts uncovered by our investigators led to a multi-million dollar settlement, as well as criminal convictions and fines, against five nursing homes operated by Cathedral Rock, a Texas corporation, and its CEO. And we’ve not stopped there. We continue to investigate claims of elder abuse in other nursing home facilities around the country, and when we find evidence of fraud and abuse, we will be aggressive and vigilant in our enforcement response.
But of course, some of our most significant enforcement work, both civilly and criminally, involves health care fraud in the pharmaceutical industry. And I think there are at least three reasons for this:
First, the money involved in this industry’s participation in health care is staggering, and we all share in the responsibility of making sure that money isn’t wasted on fraud or abuse. Health care spending in the United States surpassed $2.5 trillion in 2009, and, according to independent estimates, 10% of that ‒ $250 billion ‒ was spent on prescription drugs. Not an insignificant amount.
Second, this industry’s importance increases as the number of Americans who use pharmaceutical products continues to grow. Nearly two-thirds of Americans use prescription medicines on a regular basis, including 90% of seniors. That’s almost 200 million people in this country who are depending on the safety and efficacy of the products many of your companies manufacture. This is a significant responsibility.
And, finally, given the size, scope and reach of the pharmaceutical industry, we know that the victories we achieve when fighting fraud here will have a profound impact—not just on the health care economy, but on the lives of countless Americans.
That’s why we’ve not hesitated to demand more accountability in our health care fraud cases, holding providers, companies and physicians responsible in connection with fraud violations, and meeting those violations with serious civil and, if appropriate, criminal sanctions, including felony charges where the law and facts provide.
We will always seek to disprove the ill-advised notion that health care fraud enforcement is simply the cost of doing business by insisting on judgments, convictions, settlements, penalties and fines that eliminate any benefit that may be obtained from engaging in unlawful conduct in the first place.
And so we’ve aggressively pursued cases where we find products marketed off-label for purposes not approved as safe and effective by the FDA, like those involving Novartis, where allegations regarding the illegal marketing of Trileptal were resolved for $422 million; or Pfizer and Pharmacia & Upjohn’s 2009 $2.3 billion settlement involving Bextra and other drugs, the largest health care fraud settlement in history.
Having that profound impact on the lives of real people is also why we demand accountability when companies’ failures in drug manufacturing lead to products that materially differ from the strength, purity, or quality of what was required. That’s what we did when GSK subsidiary SB Pharmco Puerto Rico Inc. agreed to pay $750 million and plead guilty to criminal charges for such violations discovered at a now-closed facility in Puerto Rico. Or when we shut down a dietary supplements manufacturing plant in New Jersey, operated by Quality Formulation Laboratories and American Sports Nutrition, that was, among other things, infested by rats – both dead and alive.
And demanding accountability means we will consider prosecutions against individuals, including misdemeanor prosecutions under the Park doctrine, which provides that responsible corporate officers can, in appropriate circumstances, be held strictly liable for criminal violations of the Food, Drug, and Cosmetic Act.
And yet, as central as the demand for accountability is to our enforcement mission, it alone is not sufficient. I’ve often said we can’t enforce our way out of the health care fraud challenge. That’s why we also seek to promote a culture of compliance by emphasizing deterrence. A comprehensive approach to health care fraud requires preventative efforts and strong compliance programs like those many of you currently promote; it requires guidance and dialogue between government and the private sector.
And it requires creativity when negotiating resolutions, such as non-monetary measures that give companies the tools to build and maintain real change; tools that allow them to reduce recidivism and meaningfully prevent and detect violations in the future.
So in appropriate cases, for example, we may ask courts to impose post-conviction supervision over companies, or consider using our own civil authority to obtain injunctions toward the same end. And as always, we will work with regulating agencies in monitoring compliance with consent decrees and will not hesitate to bring contempt actions when illegal practices re-occur or consent decree requirements are ignored.
But a comprehensive approach to fighting health care fraud means more than just being tough. It also means being fair. It means acknowledging when companies and individuals do the right thing and voluntarily disclose wrongdoing to law enforcement officials.
Because the fact is, most health care companies and providers are trying to play by the rules. Navigating the complexities of the health care landscape is not always easy, and many companies and individuals in this industry do their best to get it right. We know that most of the public’s health care dollars are being spent legitimately, in ways that soothe suffering and improve the quality of our lives. And most companies and individuals in health care know fraud is bad for business. That is why many companies and individuals want to come forward and voluntarily disclose any instances of fraud.
We want to encourage that. That’s why it has been my practice throughout my tenure in the Civil Division to encourage, acknowledge and credit early disclosure by companies. So when a company or individual acts responsibly by timely and voluntarily disclosing unlawful conduct, we will consider that disclosure in deciding whether or how to charge or resolve a health care fraud matter. We will also take into account the extent to which a company or individual cooperates once an investigation has begun. Because that kind of cooperation –producing documents and information quickly and completely, for example – allows us to complete our investigation and the resolve each case more efficiently and expeditiously.
And so I end where I began. We serve different missions; approach the health care landscape from different vantage points; we employ different methods and use different tools. But we share a common goal: one that is animated by the notion that a competitive health care marketplace, undistorted by fraud, is good for patients and providers alike; a goal that recognizes the unique public trust that all of us in this room share, as stewards, participants and consumers of that health care marketplace.
Your presence today demonstrates that you are committed to that goal. And while we may not be able to eliminate all waste, fraud, and abuse from our health care system, we can bring our combined expertise, commitment, energy and creativity to this task, and we can move closer to the day when all Americans get the safest, most efficient, highest quality health care available; care they need, and care they deserve.
Thank you very much.