Fraud in Pharmaceuticals

The pharmaceutical industry is among the wealthiest and most influential sectors with annual sales expected to exceed $2 trillion in 2020.


Fraud in Pharmaceuticals


However, it is also one of the most complicated industries in terms of preventing and detecting fraud.


Common types of fraud include:

  • Promoting drugs in ways that push doctors to improperly or illegally prescribe medication
  • Manufacturing or selling defective drugs that do not treat their targeted ailment
  • Inflating the price of drugs to insurance or regulatory entities


Fraud can be widespread when drug manufacturers assure doctors their products can be used for a variety of illnesses or medical conditions. For example, a manufacturer might insist that a drug designed for lungs can treat cardiovascular problems. It is then marked as off-label use.


  • Off-Label Marketing Fraud. Pharmaceutical companies promote products for off-label use to increase sales. If healthcare providers believe a drug has multiple uses, more medical professionals are likely to prescribe patients that medication. Patient welfare becomes secondary to the expansion of profits. This has led to numerous cases of inadequate testing, falsified research, and increased levels of consumer risk in the rush to market. All of these practices can lead to a toxic healthcare industry that actively undermines national health security.
  • “Best Price" Fraud. “Best price" fraud is when a manufacturer artificially inflates the amount that they report to the government. Because pharmaceutical companies do not have to disclose their actual AWP to the authorities, they are often able to misrepresent the actual costs. This allows them to charge Medicaid far more than private insurers pay for a drug. Some companies have kept their fees artificially high by disguising their price discounts to private purchasers as processing fees, educational grants, financial investments, or other arrangements that effectively lower the cost of the purchased medications.
  • Kickbacks. Drug manufacturers and distributors could provide kickbacks to physicians or other prescribers. Kickbacks don't always take the form of direct monetary payments. They may include consulting fees, paid vacations, discounts to various referral programs, and or access to services in exchange for doctors endorsing their drugs.
  • Clinical trial manipulation. Drug manufacturers must obtain government (FDA in the U.S.) approval before marketing a new drug. The FDA approves new drugs that are proven to be safe, effective, and properly labeled following extensive preclinical and clinical analysis. These rigorous tests result in a wealth of data regarding the drug's safety, efficacy, pharmacology, and toxicology.


The FDA relies on the accuracy of the information provided by manufacturers about their respective drugs. However, pharmaceutical companies can make false statements to the FDA and pay researchers to falsify clinical trial data.


“Whistleblowers" have detected innumerable instances of fraud among pharmaceutical companies, resulting in billions of dollars of loss.


IT technology providers have developed customized solutions to identify instances of fraud and reduce the likelihood that data can be manipulated by fraudulent actors.


These types of anti-fraud solutions can help institutions like hospitals, clinics, and government entities stand strong as the front line against medical and pharmaceutical fraud.




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