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Question of the Week — Should Drug Companies that Defraud the Government Lose Their Patents?

Posted  September 18, 2019

Settlements between drug companies and the government are commonplace these days. Just last week the DOJ announced another settlement with a pharmaceutical company, Mallinckrodt, for allegedly paying kickbacks to doctors to induce them to prescribe more of the company’s drug. The company was accused of violating the Anti-Kickback Statute, which generally prohibits medical providers from paying or receiving kickbacks, remuneration, or anything of value in exchange for referrals of patients who will receive treatment paid for by government healthcare programs such as Medicare and Medicaid, and from entering into certain kinds of financial relationships. This year alone, various settlements have resulted from similar allegations.

This settlement was for $15.5 million. Last year, the company took in more than $3.2 billion in revenues and over $1.4 billion in gross profits; the company’s assets exceed $10 billion. $15.5M is simply not very much money to a company like Mallinckrodt.

Experts estimate that Medicare fraud costs taxpayers tens of billions of dollars each year. That number is likely to increase as healthcare costs rise. Many think that more must be done to combat that fraud. One-off settlements, although recovering billions annually, do not come close to accounting for level of fraud present in our healthcare system.

A possible alternative to monetary settlements, that might prove a more effective deterrent to fraud, could involve a pharmaceutical company losing some portion of its patents if it’s found to have defrauded the government. Patents are a major driver of profit in the pharmaceutical industry. Holding a patent often lets a company be the exclusive manufacturer of a new drug for several years. The potential to lose patents could be a major deterrent to fraud but, as the pharmaceutical often points out, the profitability of patents is a key incentive to innovate and develop new drugs, a very expensive process.

So, what do you think? Should Drug Companies that Defraud the Government Lose Their Patents?

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Tagged in: Anti-Kickback and Stark, FCA Federal, Pharma Fraud, Question of the Week,