Drugmakers have paid $8 billion in fraud fines

By Kelly Kennedy, USA TODAY

WASHINGTON – The nation's largest drugmakers have paid at least $8 billion in fines for repeatedly defrauding Medicare and Medicaid over the past decade, but they remain in business with the federal government because they are often the sole suppliers of critical products, records show.

Pfizer, the maker of drugs that help alleviate arthritis and other ailments, has paid almost $3 billion in fines since 2002 and entered into three corporate integrity agreements with the Department of Health and Human Services aimed at preventing future fraud. It and other companies are fighting attempts by Congress to exclude them from government business because of their history of fraud.  Pfizer spent $12 million lobbying Congress in 2011.

Merck, another pharmaceutical giant, paid $1.6 billion in fines since 2008, Medicare and Justice Department records show, to resolve claims it was not paying proper rebates to the government.

Pfizer's 2009 settlement was for improperly promoting the use of drugs for purposes other than those for which they were approved by the government. Merck's 2008 settlement involved claims the company paid illegal kickbacks to health care providers in exchange for prescribing its drugs.

Government investigators say their hands are tied with the tools they have. They can exclude Pfizer and other pharmaceutical companies from providing medications to Medicaid and Medicare beneficiaries as punishment for bad behavior, but that would leave beneficiaries without drugs patented through a particular company.

Or they can fine the companies and force them to enter corporate integrity agreements that require government oversight and a promise not to defraud the government again — a promise that often goes unkept.

"We're seeing some of the big companies a second and third time," said Gregory Demske, assistant inspector general for legal affairs for Health and Human Services. "The corporate integrity agreement is not sufficient to deter further misconduct."

In addition, the cases are labor- and cost-intensive as the companies fight often for years to avoid an exclusion, Demske said.

To try to change that trend, the government announced in 2010 that, rather than exclude an entire company, investigators would go after individuals within a company. Demske said his organization, the Justice Department and the Food and Drug Administration have come up with some ideas to use within the scope of the rules — such as taking away a company's patent rights as a condition of a settlement. That could begin with cases being investigated now, he said.

Sen. Chuck Grassley, R-Iowa, introduced a bipartisan bill that would make it easier for the government to find a middle ground, saying the law now forces "the inspector general to use all-or-nothing, mandatory exclusion penalties against corporations that have committed fraud." The bill would allow the exclusion of individuals from working with the government even after they've left the company where the fraud occurred.

Pharmaceutical companies altogether spent more than $200 million lobbying Congress in 2011, including $12 million spent by Pfizer. At least 12 pharmaceutical and medical device companies are lobbying specifically against a House bill, HR 675, that complements Grassley's.

None of the pharmaceutical companies —Abbott Laboratories, Pfizer or Bristol-Myers Squibb— contacted by USA TODAY responded to questions about their response to the government's proposed enforcement actions.

The industry's trade group, the Pharmaceutical Research and Manufacturers of America, says excluding an individual should occur only when there is "significant wrongdoing" that the individual knew about and did nothing to stop, said Matthew Bennett, the group's senior vice president.

Chopped: Education, Labor, and Health and Human Services

Tuesday, April 12, 2011 by Washington Post
Budget deal: Cuts of $38 billion include accounting gimmicks, target Obama priorities
by Philip Rucker

WASHINGTON - More than half of the $38 billion in spending cuts that lawmakers agreed to last week in the 2011 budget compromise that averted a government shutdown would hit education, labor and health programs.

Although the pain would be felt across virtually the entire government — the deal includes a $1 billion across-the-board cut shared among all non-defense agencies — Republicans were able to focus the sharpest cuts on areas they have long targeted. The Education, Labor, and Health and Human Services departments, which represent about 28 percent of non-defense discretionary spending, face as much as a combined $19.8 billion, or 52 percent, of the total reductions in the plan. Funding for federal Pell grants, job training and a children’s health-care initiative would face cuts, senior congressional aides said. A multitude of other programs — from highway and high-speed rail projects to rural development initiatives — also would experience significant reductions.

But some of the worst-sounding trims are not quite what they seem, and officials said they would not necessarily result in lost jobs or service cutbacks. In several cases, what look like large reductions are actually accounting gimmicks.

The legislation includes $4.9 billion from the Justice Department’s Crime Victims Fund, for instance, but that money is in a reserve fund that wasn’t going to be spent this year. Crime victims would receive no less money than they did before the deal.

The bill contains some policy provisions, including language preventing Guantanamo Bay detainees from being transferred into the United States for any purpose. And it eliminates funding for four Obama administration “czars”: the “health care czar,” “climate change czar,” “car czar” and “urban affairs czar.” But those positions are already vacant, and Democrats beat back a GOP effort to defund other “czar” positions.

Republicans were able to terminate more than 55 programs in the areas of health, labor and education, resulting in a total savings of more than $1 billion. In addition, two minor components of President Obama’s health-care law will be eliminated: the Consumer Operated and Oriented Plan and the Free Choice Voucher programs.

The bill would cut U.S. contributions to the United Nations and international organizations by $377 million, and to international banks and financial institutions by $130 million. It also would prohibit pay raises for foreign service officers, although other federal employees would not be affected.

The Washington region would be spared from potentially painful cuts to the Metro system, as the budget measure would fully fund the federal government’s $150 million share of the agency’s budget, congressional sources said.

But District officials are livid about some policy provisions attached to the bill, particularly one that would ban federal and local funding for abortion. Mayor Vincent C. Gray (D) and several members of the D.C. Council led a rally Monday on Capitol Hill to protest those provisions and were arrested.

The full extent of the cuts did not become clear until Tuesday morning, after congressional aides worked all weekend and all day Monday to shape a detailed spending plan based on the framework that Obama and congressional leaders agreed to Friday. Budget aides tallied cuts into the evening Monday, racing to prepare a bill that was introduced in the House.

(A summary of the cuts provided by the House Appropriations Committee is available here, and a detailed list of program cuts is here.)

Of the $38 billion in overall reductions in the budget that funds the government for the rest of the fiscal year, about $20 billion would come from domestic discretionary programs, while $17.8 billion would be cut from mandatory programs. The latter cuts, known as “ChIMPS,” affect permanent programs protected by law. The money they lose this year could be put back in their budgets next year.

House Appropriations Committee Chairman Hal Rogers (R-Ky.) hailed the historic nature of the spending cuts in a statement Tuesday morning.

“My committee went line-by-line through agency budgets this weekend to negotiate and craft deep but responsible reductions in virtually all areas of government,” Rogers said. “Our bill targets wasteful and duplicative spending, makes strides to rein in out-of-control federal bureaucracies and will help bring our nation one step closer to eliminating our job-crushing level of debt.”

Although the pain would be felt across virtually the entire government — the deal includes a $1 billion across-the-board cut shared among all non-defense agencies — Republicans were able to focus the sharpest cuts on areas they have long targeted. The Education, Labor, and Health and Human Services departments, which represent about 28 percent of non-defense discretionary spending, face as much as a combined $19.8 billion, or 52 percent, of the total reductions in the plan.

In addition, the Environmental Protection Agency, long a target of conservatives, will see a $1.6 billion cut, representing a 16 percent decrease from 2010 levels. At the Department of the Interior, affected agencies include the Fish and Wildlife Services ($141 million cut from last year), the National Park Service ($127 million cut from last year) and “clean and drinking water state revolving funds” ($997 million cut from last year).

Democrats were able to beat back the most severe cuts originally proposed by House Republicans and protect funding for some cherished programs, such as Head Start, AmeriCorps and the implementation of the new health-care and food safety laws.

“Race to the Top,” Obama’s signature education reform initiative, will receive an additional $700 million in funding. In addition, the Securities and Exchange Commission received a $74 million increase from 2010 levels, which will help fund new securities enforcement measures.

But Democrats agreed to key concessions in important areas and were not able to reduce military spending.

White House press secretary Jay Carney said Monday that the deal demonstrates “a commitment to making tough choices that are not the kinds of choices in an ideal world the president would want to make or that Democrats would want to make.”

Less-painful cuts

Some of the cuts may have only a limited effect on people’s daily lives. The Crime Victims Fund provides money — for counseling and other services — that comes from fees levied on criminals, according to U.S. officials and victims’ advocates. By law, all the money collected must be spent on victims. But Congress has limited the amount that can be spent each year, allowing excess money to grow in a reserve account. Those savings constitute the $4.9 billion listed as a cut, advocates and officials said.

“It would be a disaster for crime victims if this were really a cut,” said Susan Howley, director for public policy at the National Center for Victims of Crime.

The bill includes savings of nearly $500 million on the federal Pell grant program, which aids low-income college students. But those savings are reflected in an administration plan already underway to limit grants to the academic year to preserve the maximum grant amount of $5,550.

The year-round component “was costing more money than was originally anticipated and was not having a noticeable effect” on completion rates, Education Department spokesman Justin Hamilton said.

Another cut, $3.5 billion for the Children’s Health Insurance Program, would affect only rewards for states that make an extra effort to enroll children. But officials with knowledge of the budget deal said that most states were unlikely to qualify for the bonuses and that sufficient money would be available for those that did.

And about $2.2 billion would be cut from the COOPS program, a provision of the new health-care law that subsidizes loans to civic and community groups that come together to create health insurance cooperatives. This represents more than one-third of the program’s $6 billion budget.

‘We’re on a battleship’

Most lawmakers will not discuss the specifics of the spending cuts until a final analysis is revealed. But Rep. George Miller (Calif.), the ranking Democrat on the House Education and the Workforce Committee, issued a statement after the deal was announced Friday saying that he “had concerns.”

“Poor and middle-class families have already received more than their fair share of pain in this economy while the wealthy and special interests have paid no price,” he said.

The House and the Senate plan to vote on the budget bill this week. Some conservative lawmakers have said they will not support it. Many freshmen House Republicans — who had resisted backing down from the GOP proposal of $61 billion in cuts — said they will remain undecided until they have a chance to read the measure.

“I’m not sure that this agreement will look quite as good under the light of day,” said freshman Rep. Bill Huizenga (Mich.). “We’re on a battleship. The wheel has been turned. And I understand that. I get that. I just want to make sure that we’ve turned the wheel all the way.”

It remains unclear how deep a conservative backlash might be — 54 House Republicans voted against a short-term spending bill earlier this year, many arguing that it did not contain deep enough cuts. Privately, though, Republican leadership aides said the legislation would almost certainly pass when it comes to the House floor on Wednesday.

Across the Capitol, Sen. Rand Paul (R-Ky.), a freshman tea party adherent, issued an open letter to fellow senators saying he would vote against the bill because it is “simply not credible or serious.”

“Think about it another way before you vote: The entire budget cut [skims] 3 percent off the top of our historic $1.65 trillion deficit. That means the side of Big Government got 97 percent of what they want,” Paul wrote. “I prefer to be on the other side. The side of the people who sent us here to Washington to do something. To cut spending.”

The legislation is not expected to include funding for an alternative engine for the Joint Strike Fighter program, according to a source with knowledge of the decision. The Ohio district of House Speaker John A. Boehner (R) stands to gain from the costly and controversial defense project.

The budget bill also will not include the more controversial policy provisions, or “riders.” Republican efforts to defund Planned Parenthood and peel back environmental regulations led to a stalemate last week.

Other policy riders kept out of the final bill include efforts to prevent regulation of the for-profit college industry and to defund Obama’s health-care law and National Public Radio. But the bill does include provisions that would limit NASA’s cooperation with China and that would remove wolves from the endangered species list in Montana, something Sen. Jon Tester (D-Mont.) had been seeking.

The deal also includes several other concessions Republicans sought. It guarantees that the Senate will debate and vote on repealing Obama’s health-care law and ending federal funding to Planned Parenthood. That’s designed to force politically vulnerable lawmakers to vote on the hot-button issues. The legislation also would block a funding increase, sought by the administration, for the Internal Revenue Service to hire additional agents to enforce the administration’s agenda on a range of issues.

40 Million Doses of H1N1 Vaccine To Be Destroyed

Thursday, July 01, 2010

About a quarter of the swine flu vaccine produced for the U.S. public has expired — meaning that a whopping 40 million doses worth about $260 million is being written off as trash.
“It’s a lot, by historical standards,” said Jerry Weir, who oversees vaccine research and review for the U.S. Food and Drug Administration.

The outdated vaccine, some of which expired Wednesday, will be incinerated. The amount, more than twice the usual leftovers, likely sets a record. And that’s not even all of it.
About 30 million more doses will expire later and may go unused, according to one government estimate. If all that vaccine expires, more than 43 percent of the supply for the U.S. public will have gone to waste.

Federal officials defended the huge purchase as a necessary risk in the face of a never-before-seen virus. Many health experts had feared the new flu could be the deadly global epidemic they had long warned about, but it ended up killing fewer people than seasonal flu.

“Although there were many doses of vaccine that went unused, it was much more appropriate to have been prepared for the worst case scenario than to have had too few doses,” said Bill Hall, spokesman for U.S. Department of Health and Human Services.Most leading health experts generally agree with that.

Millions of doses of flu vaccine generally go unused every year and are marked for burning, but in recent years the leftovers amounted to closer to 10 percent of the supply, rather than the 25 percent expiring now. Government flu experts couldn't recall throwing away anything close to 40 million doses before.

The new H1N1 swine flu emerged in April last year, hitting children and young adults particularly hard. It was difficult to predict how deadly it might be or how easily it might spread. Federal health officials pushed five vaccine manufacturers to produce a vaccine as quickly as possible. What's more, they wanted a lot of it — many experts thought most people would need two doses for it to work.

The government placed three orders last year for a combined total of nearly 200 million doses — an unprecedented amount and almost double the amount of vaccine produced in recent years for seasonal flu.

About 162 million doses were meant for the general public. Another 36 million included doses for the military and other countries.

But demand never took off, for several reasons:

—Tests of the vaccine soon showed only one dose was enough to protect most people.

—Much of the vaccine was not ready until late 2009, after the largest wave of swine flu illnesses passed.

—Swine flu turned out not to be as deadly as was first feared. About 12,000 deaths have been attributed to it

— or roughly a third of the estimated annual deaths from seasonal flu.

So while people were waiting hours for swine flu vaccinations in some cities in October and November, by January local health departments were trying gimmicks to get anyone at all to come in for a shot.

Government officials have known for months that they were looking at a huge surplus. According to an Associated Press calculation based on federal purchasing information, the dollar value of the 40 million expired doses is about $261 million. The government didn't release an official figure, but Hall said the AP estimate was approximately correct.

In Europe, where nations also found themselves with millions of unused doses, some commentators have attacked the World Health Organization, which declared swine flu a global epidemic, or pandemic.

The critics have questioned the motivation of some WHO advisers who had links to the pharmaceutical industry.

Some critics have simply lamented that a lot of anxiety was raised and money wasted, not just during the swine flu scare but also in government responses to bird flu and SARS, a respiratory virus that swept parts of Asia in 2003.

"Each time the so-called experts told us that millions of people would be killed worldwide by the respective viruses. We have learned that the experts were utterly wrong," said Dr. Ulrich Keil, a professor at Germany's prestigious University of Muenster and a WHO adviser.

"This behavior is irresponsible because the angst campaigns ... confuse the priority setting in public health," he said. The death toll from influenza epidemics is much smaller than the number killed annually by chronic illnesses like heart disease, cancer, stroke and diabetes, he added, in an e-mail.

Unused flu vaccine is a common problem. The June 30 expiration date is set by the FDA and has less to do with the vaccine's shelf life than the desire to tweak the recipe each year to protect against the three flu strains expected to cause the most illness.

"It's not necessarily because it's degraded or not potent," said Dr. Mark Mulligan, an Emory University vaccine researcher.

In the past year, about 114 million doses of seasonal flu vaccine were distributed. The government thinks most of that was used — demand was unusually high because of fears about swine flu.

In the flu vaccination campaign for this coming fall, swine flu vaccine is being combined with two seasonal strains in single doses. Manufacturers have told the government they expect to make about 170 million doses.

An influential government advisory panel this year recommended that virtually all Americans get flu shots each year. Still, that doesn't mean it will all get used.

"No doubt there will be unused doses. This happens every time," said Dr. John Treanor, an immunology specialist at the University of Rochester Medical Center.