Pharmaceutical Pricing Fraud

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The federal government in the United States is the single largest buyer of pharmaceuticals in the world. The majority of the prescription drug expenditures made by the government represent program reimbursements for claims made by TRICARE, Medicare and Medicaid enrollees. 

Legislation relating to prescription drug pricing has long been drafted in such a way as to guarantee that the government receives the most competitive pricing possible. As an example, drug manufacturers participating in individual states' Medicare programs are required to refund a percentage of the total amount of expenditures made by each state for prescription drugs that fall under the umbrella of its Medicaid plans.

Rebate Fundamentals

According to the rebate arrangements between the Department of Health and Human Services (HHS) and the drug companies, the government must be provided with data regarding the average price charged by drug makers for a specific item, the baseline average price in the industry and also the drug maker's best price.

HHS takes that information and determines the amount each state must receive in rebates from the pharmaceutical firms for the drugs at issue. The rebate amount typically is a defined portion of the difference between an average manufacturer price for the drug and the maker's stated best price.

Drug Pricing Fraud Within Medicare and Medicaid

HHS and various other governmental agencies are vigilant when it comes to detecting fraud in drug pricing. Unfortunately, the Medicaid reimbursement framework is characterized by multiple vulnerabilities able to be exploited by unscrupulous operators.

Drug manufacturers have been known to deliberately alter one of the two factors used to calculate the applicable rebate amount. They may attempt to manipulate either their best price or the average drug maker price.

This can be done in a number of ways, each of which constitutes fraud. Known techniques have included the following strategies:

  • Companies may make payments of kickbacks to Managed Care Organizations or Benefits Managers in order to secure a listing on the organization's formulary or to obtain generally preferential treatment of a product that results in higher utilization
  • Firms may enter into contracts with hospitals or other customers for research grants. This activity works to increase prices and reduce the required rebate amount.
  • Drug makers could offer backdoor price breaks or rebates that disguise the actual price paid for a given drug.


Acts of this type or any other schemes meant to falsely characterize prescription drug prices run afoul of the law and can lead to criminal charges for the offending parties.

How to Fight Pricing Fraud

Have you discovered evidence of fraudulent pharmaceutical pricing in the context of federal reimbursements? You have the power to combat waste and unnecessary government spending. Our firm possesses substantial expertise when it comes to representing whistleblowers in the healthcare field. 

Do You Have Information About Pharmaceutical Pricing Fraud? Report it Here.

You can stop abuse of government funds by becoming a Medicare fraud whistleblower and get a substantial reward for your information. Our attorneys have a lot of experience representing those who expose fraud in the healthcare industry. To get a consultation with a lawyer free of charge, you may fill out the secure and confidential form on this page, or contact us at 1-866-648-5223.