Predictors of loss due to pharmaceutical fraud: Evidence from the U.S.

Cost Effectiveness and Resource Allocation. 2022. Vol. 20. No. 6. Article 6.

Timofeyev Y., Hayes S., Jakovljević M.

Background

Globally and in the U.S. in particular, pharmaceutical fraud account for a large number out of all crimes in healthcare, which result into severe costs to the society. The Academy of Managed Care Pharmacists (2019) estimate that pharmacy fraud is 1% of costs, therefore estimating that pharmacy fraud costs at $3.5 billion, given that pharmacy costs are $358 billion (Statista, 2021).   

Aim

This exploratory study aims to demonstrate a fraudster’s profile as well as to estimate average consequences in terms of costs and identify the loss predictors’ hierarchy in the pharmaceutical industry in the U.S. 

Materials and methods

Data from the Corporate Prosecution Registry and mixed-effects models are utilized for this purpose. The dataset covers years 2001-2020 and 75 cases, falling into one of the following broad sub-categories: misbranding, counterfeit, off label use of drugs, off-label use of drugs / deceptive marketing; violation of the Food, Drug and Cosmetic Act.

Results

The main factors positively associated with loss due to pharmaceutical fraud are (i) duration of (ii) the scheme and scheme being executed at a U.S. public company. Surprisingly, presence of collusion negatively and significantly effects the cost. Potential factors include (a) principal perpetrator being a white American and/or male, and (b) number of employees at individual and organizational level respectively.

Conclusion

This study empirically justifies considering loss, due to pharmaceutical fraud, from a multi-level perspective. Identified profiles of a typical fraudster helped to elaborate on specific practical recommendations aimed at pharmaceutical fraud prevention in the U.S.

Keywords: healthcare, hierarchical linear modeling, profiling, pharmaceutical fraud