Unapproved Drugs

In 1962, Congress amended the Federal Food, Drug and Cosmetic Act to require that all new drugs must demonstrate through studies to be both “safe and effective” before going on the market.  Drugs before 1962 were only approved as safe, and thus had to be studied for their effectiveness under the Drug Efficacy Study Implementation (DESI) program.  If the DESI review did not result in proven effectiveness, the drug was classified as a “less-than-effective” (LTE or DESI-LTE) drug until approved by the FDA.  LTE drugs are not covered under the Medicare or Medicaid programs. Therefore, misrepresenting a drug’s LTE designation may constitute a false claim violating the FCA.

Additionally, drugs manufactured after 1962 that never received FDA approval as safe and effective are ineligible for payment under Medicare and Medicaid.  Finally, even drugs that were once approved can be ineligible under Medicare and Medicaid if later studies by the FDA reverse this approval.

Example

Pharmaceutical manufacturing company Schwarz Pharma Inc. manufactured and sold the drugs Deponit and Hyoscyamine Sulfate ER during the 1990s.  However, in 1997 and 1999 the FDA made determinations that the drugs were less than effective, and therefore ineligible for Medicare or Medicaid coverage.  Schwarz Pharma nonetheless submitted reports misrepresenting the regulatory status of the drugs and failing to disclose the drugs’ ineligibility Medicare or Medicaid coverage.  As a result, the company settled the case under the FCA for $22 million in 2010.