10/05/2007 05:14 pm ET Updated May 25, 2011

The GOP's Socialized Medicine: Corporate Drug Fraud

While President Bush and his GOP allies are railing against the specter of socialized medicine and the high cost of the SCHIP program, the Bush administration has done relatively little to crack down on billions in corporate drug fraud that bilks our government health programs, as noted in my article this month in The American Prospect, "Medifraud Amok." These fraud schemes have led to $5 billion in settlements and fines in the last eight years, but experts say there are billions more that have been stolen by the drug industry -- but the Bush administration has allowed the industry to get away with fraudulent overcharges, destroyed prescriptions, resending returned drugs and other scams -- all while complaining that spending to insure lower-income kids ineligible for Medicaid is too expensive.

(If you're angry about such hypocrisy, go to the websites of groups like Families USA [and see their SCHIP TV ad they're seeking to place in key states] ,and the Children"s Defense Fund to see how your legislators voted, so you can get the information you need to lobby your member of Congress to overturn the president's veto on SCHIP.)

Meanwhile, a knowledgeable Justice Department official told me: "Starting in 2002 there was a conscious decision that the pendulum had swung too far towards health-care fraud enforcement. The investigative and regulatory agencies are less supportive of making the cases and more supportive of drug industry arguments."

Of course all the claims made by the GOP and Bush that the SCHIP program will primarily help families earning $83,000 a year and children who are already well-served by private insurance are a concoctions of lies, fabrications and exaggerated half-truths, as the Center on Budget and Policy Priorities points out. For starters, the $83,000 families would only be covered if an exemption is granted to one state, New York, that's made an application to extend such coverage as a way to cover moderate income children without health insurance, but hasn't won approval yet. I underscored these WMD-style whoppers in an article in In These Times: "In fact, the proposed expanded SCHIP program would primarily reach uninsured kids who are already eligible for either SCHIP or the even more restrictive Medicaid program. Indeed, currently nine out of ten of those now enrolled in SCHIP are in families that earn below 200 percent of the poverty line." (Here's a detailed debunking of the administration's SCHIP claims, based on the Senate bill that became the basis for the final legislation.)

But the administration has no problem in creating boondoggles for drug companies in exploiting Medicare and Medicaid that are the GOP's version of socialized medicine -- for drug industry CEOs.

All this alleged or admitted fraud goes way beyond the overpricing that's commonly acknowledged as a major factor in exorbitant health costs. Yet's there's $60 billion in potentially reclaimed fines and settlement payouts from drug companies waiting to be collected -- but the under-funded Justice Department's enforcement of fraud claims has led to a backlog of 180 pending whistleblower lawsuits.

As a press release summarizing the article points out:

The American Prospect:

Lax Bush Administration Allows Billions in Corporate Drug Fraud

Justice Department insider tells magazine: Agencies hampering enforcement, "supportive" of drug industry.

Washington, D.C.-- Investigative journalist Art Levine reports in the October issue of The American Prospect that key Bush administration agencies, including the Justice Department and Health and Human Services (HHS), are failing to effectively monitor, prevent, and punish an epidemic of drug-industry fraud.

Accused of such schemes as illegally marketing drugs for off-label uses, reselling drugs returned in the mail, and improperly switching patients to drug capsules that cost as much as 17 times more than cheaper tablets, the drug industry has paid out at least $5 billion in fines and settlements in the last eight years. But leading drug companies and little-known pharmaceutical management "middlemen" companies have apparently succeeded in looting billions more from Medicaid and Medicare programs that aim to serve the poor, elderly, and disabled, according to current and former prosecutors, attorneys for whistleblowers, and Congressional watchdogs.

At the same time, under-staffed Justice Department anti-fraud prosecutors and attorneys face a backlog of 180 federal lawsuits alleging false claims by drug companies. The suits represent a potential recovery of $60 billion in funds to federal government and state Medicaid programs. Additionally, a knowledgeable Justice Department official tells The American Prospect: "Starting in 2002 there was a conscious decision that the pendulum had swung too far towards health-care fraud enforcement. The investigative and regulatory agencies are less supportive of making the cases and more supportive of drug industry arguments."

The article, based on dozens of interviews and a review of hundreds of pages of legal documents and testimony, offers the first major overview in a national magazine on the wide range of drug-industry fraud. It also sheds additional light on alleged abuses by "Pharmaceutical Benefit Managers"(PBMs) that act as all-purpose middlemen between drug companies and the insurance plans and Medicaid programs that contract with them. Levine's article looks at how dozens of lawsuits by federal and state governments, along with HMOs, corporations, and unions, have charged the PBMs with a wide range of fraudulent and unethical practices; these allegedly include secretly retaining manufacturer rebates that were supposed to go to clients, and reselling returned drugs.

Rep. Henry Waxman of California , whose oversight committee has led Congress in investigating drug fraud, tells The American Prospect: "We have failed the taxpayers if we allow these dollars that were intended for prescription drugs to be stolen or wasted, and we also let down the elderly, the poor, and disabled who need these medications."

Why aren't Democrats scoring more points on this issue while trying to build support to override the President's veto of SCHIP?