- Associated Press - Monday, October 25, 2010

WASHINGTON (AP) - In the 1990s, the pharmaceutical industry repeatedly was named the most profitable industry in the world. More than a decade later, the industry tops a more dubious list: the No. 1 source of fraud-related settlements with the Department of Justice, an advocacy group says.

Pharmaceutical companies made up eight of the government’s top 10 settlements related to fraud in the last year, according to the advocacy group Taxpayers Against Fraud Education Fund. An insurer and a hospital chain filled out the list.

Topping the list was specialty drugmaker Allergan Inc. which paid out $600 million to settle allegations that it marketed the anti-wrinkle injection Botox for unapproved uses. Trailing just behind was AstraZeneca, which paid $520 million over allegations it inappropriately marketed its psychiatric drug Seroquel. Other companies in the top 10 include Novartis Pharmaceuticals, Forest Laboratories and Teva Pharmaceuticals.

Drug companies are permitted to market drugs only for uses that have been approved by the FDA. In recent years the Department of Justice has increasingly pursued cases of so-called off-label marketing by pharmaceutical companies, reaching record-setting settlements with Pfizer Inc. and Eli Lilly & Co. As more baby boomers become eligible for Medicare, the government is spending more on prescription drugs, attracting scrutiny from government investigators.

Overall, the group estimates that in the fiscal year that ended Sept. 1, government prosecutors collected $3.1 billion under the False Claims Act, which allows the government to collect damages reported by private citizens. In many cases, the alleged fraud is reported by company whistleblowers, who are eligible to receive between 15 percent and 30 percent of the total sum collected by the government. The group advocates for whistleblowers and their attorneys who report fraud to the federal government.

Approximately 80 percent of the $3.1 billion collected last year came from health care companies, including insurers and hospitals, according to Taxpayers Against Fraud.

Despite the slew of payouts by drugmakers in recent years, some lawyers and public health advocates say steeper penalties are needed to curb industry behavior. They point out that for drugs like Seroquel _ which generate billions of dollars annually _ a multimillion dollar penalty represents just a fraction of total sales.