Drug Company Whistleblowers Get Hardships Along With Million-Dollar Awards

People who become U.S. government informants in health fraud cases against drug companies may reap millions in financial rewards at the expense of tattered personal and professional lives, a study found.

These whistleblowers, portrayed as struggling heroes in Hollywood films like “The Insider,” said their strongest motivations were a personal sense of right and wrong, along with fears of being blamed for illegal behavior, according to Harvard University researchers. The study, which found the informants received a median of $3 million for their cases, was published today in the New England Journal of Medicine.

President Barack Obama said March 10 that rooting out fraud in government health programs may save $2 billion over three years. He announced an effort using private auditors to detect fraudulent claims in Medicare, which provides health coverage for those ages 65 and older and the disabled.

“Prosecution of health-care fraud is being relied on by the current administration as one of the main tactics to control health-care costs,” Aaron Kesselheim, a researcher at Harvard Medical School and the study’s lead author, said in an interview. “Whistleblowers form the spine of health fraud investigations” because “the government often doesn’t know about illegal behavior until someone comes forward and tells them.”

‘Qui Tam’

A federal law, the False Claims Act, lets private citizens sue on behalf of the U.S. government and share in any settlement money. The government recovered more than $9 billion in so- called qui tam cases involving health fraud from 1996 to 2005, according to the study. Qui tam comes from a Latin phrase used in cases in which a private individual assists government prosecutors.

“Our member companies devote significant resources to internal compliance programs and thorough investigations of any reported misconduct -- activities that complement the government’s enforcement actions,” Ken Johnson, a senior vice president of the Pharmaceutical Research and Manufacturers of America, a Washington-based trade group, said today in an e- mail.

Kesselheim and colleagues interviewed 26 people who filed 17 whistleblower cases against drug companies from January 2001 to March 2009, according to the study. Most, or 22, worked for the drug companies targeted in the government’s fraud case. The cases took almost five years on average to conclude, with the whistleblowers’ shares of the settlements ranging from $100,000 to $42 million - or up to 25 percent of an individual case, the study said.

‘Large Jackpot’

“I won’t deny that some insiders hit a sort of large jackpot,” Kesselheim said.

Many also paid a heavy toll in ruined careers, stress- related health problems, broken marriages and shattered finances, the authors said in the study.

“Contrary to the popular portrayals, being a whistleblower is a much more arduous experience than we thought,” said study co-author Michelle Mello, a researcher at the Harvard School of Public Health.

Fifteen of the whistleblowers were asked by prosecutors to wear recording devices during company meetings, to tape telephone conversations or copy documents, according to the study.

“A typical day could be meeting an FBI agent in a parkway rest stop, sitting in his car with the windows rolled up, neither heat nor air conditioning, getting wired,” according to one insider quoted in the study.

Most Left Industry

Only two of the 22 insiders remained employed in the drug industry after their cases were settled, the study found.

“I just wasn’t able to get a job. It went longer and longer,” one person told the researchers. Needing money, the person eventually sold his house and spent his retirement savings. “I lost everything. Absolutely everything,” he told the researchers, according to the study.

Six of the insiders reported divorces, marital strain or family conflicts. Thirteen said they had panic attacks, insomnia, migraine headaches or shingles among their stress- related health problems. Eight described “devastating” financial consequences, lost jobs or stalled careers, as their cases progressed.

“There are these headline-grabbing rewards but most people do not get life-changing rewards,” said Erica Kelton, an attorney with Phillips & Cohen LLP in Washington, D.C., who has worked on health-care whistleblower cases.

Less Than $1 Million

Among the 26 people in the study, five received less than $1 million, 13 received from $1 million to $5 million and seven won more than $5 million, according to the study. One didn’t say how much he received.

Whistleblowers have lost their jobs or been “blackballed’ by industry and had to find new careers, Kelton said.

“We’ve had clients who have gone from being senior engineers at defense contractors who couldn’t find jobs and ended up mowing lawns and bagging groceries,” she said.

The majority of whistleblowers said they were primarily motivated by a desire to preserve their jobs or careers or a personal sense of justice or integrity, according to the study.

“If these guys go down, I’m not going to be the one that gets blamed for this,” one whistleblower told the researchers.

In one recent case that ended after the study concluded, AstraZeneca Plc agreed on April 27 to pay $520 million to settle U.S. allegations that it illegally marketed the schizophrenia drug Seroquel to children, prisoners and the elderly for uses not approved by regulators. The whistleblowers in that case, a former Astra-Zeneca sales representative and a psychiatrist, split a $45 million award.

The U.S. government in October had about 1,040 qui tam cases that were unsolved because prosecutors hadn’t made a decision about whether to pursue them, according to Sen. Chuck Grassley’s office. About 985 of those cases involved health fraud, of which 200 concerned pharmaceutical pricing and marketing, Grassley said.

To contact the reporter on this story: David Olmos in San Francisco at dolmos@bloomberg.net

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