The cost of whistle blowing

Below is a post from PharamaGossip today that shows a Table of the settlements recovered by the Federal Goverment in Whistle Blower cases versus Pharmaceutical companies since 2001.  The total settlement amounts in the 17 cases depicted exceeds $6.3 B dollars.  If you also include the recent $2.3 B dollar settlement versus Pfizer in 2010, the total nears $9 B.  That's a lot of whistling!

PharmaGossip: The cost of whistle blowing. 

The New England Journal of Medicine also published a study on Whistle Blowing outlining the experiences of whistle blowers in 17 so-called Qui Tam litigations under the Federal False Claims Act (FCA). Under the FCA, whistle blowers (called relators under the law) may be awarded between 15 to 25% of the recovery in the case.  The total relator share is set by the government and divvied up among relators.  In these cases, individual relator shares ranged between $100,000 and $42 million - with a median of $3 M.

Despite the financial incentives, all whistle blowers reported non-financial reasons for getting involved in these cases.  Four main reasons were cited, personal integrity, protection of public safety (altruism), justice, and self-protection (against company retaliation).  The majority of whistle blowers indicated that any eventual financial award they saw did not compensate them for the time, stress and life disruption that came from blowing the whistle.  The main exception to this finding - came from the relatively few (only 4) whistle blowers who made their reports from outside the company being charged with wrong-doing.

The good news (sort of) was that 22 of 26 whistle blowers (despite any dissatifaction with personal trials and inadequacy of financial rewards) felt vindicated by a sense of ethical, psychological or spiritual rewards.

The authors of NEJM report finalize their article with several suggestions that could be undertaken by the government to support whistle blowers better thorugh the process.  This would be especially needed by those who lose their jobs, families, health, health insurance etc as a consequence of stepping forward.

It would seem that stronger protections could be put in place to support truth tellers. In this study, only 2 of 22 whistle blowers 'inside" remained employed in the pharmaceutical industry, while 4 outsiders remained in their jobs. The authors suggest that better protections might lead to more relators willing to step forward which in turn might have a greater deterrence effect on this type of fradulent behavior. 

Several industry blogs have suggested that the financial penalties incurred in these cases are too low versus the profits that the offending companies reap to have any lasting deterrent value.  The repeated instances of fraudulent behavior - particularly in times when market conditions are tough -- would seem to bear that observation out.

For now, the protections for whistle blowers in the FCA appear to be too weak to afford real protection -- these folks face a difficult choice in stepping forward.

Posted by Bruce Lehr May 13th 2010.

Comments

[accounting homework help]

Whistle Blowing in the Public Sector and the etymological origins of whistle blowing are gloriously obscure.

[Bruce Lehr]

This additional information from Philly.com,

The False Claims Act lets private citizens sue on behalf of the government and share in any recovery. Whistle-blowers were paid $2.39 billion from 1987 to 2009, or 16 percent of the $15.19 billion collected in lawsuits where the U.S. government joined the case, according to the Justice Department.

Read more: http://www.philly.com/philly/business/20100516_The_repeat_whistle-blowers.html#ixzz0o6d6S0sn

[Bruce Lehr]

Here's another post on this topic from the Pharmagossip blog with a link to the Guardian (UK).
http://pharmagossip.blogspot.com/2010/05/if-we-can-help-whistleblowers-then-we.html