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OCTOBER 20, 2010

Thank you. Let me express my thanks to the Pharma Congress Co-Chairs, Colleen
Craven, Margaret Feltz, Kelly Freeman, and Michael Shaw for inviting me to speak today. And
thank you, Colleen, for that introduction.

I am so pleased to be with you this afternoon at the eleventh annual gathering of this
Pharma Congress. When the Pharmaceutical Compliance Forum first sponsored this meeting of
compliance officers, pharmaceutical and health care executives, physicians, nurses, industry legal
counsel and other industry professionals, it was to promote effective corporate compliance
programs through the open and informal exchange of information, best practices, and current
developments. In the decade since, this annual event has become the premier forum on
pharmaceutical and biotech regulation and compliance—a “must attend” for those industry
professionals who seek the best information to improve the preventative legal and compliance
efforts of the companies they represent.

And your participation here is so important because through this industry – this complex,
competitive, global industry comprised of innovators, manufacturers and distributors – you play a
central role in promoting the good health and well-being of the American people. Your work
recognizes that fair competition and ethical compliance efforts are the foundation of a vibrant and
successful pharmaceutical sector. And I know you take that work seriously.

What you do here matters greatly because you are such an important part of the investment
this country makes in health care. According to the Kaiser Family Foundation, between 1997 and
2007, the number of prescriptions purchased in the United States increased by 72%, while the
population grew by only 11%. Today, prescription drugs account for almost 10% of the total
health care spending in the United States. Expenditures for Medicare Part D alone will likely top
$60 billion this year.

So your discussions and deliberations here could not be more relevant to one of the core
priorities of this Administration and the Department of Justice, and that is our vigilant fight to curb
health care fraud.

This is actually the second time I’ve had the privilege of addressing this congress. Last
year, when I spoke, I had been on the job as Assistant Attorney General of the Civil Division
barely six months—just enough time to know where the restrooms where—and at that time I was
still getting used to the my role overseeing much of the federal government’s civil litigation in
U.S. District and appellate courts across the country, in areas as diverse as protecting our national
security; litigating national immigration policy; defending Presidential initiatives and federal
agencies, as well as laws passed by Congress; and taking the lead in the Justice Department’s
efforts to protect consumers and recapture billions of taxpayer dollars lost to health care fraud,
waste and abuse. And as I told you then, one of my top priorities as Assistant Attorney General
was to combat health care fraud with every civil and criminal tool at the Civil Division’s disposal.

And the reasons for that are straightforward: few decisions are more critical to the quality
of one’s life than the decisions one makes about health care. And when consumers make those
critical decisions, they of course have the right to rely upon the claims pharmaceutical companies
make about the drugs they sell.

In addition, hundreds of billions of dollars are spent annually to provide health security for
America’s seniors, children, and the disabled. Federal and state spending on Medicare and
Medicaid this year alone will exceed $900 billion. And while most of that money is being spent
on ways that heal sickness, improve our quality of life, or bolster our defenses against disease, too
much of that money is wasted by fraud and abuse—some external estimates say anywhere from 3
to 10 % of total spending.

And we also know that this is not just a government problem. As the private sector
insurers I’ve met with will tell you and as each of you knows well, health care fraud is an equal
opportunity offender, affecting the public and private sectors alike.

So for your industry that is committed to bringing important pharmaceuticals to the public;
for the Justice Department that is committed to protecting consumers and the integrity of our
public health care programs; and for American taxpayers and consumers who demand an efficient,
effective and affordable health care system, health care fraud is, simply put, unacceptable.

When a health care provider bills Medicare or Medicaid for services not rendered, it’s
unacceptable because all of us as taxpayers foot the bill.

When our public health care programs are burdened with fraudulent charges, it’s
unacceptable because that drives the cost of health care up for everyone—private sector, public
sector and consumers alike.

When a company pays kickbacks to encourage the use of a certain drug, it’s unacceptable
because that not only undermines the judgments of health care professionals and erodes consumer
confidence, it can put patients’ health and safety at risk.

That’s why this fight against health care fraud is such a high priority for the President,
Attorney General Eric Holder and for me.

And it’s why, in the year since we last met, we’ve made significant progress in our efforts
to curb health care fraud. Since January 2009, we’ve commenced more health care fraud
investigations, secured larger fines and judgments, and recovered more taxpayer dollars lost to
health care fraud than in any other two-year period. During that period, our civil fraud attorneys
in the Civil Division have used the False Claims Act – a powerful tool that provides for treble
damages – to recover about $4.2 billion lost to fraud against government health care programs.

In addition, through our Office of Consumer Litigation where the Civil Division has both
civil and criminal authority to enforce the Food, Drug, and Cosmetic Act, or “FDCA,” we have
investigated and prosecuted the unlawful promotion and distribution of misbranded and

adulterated drugs or devices. Since January of 2009, we have secured 15 criminal convictions
under the FDCA of companies and individuals and fines and forfeitures in excess of $2 billion.

I’ve also strongly encouraged Civil Division and United States Attorneys throughout the
country to be appropriately aggressive in their use of the wide array of affirmative civil
enforcement tools at their disposal. Tools like Civil Investigative Demands, or “CIDs,” which
allow law enforcement to speed up civil investigations by obtaining documents and testimony
quickly and under oath. The authority to issue CIDs once rested only with the Attorney General,
but amendments to the False Claims Act last year allowed the Attorney General to delegate that
authority to me as the Assistant Attorney General for the Civil Division. I, in turn, have re-
delegated much of that authority to U.S. Attorneys around the country so that they will be able to
use this powerful investigative tool properly and effectively.

And since we last met, there have been several examples of where we’ve used our
affirmative civil enforcement authority to fight health care fraud more effectively.

This past April, for example, AstraZeneca agreed to pay $520 million to federal and state
taxpayers to settle claims that it illegally marketed the anti-psychotic drug, Seroquel, to treat
hyperactivity in children, as well as Alzheimer’s in the elderly, even though the FDA had only
approved the drug for treating schizophrenia and certain bi-polar conditions. That resolution
marked the largest amount ever paid by a company in a civil-only settlement of health care fraud

Just two weeks ago, Allergan pled guilty to one count of misbranding in violation of the
FDCA, admitting that it marketed and promoted Botox for off-label uses and agreeing to pay a
total of $600 million to resolve all criminal and civil allegations.

And, there is Pfizer, which agreed last fall to resolve serious off-label marketing claims in
a civil and criminal resolution that resulted in a payment of $2.3 billion in fines, penalties and
settlement—the largest health care fraud settlement in U.S. history.

Now, just so you don’t think I’ve been picking on the pharmaceutical industry, I want you
to know that it’s not just big pharma that’s attracted our attention at the Justice Department.
While those cases often get big headlines because of the large dollar amounts, there are other,
lower-dollar-yet-equally-important non-pharma cases that characterize our efforts against health
care fraud.

There is, for example, our case against City of Angels Hospital in Los Angeles, where we
alleged that the owners of that hospital were paying kickbacks in an effort to drum up more patient
business for which the hospital could turn around and bill Medicaid. We have charged that in
exchange for payments by the hospital, local homeless shelters would deliver their temporary
tenants to City of Angels where they would receive unnecessary and expensive treatment--all at
taxpayer expenses. The hospital settled that case for $10 million and our related criminal
investigation is ongoing.

There are also cases that underscore our renewed focus on individual wrongdoers, because
where the facts and law allow, the Civil Division will pursue individuals responsible for illegal
conduct just as vigorously as we will companies. Earlier this year, we sued individual surgeons in
two different states—one over allegations that he performed complex endovascular procedures he
was neither qualified nor competent to perform, another because he allegedly performed medically
unnecessary invasive cardiac procedures such as angiograms, angioplasties, and stents. Not only
did these doctors provide unnecessary and, in some of the endovascular cases we believe, harmful
services that injured several patients; they also charged you, the taxpayers, for their work by
improperly billing Medicare for these services.

And then there are those cases we pursue because they cut to the core of protecting both
patient safety and the integrity of our public health care programs. Cases like Small Smiles. You
may have heard about this case. It involved a nationwide network of dental clinics that provided
unnecessary dental services to needy children on Medicaid in order to maximize the company’s
Medicaid reimbursements.

And the stories we learned about during the course of our investigation were horrific:
unnecessary tooth extractions performed on children where healthy teeth were pulled; unnecessary
dental surgery such as needless crowns; and excessive baby root canals – one child had 16 root
canals in a one sitting.

In that case we not only obtained a $24 million settlement, but more importantly, important
reforms to Small Smiles’ practices under new management, as well as the company’s cooperation
in our ongoing investigation into individual dentists.

That last point—working cooperatively with companies—is an important one. To be

clear, no company is required to cooperate in the context of a civil or criminal case. Yet when a
company acts responsibly by timely and voluntarily disclosing unlawful conduct, it is the case that
the Department may consider such cooperation in deciding whether or how to charge a corporation
or to resolve a case, and indeed, it has been my practice to encourage that in appropriate cases. In
addition, when a company cooperates fully with an investigation, the Civil Division typically
informs the HHS Inspector General’s office about the assistance the company provided.

Now, there is no question that over the last year and a half, we’ve demonstrated how
effective civil enforcement tools can be in combating health care fraud. But if there’s one thing
I’ve learned as I’ve stepped up our civil enforcement anti-fraud efforts in the Civil Division, it is
this: We cannot enforce our way out of health care fraud. Our ability to curb waste, fraud and
abuse will depend not only on enforcement, prosecution and penalties but also on cooperation,
partnership and prevention. We need to work with those of you in this room against our common
enemy of health care fraud.

Because your work is critically important to our overall success. Your advice and counsel
is crucial to companies and health care providers that strive to be good corporate citizens; that
want to focus on their core competencies of providing safe and effective drugs, quality services
and conducting innovative research; that seek to adhere to the spirit, as well as the letter, of the
rules that govern the health care road.

And notwithstanding the several cases I just recounted, one thing I’ve learned in this job is
that most health care providers, most drug and device manufacturers, most pharmaceutical
distributors are trying to do the right thing. They’re working hard everyday to develop drugs that
will save and improve lives; they’re working to strengthen compliance efforts and anticipate
potential problems. I know that you are the ones to whom these companies and providers turn to
negotiate a complex legal and regulatory landscape. I know you are the ones on whom so many
rely for guidance on how best to maximize compliance and innovation. And I know your task is
not easy.

And that is why I hope we can stand together in our mutual interest of deterring health care
fraud. Because every time we are successful in this fight, we make a deposit in the bank of public
trust. Whether it’s a vaccine to protect against disease or a drug regimen designed to heal the
body or mind, nearly every American will, at some point in their lives, look to your industry for
renewal, for relief, for hope. And it is incumbent upon those of us here, in this room, whether we
represent the public or private sectors, to be worthy of that hope—to earn that public trust.

Thank you for the important work you do and thank you for inviting me speak today.