In yet another victory against medical fraudsters, federal officials running the Health Care Fraud and Abuse Program have been getting an average of $7.90 in returns for every dollar spent on health care fraud investigations — an all-time record.

As the Huffington Post reports, “the Justice Department opened more than 1,100 criminal health care fraud investigations last year involving 2,148 potential defendants, and over 800 defendants “were convicted of health care fraud-related crimes during the year and the department opened nearly 900 new civil investigations.”

Cutting down on Medicare and other health care fraud has been a top priority for the Obama Administration, and so far their efforts have been paying off. Last year, the Justice Department carried out one of the largest Medicare fraud busts in history, and the agency collected a record $3 billion in settlements from physicians and pharmaceutical companies under the auspices of the False Claims Act last year.

Fraud and abuse is an enormous source of waste in health care spending, with some studies estimating that it accounts for anywhere between a third and half of national health expenditures. Much of the initial projected savings in Obamacare stems from combating fraud — it would appear that, so far, those projections are correct.

According to Modern Healthcare, the Department of Justice took in $4.9 billion in collections and settlements through the False Claims Act in fiscal year 2012 — an all-time high, largely bolstered by over $3 billion in collections from health care firms.

The False Claims Act encourages whistleblowers to report fraudulent activities undertaken by private actors against the U.S. government. This past fiscal year, the Justice Department received its highest-ever haul from health care firms engaging in Medicare fraud and pharmaceutical companies promoting drugs for off-label use not authorized by the FDA:

Top among the healthcare settlements in 2012 was GSK’s agreement to pay $1.5 billion in civil remedies to resolve charges, without admitting liability, in allegations that it promoted Paxil, Wellbutrin, Advair, Lamictal and Zofran for off-label uses, as well as making false statements about the safety of Avandia and paying kickbacks to doctors to prescribe Imitrex, Lotronex, Flovent and Valtrex.

GSK’s civil payments were part of a $3 billion “global” settlement with federal and state governments that also included criminal fines and pleas and an unusual corporate integrity agreement that changed how the company compensates sales staff and executives.

Also in 2012, the Justice Department reported collecting $441 million to resolve allegations that Merck illegally marketed the painkiller Vioxx, which was pulled from the market in 2004. That settlement, which came without an admission of wrong-doing, was part of a $950 million resolution that involved criminal and civil fines and settlements.

Fraud in government health care programs has been a consistent target of the Obama Administration in an effort to protect consumers and lower wasteful health spending. Doctors regularly overbill Medicare through shoddy, fraudulent procedures such as “self-referring” their patients and “upcoding” the complexity of the services they provide patients in order to reap undeserved profits.

But the biggest settlements from the past fiscal year’s False Claims Act collections stem from pharmaceutical companies engaging in unlawful and misleading drug promotions — a practice that was upheld by a federal appellate court on Monday and may soon head to the Supreme Court.

A federal appellate court on Monday sided with pharmaceutical industry interests to overturn the conviction of Alfred Caronia, a pharmaceutical sales representative who sold and promoted drugs for off-label use, on First Amendment grounds. This decision sets the stage for a potential Supreme Court case that would have enormous consequences for the Food and Drug Administration (FDA), and potentially shift the contours of how the pharmaceutical industry is regulated in America.

The Second Circuit Court of Appeals in Manhattan found by 2-1 margin that Caronia was simply exercising his right to free speech while promoting a drug — which has been officially approved by the FDA to treat narcolepsy — as a suitable treatment for insomnia, along with several other medical conditions for which it was not intended. While doctors have the authority to prescribe medication for purposes other than a drug’s intended use, drug manufacturers are subject to a higher level of scrutiny in the way they promote their products’ uses, and firms such as Johnson&Johnson have had to dole out big settlements to the Justice Department in recent years for violating these standards and promoting off-label use.

While the appellate court ruled that Caronia was within his constitutional rights to discuss the alternative effects of the drug he was promoting, government officials and dissenting Judge Debra Livingston warned that the Second Circuit’s wide-ranging decision could open up a can of worms that leads to an asymmetric level of power and discretion for pharmaceuticals, while stripping the FDA of its ability to safeguard Americans’ health by effectively regulating drug makers:

“Most if not all of these cases have been based on a central premise: that it is unlawful for a company and one of its employees to be promoting a drug or a medical device off-label,” said John R. Fleder, a director at the law firm Hyman, Phelps & McNamara who represented the F.D.A. while working at the Justice Department. “And this decision hits at the heart of the government’s theory.” [...]

Under the Food, Drug and Cosmetic Act, which gives the F.D.A. the authority to regulate drugs, selling a “misbranded drug,” or one that is intended to be used for purposes not listed in the label, is illegal. Doctors, on the other hand, are free to prescribe a drug for any use. The agency has argued that off-label promotion of drugs is evidence that a sales representative or company intended to sell misbranded drugs. [...]

The lone dissenting judge [in the court's decision], Judge Debra Ann Livingston, vigorously disagreed, arguing that by throwing out Mr. Caronia’s conviction “the majority calls into question the very foundations of our century-old system of drug regulation.” She argued that if drug companies “were allowed to promote F.D.A.-approved drugs for nonapproved uses, they would have little incentive to seek F.D.A. approval for those uses.”

If the decision is upheld in a review by the full Second Circuit bench or the Supreme Court, the FDA will have to significantly modify its approach to overseeing the drug industry. Former FDA chief counsel Gerald Masoudi says that the ruling will force the FDA to “focus on the kinds of speech that are more likely to harm consumers, such as false or misleading marketing versus something that is not approved” in future dealings with pharmaceutical promotion and advertising.

This is not the only major drug industry case that may soon be headed to the Supreme Court. As ThinkProgress reported, the Supreme Court decided Monday to review a case asking whether bio-tech drug company Myriad Genetics can patent two human genes for a cancer-prevention screening procedure.

Health and Human Services (HHS) Secretary Kathleen Sebelius and Attorney General Eric Holder announced Thursday that the Medicare Fraud Strike Force has arrested 91 people for a variety of Medicare billing fraud schemes across seven U.S. cities. The alleged fraud is massive in both scope and breadth, totaling over $230 million in home care billing fraud and $100 million in mental health billing fraud and involving health professionals including doctors, nurses, and various other care providers:

“Today’s enforcement actions reveal an alarming and unacceptable trend of individuals attempting to exploit federal health care programs to steal billions in taxpayer dollars for personal gain,” said Attorney General Holder. “Such activities not only siphon precious taxpayer resources, drive up health care costs, and jeopardize the strength of the Medicare program — they also disproportionately victimize the most vulnerable members of society, including elderly, disabled and impoverished Americans.”

“Today’s arrests put criminals on notice that we are cracking down hard on people who want to steal from Medicare,” said HHS Secretary Sebelius. “The health care law gives us new tools to better fight fraud and make Medicare stronger. In addition to the arrests made today, HHS used new authority from the health care law to stop future payments to many of the health care providers suspected of fraud, saving Medicare resources and taxpayer dollars from being lost to fraud in the first place.”

The Obama Administration has taken Medicare billing fraud very seriously, setting up consumer-driven watchdog groups, issuing strict warnings to providers about gaming Medicare for personal gain, and enforcing strong fraud-prevention measures in Obamacare, all in an effort to curb unsavory (and illegal) practices such as “upcoding” that have the potential to devastate the medically needy by looting the safety-net program’s funds and driving up costs. The recent arrests go to show that the Administration has the bite to go with its bark.

“This is the result of coordinated anti-fraud efforts – including Medicare flagging suspicious activity, efforts between agencies to investigate this criminal activity, and today’s actions by law enforcement and HHS,” said CMS Deputy Administrator for Program Integrity Peter Budetti. “As we stop payments to these providers suspected of fraud, we continue our efforts to move from a pay-and-chase model to one where we stop fraudsters before they can successfully bill Medicare and Medicaid.”