Life Science Compliance Update

January 23, 2017

U.S. Senators Collins and McCaskill Release Drug Pricing Investigation Report

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United States Senators Susan Collins (R-ME) and Claire McCaskill (D-MO), the Chairwoman and Ranking Member of the Senate Aging Committee, respectively, released a report on drug pricing titled, “Sudden Price Spikes in Off-Patent Prescription Drugs: The Monopoly Business Model that Harms Patients, Taxpayers, and the U.S. Health Care System. The 131-page report details findings from the Committee’s bipartisan investigation into abrupt and dramatic price increases for prescription drugs whose patents expired long ago.

The bipartisan duo launched the Aging Committee’s investigation in November 2015 after a series of media reports detailing dramatic drug price increases after the acquisition of decades-old, off-patent, and previously affordable drugs. The investigation focused on four companies: Turing Pharmaceuticals, Retrophin, Inc., Valeant Pharmaceuticals International, Inc., and Rodelis Therapeutics. According to the Senators, evidence gathered by the Committee suggests that additional companies have employed the “monopoly business model uncovered in this report.”

During the course of the bipartisan investigation, the Aging Committee held three different hearings; interviewed patients, doctors, hospital administrators, consumer advocates, health experts, and pharmaceutical industry executives/board members; reviewed more than one million pages of documents obtained from the four companies; and deposed or took transcribed interviews of numerous corporate witnesses.

The report examines what it refers to as a “monopoly business model” used by the four aforementioned pharmaceutical companies to exploit market failures: the way companies acquired decades-old, off-patent, and previously affordable drugs, only to suddenly raise the prices “astronomically.” The report provides case studies of the four companies, explores the influence of investors, assesses the impact of price hikes on various stakeholders, and discusses potential policy responses.

Chairwoman Collins noted, “The skyrocketing prices of prescription drugs affect every American family, particularly our seniors. This report is the culmination of the Senate Aging Committee's year-long, bipartisan investigation into the egregious price increases on a number of decades-old drugs acquired by pharmaceutical companies that act more like hedge funds. We must work to stop the bad actors who are driving up the prices of drugs that they did nothing to develop at the expense of patients just because, as one executive essentially said, ‘because I can.’”

Ranking Member McCaskill stated, “The hedge fund model of drug pricing is predatory, and immoral for the patients and taxpayers who ultimately foot the bill—especially for generic drugs that can be made for pennies per dose. We’ve got to find ways to increase competition for medicines and ensure that patients and their families aren’t being gouged.” 

The report identified several potential policy responses, including:

  • Enact the Increasing Competition in Pharmaceuticals Act, introduced by Chairman Collins and Ranking Member McCaskill, to incentivize competition to address regulatory uncertainty, small market size, and other factors that serve as limitations to generic entry;
  • Encourage generic competition by ensuring the right to obtain samples and simplifying Risk Evaluation and Mitigation Strategies;
  • Consider allowing highly targeted, temporary prescription drug importation to provide prompt price relief for major price increases in off-patent drugs;
  • Take steps to prevent the misuse of patient assistance programs and copay coupons;
  • Reinvigorate the Federal Trade Commission to take greater enforcement action on drug company mergers, operations, and drug market dynamics; and
  • Improve transparency in the health care system.

The report noted that “while release of the report does not indicate unanimous support of each of these policy options, we hope that it will help contribute to the ongoing discussion.”

Nursing Facilities & Kickbacks - Is the DOJ Shifting Away from Pharma?

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DOJ may have a new focus for Anti-Kickback Statute violations: care facilities and their owners. This year alone, at least two high-profile cases have emerged where a care facility wound up in high-profile enforcement actions involving antikickback violations. This article examines the cases and explores why life science compliance professionals should pay attention to them.

For many years now, the United States Department of Justice (“DOJ”) has focused its anti-kickback attention on the pharmaceutical industry. We have seen scores of enforcement actions targeting salespeople paying kickbacks to physicians in exchange for prescribing specific drugs, and executives charged for allegedly overseeing improper medical device promotion practices within their company. However, recently, the DOJ has recently started branching out. Now the DOJ is applying the anti-kickback laws in earnest to long-term care facility owners.

Read the full article in the January 2017 issue of Life Science Compliance Update

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January 20, 2017

The Trump Administration: One Predictive Perspective

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We recently had the pleasure of speaking with Michaeline Daboul, President and CEO of MediSpend, about the upcoming administration and what she portends for the future of compliance and enforcement. Ms. Daboul introduced the first open source SaaS compliance solution to the life sciences industry and has been introducing disruptive technologies in the pharmaceutical industry for drug development, genomics research, and compliance since 1985.

With so many compliance regulations in different parts of the world, global business leaders need to understand the different laws and industry codes of conduct that they encounter on a regular basis. Compliance solutions that aggregate business data daily allow companies to manage the constant changes in laws, currency and data differences, and multiple language cross-border interactions.

For life science companies, relevant and timely compliance management and monitoring is extremely important. The impending Trump administration will likely influence how seriously companies continue to comply with US laws like the Foreign Corrupt Practices Act (FCPA), Anti-kickback and Securities and Exchange Commission (SEC) laws, not to mention the complications Brexit and changes in Italy add to the mix.

We have seen an era of vigorous FCPA enforcement from roughly 2000 up to the present, with Attorneys General making prosecuting foreign bribery a significant priority and/or devoting substantial resources to the area.

As someone who has been entrenched in the life sciences industry for over thirty years, she has seen her fair share of changes, and the ebbs and flows with each presidential administration and corresponding Congresses. With respect to the upcoming Trump Administration and Republican-led Congress, Ms. Daboul says, “We don’t know what is going to happen, but all signs lead to a more relaxed interpretation of the law. These laws were enacted to control and prevent corruption. Companies need to operate in an ethical manner – and organizing and aggregating the data needed to be in compliance with the many existing laws will go a long way towards preventing non-compliance and corruption.”

While there is no current movement in Congress to change the FCPA, Ms. Daboul believes that President-Elect Trump may try to dismantle the law. She refers back to a 2012 episode of CNBC’s Squawk Box when Mr. Trump referenced the FCPA saying, “It’s a horrible law, and it should be changed.” He believes the FCPA inhibits US businesses from conducting business abroad in places like China, Colombia, and Brazil.

Ms. Daboul is not alone in thinking that Mr. Trump will attempt to dismantle the law. Matthew Stephenson, a professor at Harvard Law School, wrote about his belief that the “era of vigorous FCPA enforcement…is over.” He believes that the FCPA “is likely to be substantially weakened,” though entire repeal is relatively unlikely.

Those who are suspicious of Mr. Trump and his business dealings, believe that enforcement may become more politicized than it has been in the past, with more deliberate targeting of foreign companies and perceived political enemies (especially those that compete with firms close to Mr. Trump and his businesses).

Alexandra Wrage, president and founder of TRACE International, also believes that enforcement will slow during the Trump Administration, noting that “[Mr.] Trump has championed reduced regulation and has derided the FCPA, so it seems likely that fighting corruption will be a considerably lower priority.”

If Mr. Trump indeed ushers in a period of deregulation, Ms. Daboul recommends that companies around the world continue to focus on improving business process workflows, transparency between organizational stakeholders, and doing the right thing by managing end-to-end business activities with proper controls.

Ms. Daboul also made sure to note that in order to do business all over the world, it is imperative to understand how to interact and operate globally – the FCPA is only one law and there are other new and forthcoming laws by which global companies need to abide.

Mr. Trump Nominates Jay Clayton

In early January 2017, Donald Trump nominated Jay Clayton (currently in private practice as a partner at Sullivan & Cromwell) to lead the SEC during his administration. Mr. Clayton presently represents companies in FCPA investigations.

In 2011, prior to the wave of global anti-bribery cooperation, Mr. Clayton authored a 2011 New York City Bar Association paper about the FCPA, addressing the “lasting harm to the competitiveness of U.S. regulated companies” due to the current “anti-bribery regime.” 

Richard Bistrong at the FCPA Blog seems to think that Mr. Clayton may be another Andrew Weissman, who was appointed as Chief of the DOJ Fraud section a year ago. Prior to being appointed to that position, Weissman aggressively advocated limiting the FCPA, which led many to believe that his appointment would result in less FCPA enforcement. However, that did not happen, and instead, led the biggest 365 days in FCPA enforcement history.

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