Life Science Compliance Update

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.

Co-Payment & Deductible Waivers as Illegal Inducements

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Health insurance providers and out-of-network providers, have found themselves in murky water by providing waivers of co-payments, coinsurance, and deductibles to patients treated by out-of-network laboratories and other providers, where commercial insurers continue to seek legal reimbursement actively, recovery and collection claims against such providers, alleging in pertinent part False Claims Act (“FCA”), Anti-Kickback Statute Violations (“AKS”), and other legal claims. Such efforts are requiring Courts to identify, determine, evaluate, and when waivers of co-payments, coinsurance, and deductibles, constitute such FCA and AKS violations.

It is no secret that health insurance is getting more expensive, especially as insurance payers seek to shift more of the cost burden to patients. This burden shifting exercise has caused waivers of co-payments, coinsurance, and deductibles to be more in vogue than ever before. However, use of waivers is not a new practice but historically, and more so in recent years, it has been an effective means to address the “difficult economic environment [where] many health care providers are actively trying to increase cash flow and reduce administrative expenses.”

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

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January 19, 2017

Interim FDA Commissioner Announced

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Dr. Robert Califf’s tenure as commissioner of the United States Food and Drug Administration (FDA) is slated to come to an end ahead of the January 20th inauguration of Donald Trump as president. Deputy commissioner Dr. Stephen Ostroff is expected to take over on an interim basis after the inauguration. Ostroff has previously been acting commissioner – from April 2015 to February 2016 he served as acting commissioner. Once Califf was sworn in, Ostroff became the FDA’s deputy commissioner for foods and veterinary medicine.

Califf Permanent Replacement

Scott Gottlieb

The leading candidate to replace Califf is said to be Dr. Scott Gottlieb, an Obamacare opponent who’s also a former deputy commissioner at the federal safety watchdog. Gottlieb, currently a fellow at the American Enterprise Institute, is also an assistant professor at the New York University School of Medicine and a former practicing physician and hospitalist.

While at the FDA, Gottlieb served as a senior advisor for medical technology, director of medical policy development and deputy commissioner for medical and scientific affairs. Before that, he was a senior policy advisor at the Centers for Medicare & Medicaid Services (CMS).

Jim O’Neill

Mr. Trump is also expected to be considering Jim O’Neill, a libertarian and Silicon Valley investor with no medical experience (a fact that has some healthcare experts concerned). O’Neill has also previously made controversial statements about the federal safety watchdog, including when he said the FDA should no longer evaluate whether medical devices or drugs are effective when considering them for approval. That 2014 statement was viewed harshly by experts, with some thinking that it demonstrates O’Neill’s lack of medical experience and the problems that come with that.

Peter Pitts, a former FDA associate commissioner under President George W. Bush, said it’s nearly impossible to separate safety and efficacy when considering pharmaceuticals. “People need to understand that safety doesn’t exist without the balance of risk,” Pitts noted while explaining “every drug has risks,” providing the example of side effects that might be acceptable for lung cancer drugs, but not aspirin.

Experts have also expressed shock and concern over O’Neill’s interest in anti-aging products, and his claim that immortality could be a possibility within the next forty years. O’Neill has said, “You can tell a lot about an era by listening to what people whine about. If we invest wisely in life extension technologies, in 40 years, we’ll all be able to annoy our friends with complaints like ‘immortality almost never works.’”

O’Neill has also made suggestions that donors should be permitted to be paid to donate their organs, a concept largely rejected by healthcare experts.

O’Neill also served as principal associate deputy secretary of the Health & Human Services Department under Bush 43. In that position, he was responsible for the FDA, the National Institutes of Health, the Agency for Healthcare Research and Quality, the Office of Public Health and Science, the Biomedical Advanced Research and Development Authority, and global health.

Such experience prompted Dr. Michael Carome, director of Public Citizen’s health research group, to say, “He is stunningly unqualified in terms of his understanding of medicine.” However, Carome also noted that he was “just stunned” when he heard Mr. Trump was considering O’Neill as FDA chief.

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