Life Science Compliance Update

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26 posts from March 2013

March 29, 2013

FDA Reorganizing Office of Prescription Drug Promotion

Moving 2
Janet Woodcock, Director of the Center for Drug Evaluation and Research (CDER) at the Food and Drug Administration (FDA) announced a new restructuring of FDA’s Office of Prescription Drug Promotion (OPDP).  As we noted back in the fall of 2011, FDA reorganized its previous office—the Division of Drug Marketing, Advertising, and Communications (DDMAC) into OPDP. 

OPDP works to protect the public health by ensuring that all prescription drug promotional labeling and advertising directed to health care professionals and consumers is truthful, balanced, and not misleading.  

Shortly after launching OPDP, the office created a new “Bad Ad Program,” which subsequently issued a few yearly reports about its progress in educating physicians and “deputizing” them to report fraudulent or questionable detailing or advertising.  

Recently, OPDP reviewed and analyzed the workload and review processes in its two divisions, the Division of Consumer Drug Promotion, and the Division of Professional Drug Promotion, in an effort to improve upon their overall impact and effectiveness.  The goal of this analysis was to increase efficiency, improve work distribution, and eliminate redundancy.   

Through the analysis, OPDP concluded that a structure that integrates the review of health care professional-directed and consumer-directed promotion across the two divisions would meet this goal. 

Toward this goal, OPDP will be restructuring its divisions and, pending final approval, will rename them the Division of Advertising and Promotion Review I and the Division of Advertising and Promotion Review II.  Both divisions will handle health care and consumer promotion.  As a way to distribute the work evenly, each division will oversee different therapeutic classes of drugs.  These changes will allow OPDP to review direct-to-consumer (DTC) and health professional advertising more effectively. 

Woodcock acknowledged the importance of DTC ads, and noted that it is “often the catalyst for patients initiating conversations with their physicians about their untreated or undertreated conditions.”  Woodcock noted that the “decision to restructure the divisions reflects our commitment to continue providing close oversight of DTC advertising. The new structure will improve efficiency in our program area and our ability to meet the health needs of the American public.”  

Finally, she noted that “ODPD reviewers will continue to use a comprehensive surveillance, enforcement, and education program to foster superior communication of labeling and promotional information to both health care professionals and consumers.” 

Whether this new restructuring will help in speeding up the issuance of the long-awaited Social Media guidance is yet to be seen.   

March 28, 2013

OIG Offers Compliance Tips for Healthcare Boards, Executives

Two of the most recent settlements involving pharmaceutical companies alleged to have engaged in off-label promotion, included corporate integrity agreements (CIAs) with the Office of the Inspector General (OIG) for the U.S. Department of Health and Human Services.  These recent CIAs—GlaxoSmithKline (GSK) and Par Pharmaceuticals—both included new provisions, which specify that company executives may have to forfeit annual bonuses if they or their subordinates engage in significant misconduct, and sales representatives may not be paid incentive compensation (e.g., based on volume) for drugs that were involved in the settlement or successor branded versions of that drugs. 

These recent CIAs created Employee and Executive Incentive Compensation Restriction Program and Executive Financial Recoupment Programs, which put at risk of forfeiture and recoupment an amount equivalent to up to 3 years of annual performance pay for an executive who is discovered to have been involved in any significant misconduct.  The financial recoupment program applies to Covered Executives who are either current employees or who are former employees at the time of a Recoupment Determination.

These recent CIAs highlight the crucial role that pharma and device executives play in ensuring compliance throughout their organizations, particularly compliance officers and their staff.  Emphasizing the important role healthcare boards play, OIG Chief Counsel Greg Demske recently posted a video on the OIG website explaining guidance for health care boards, including boards and executives of pharmaceutical and medical device manufacturers.

The video is particularly interesting given recent decisions by OIG to exclude executives and corporate officials, such as the executives at Purdue Pharma, executives at Synthes, and Scott Harkonen.  One could only speculate, but this video may confirm opinions by OIG, FDA, and DOJ that the emphasis for compliance will increasingly be pressed on corporate executives and board members, and such outreach to these individuals may reaffirm the government’s inclination to use the Park doctrine.

Demske recognized that boards play a vital role in health care organizations, by promoting economy, efficiency and effectiveness—common goals that OIG shares.  “The emergence of new payment models that reward quality, value and the reduction of waste present opportunities and risks.”  As a result, health care organizations going forward “will need to use new tools to collect and analyze data and improve clinical effectiveness at lower costs.”

He referenced the two CIA roundtables held last year (pharma and healthcare provider), and the feedback from stakeholders under CIAs.  Demske said the message was clear: “boards have the power to enhance compliance through involvement in oversight activities and by integrating compliance throughout the business.”

Regardless of the size of the company or the size of the compliance department or staff, Demske emphasized the critical role of boards and compliance programs.  He listed three key roles of a health care board and board members:

  1. Compliance oversight
  2. Structuring your compliance program; and
  3. Evaluating effectiveness of standards and processes

First, Demske noted that serving on a healthcare board requires a “unique skill set.” Accordingly, he maintained that board members should engage in oversight responsibilities.  He recognized several factors that make the “best boards:”

  • Is the board active? Do they raise questions and exercise some degree of skepticism in their oversight responsibilities?
  • Does the board have diverse experience in several areas of expertise, including compliance, clinical, and financial auditing expertise?
  • Does the board stay informed on risk areas and compliance issues?  How does the organization identify, audit and monitor risk areas?  Does the board learn all significant compliance issues?  Is someone responsible for keeping the board informed?
  • Is the board involved?  Do they attend compliance training and speak to staff about compliance, demonstrating their commitment to it?; and
  • Is the board adaptble to the changing health care delivery system and reimbursement risks?  Does the organization evaluate new risk areas and develop appropriate and update safeguards?

Second, Demske emphasized the key role board members must play in evaluating the design and implementing the compliance program.  Demske said that board members should ask several questions to determine how far reaching and effective the structure of such program is:

  1. Does your compliance officer have sufficient prominence and influence in the organization? Does the compliance officer report directly to the board?
  2. How does your organization encourage communication between compliance staff and the rest of the organization?   
  3. Are compliance goals periodically adjusted to account for payment reform and new quality standards?
  4. How does the board encourage managers to incorporate compliance considerations in daily decision-making?
  5. Does the board hold key employees accountable for following compliance standards and processes?

Finally, the OIG Chief Counsel discussed evaluating whether an organization’s compliance program is effective.  Demske emphasized the need for boards to “routinely review” compliance efforts across its organization to determine if its program is effective.  To assess the effectiveness of an organization’s compliance program, the board should ask:

  1. What metrics are used to evaluate the company’s compliance with laws and regulations?  How are those metrics selected?
  2. How does your organization identify gaps in quality and areas for quality improvement?
  3. Is the organization routinely conducting internal compliance audits?
  4. Is the organization’s response to specific problems sufficient?  Does it track correction action plans to make sure the proposed changes are implemented; and
  5. Has your compliance officer identified hurdles to promoting compliance, such as resource constraints or lack of management support?




Court Upholds InterMune Executive Conviction on Misleading Speech

9th Circut Court of Apeals
In December of last year, we reported on a landmark ruling from the United States Court of Appeals for the Second Circuit (New York), which ruled in United States v. Caronia, " that the government cannot prosecute pharmaceutical manufacturers adn their representatives under the FDCA for speech promoting the lawful, off label use of an FDA-approved drug."  While the victory for industry and free speech advocates has remained uncertainIn practice, several other closely watched First Ammendement cases involing the pharmaceutical industry were being closley looked at.  Consequently, the U.S. Court of Appeals of the Ninth Circut decided one of those cases in early March.

Specifically, former InterMune Inc. Chief Executive W. Scott Harkonen appealed his 2009 wire fraud conviction for a news release that trumpeted the purported survival benefits of Actimmune, made to treat fatal lung disease.  As noted by Bloomberg News, “Harkonen, a physician, was accused of crafting a deceptive press release in 2002 to boost sales of Actimmune. InterMune marketed Actimmune as a safe, effective treatment for idiopathic pulmonary fibrosis, or IPF, a fatal lung disease, although the drug wasn’t approved by the U.S. Food and Drug Administration, prosecutors said.”

Harkonen’s press release, which said Actimmune reduced deaths by 70 percent in patients with mild to moderate IPF, was false and misleading, according to a March 2008 federal grand jury indictment. After the company’s clinical trials failed to show that Actimmune was effective in treating IPF, Harkonen directed employees to conduct additional analyses of death-rate data by breaking patients up into subgroups, according to the indictment.

The government, which indicted Dr. Harkonen in 2008, maintained in its brief that the First Amendment doesn't bar a “criminal prosecution of false statements with an intent to defraud" just because they "concern scientific matters.”  “It is important to the FDA to preserve the notion that you can't sell a medicine for an unapproved purpose,” said Washington attorney Bert W. Rein of Wiley Rein, who has represented an opponent of FDA marketing rules.  “That agency is so vested in its regulatory scheme that they will fight.”  PhRMA filed an amicus brief on Dr. Harkonen's side, calling the case “an unprecedented prosecution of a pharmaceutical executive for expressing in a news release his scientific opinion about the development of a drug to treat disease.

His attorneys contended that the conviction should be reversed because the release “expressed a scientific view” that is protected by First Amendment free-speech rights, the Wall Street Journal reported. Harkonen was also excluded by HHS-OIG, and is appealing that decision as well in the U.S. District Court of Northern California, San Francisco Division.

InterMune, which made Actimmune to treat rare bone and immune disorders, agreed in 2006 to pay $36.9 million to settle U.S. claims it illegally marketed the drug for unapproved uses and caused false claims for reimbursement from government health programs.

Rejecting Harkonen’s First Amendment arguments, the Ninth Circuit upheld his convictions for disseminating misleading information about Actimmune.  “A jury found, beyond a reasonable doubt, that Harkonen issued the press release with the specific intent to defraud, and that finding is supported by the evidence presented at trial,” the court said in an opinion.

Harkonen’s case was closely watched by the pharmaceutical industry. The Pharmaceutical Research and Manufacturers of America, a trade association for drug companies, filed a brief in support of Harkonen’s appeal.

Harkonen will seek review of his case by a larger panel of appeals court judges, his lawyer told Bloomberg.  “The central issue is whether the government may criminally prosecute a speaker for his scientific interpretation of valid study results,” Mark Haddad, his lawyer, said in an e- mail. “The implications of the decision, if allowed to stand, are profound.

First Amendment Analysis

In approaching the case, the Ninth Circuit recognized that the First Amendment does not protect fraudulent speech, so the core constitutional issue in Harkonen’s case is whether the facts the jury found establish that the Press Release was fraudulent.  Accordingly, the Court engaged in a two-step inquiry.

First, the Court sought to determine whether sufficient evidence supported the verdict.  The Court went through the three elements of wire fraud: (1) knowing participation in a scheme to defraud; (2) use of the wires in furtherance of the scheme; and (3) a specific intent to deceive or defraud.  The court noted that the second element was uncontested on appeal and was irrelevant for First Amendment purposes.

For the knowing participation, the Court acknowledged that practically everyone involved in the clinical trial in question testified that the Press Release misrepresented the results.  Based on this and other facts, the Court found this element satisfied.

For the third element, the Court used the same evidence in the first factor, coupled with circumstantial evidence, to show his intent.  “Given his clear financial incentive to find a positive result in the face of GIPF-001’s failure to meet its pre-determined goals,” the court concluded that “the evidence sufficiently supports the jury’s determination that Harkonen had the specific intent to defraud.”

The Court then engaged in an analysis under a 1902 U.S. Supreme Court Case, American School of Magnetic Healing v. McAnnulty, 187 U.S. 94 (1902).  Under this case, Harkonen argued that the Court should reverse his conviction because “genuine debates over whether a given treatment caused a particular effect are outside the scope of the mail and wire fraud statutes.”

First, the court noted that McAnnulty does not categorically prohibit fraud prosecutions for statements about the efficacy of a particular drug; indeed, “[t]hat false and fraudulent representations may be made with respect to the curative effect of substances is obvious.  Here, the government alleged the Press Release contained “false and misleading information” about Actimmune, and the government was permitted to go to trial on that theory.”

Second, Harkonen’s McAnnulty-based argument that his statements were fraudulent only if they were universally considered objectively false “is unavailing,” the Court wrote.  As used in the criminal mail fraud statutes, the term “to defraud” has its commonplace definition and includes any sort of “dishonest method[] or scheme[],” and any “trick, deceit, chicane or overreaching.”

Third, Harkonen’s request that the Court reverse his conviction because he was engaging in a genuine scientific debate “is hardly different than arguing that he is innocent; genuine debates of any sort are, by definition, not fraudulent.”  Here, a jury found, beyond a reasonable doubt, that Harkonen issued the Press Release with the “specific intent to defraud, and that finding is supported by the evidence presented at trial,” the Court wrote.  

It remains to be seen when and whether Harknonen’s appeal will take place—and it is uncertain whether his challenge has any merit.  Now that Par Pharmaceutical has settled their case and dropped their First Amendment challenge, the Caronia decision remains the only positive sign of a shift in First Amendment jurisprudence for industry. 


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