CBI's Pharmaceutical Compliance Congress started off both mornings of their two day conference with a matter sure to get industry members' attention: enforcement. A variety of government attorneys offered a glimpse into their approach to healthcare fraud, and shared insights into what they consider to be best practices regarding compliance. Carmen Ortiz, U.S. Attorney for the District of Massachusetts, began by highlighting the high priority areas of 2014. The "enforcement panel" of five government attorneys followed, splitting their time between healthcare fraud on the one hand, and the importance of robust compliance programs on the other. On Wednesday, Assistant Attorney General, Stuart Delery, spoke regarding civil enforcement and non-monetary penalties the Department of Justice (DOJ) has utilized.
Healthcare Fraud Landscape
Healthcare is entering a new era. The Centers for Medicare and Medicaid Services (CMS) expects a 6.1% growth of health care spending in 2014 due to implementation of the Affordable Care Act (ACA), the aging baby-boomer population, and the end of the federal government sequester.
As more people enroll in government funded healthcare, the government believes that more fraud is an inevitable result. The Department of Justice (DOJ) has made fraud a priority in 2014 for obvious reasons: fraud adds even more cost to an already expenses arrangement. Furthermore, fraud hurts patients and "threatens the strength and integrity of the healthcare system," a phrase that became a catchphrase at the conference this week.
The enforcement panel stressed the large number of resources that the government has directed toward health care fraud enforcement. William C. Killian, of the Eastern District of Tennessee, said that his district averages $25 million in health care fraud each year. Ben Singer, Deputy Chief, U.S. Department of Justice Criminal Division, stated that his office has 38 prosecutors working solely on healthcare fraud. Singer's "Medicare strike forces" have charged 345 people with felony health care fraud, including 234 convictions, and recovered $1 billion dollars in ten cities alone.
The task forces get big results, and display them prominently in the news. The DOJ has leveled huge monetary fines against pharmaceutical companies recently: GSK, for $1 billion criminally and $2 billion resolution of civil liabilities; J&J, $2.2 billion for misbranding; Pfizer, for $2.3 billion; Abbot Laboratories, for $1.5 billion.
The U.S. Attorneys unanimously stressed the effectiveness of the coordination efforts between their criminal and civil division. Assistant Attorney Stuart Delery of the U.S. Department of Justice stated that Health Care Fraud Prevention and Enforcement Action Team (HEAT) increases coordination between the FDA, CMS, and U.S. attorneys' offices, and has spurred dramatic, billion dollar resolutions.
Sanford C. Coats, U.S. Attorney for the Western District of Oklahoma, also spoke about how healthcare fraud cases are not limited to big markets. His Oklahoma office won a $491 million judgment against Pfizer in August 2013, a case he believes would not have been possible even five years ago. Pooling departmental resources—combined with an increased public awareness of healthcare fraud issues—made the lawsuit possible.
Utilizing False Claims Act Qui Tams
Private whistleblowers often offer prosecutors the damaging facts they need to show that a company has engaged in wrongdoings. Whether the qui tam action stems from the company continuously rejecting an employee's internal complaint, or is brought by a disgruntled former employee (or both), whistleblowers stand to gain a lot of money. Plus, it only takes one to come forward with credible and supportive evidence of company misconduct.
Qui tam suits have been increasing at a rapid pace. The DOJ announced that the number of qui tam filed in 2013 grew to 752 in 2013 – over 100 more than the prior record established last year. DOJ recovered $3.8 billion in these cases.
How much money do these individual whistleblowers actually make?
- $167.7 million from J&J
- $96 million from GSK
- $84 million from Abbot
- $51.5 million from Pfizer
Holding Individuals Liable
Despite prosecutors blasting industry with billion dollar fines, Carmen Ortiz, U.S. Attorney for the District of Massachusetts, admitted: "We know the sole blame does not fall on the shoulders of the pharmaceutical corporations. Wherever there is a generous hand there's a greedy one prepared to pocket the cash." Physicians, who demand speaker arrangements, elaborate dinners, and trips, are equally culpable, she argues. Ortiz stressed her department's efforts to hold individuals criminally accountable, such as the executives at Orthofix. Thomas Guerreri, former vice president of sales at Othofix, is serving 8 months in prison for paying kickbacks to prescribe his company's products and for putting undue pressure on the sales team. Many other employees in the company are also serving prisons sentences.
However, it is worth questioning whether there is a disincentive to prosecute individuals if there is an opportunity for the government to obtain a large settlement from the company. Ortiz stated that the government always looks more toward criminal culpability than money, but noted that often the statute of limitations has run on individuals. Once the statute runs, she has to go after the company.
CIAs and Non-Monetary Fines
The presenters placed a high level of importance on Corporate Integrity Agreements (CIAs). Ortiz noted that CIAs have the potential to provide clawbacks for executives, overhaul compensation programs for sales representatives, provide a certification of compliance by executives and board members, and also offer transparency.
Assistant Attorney General Stuart Delery said that DOJ has put "renewed emphasis on identifying non-monetary measures that will help DOJ to prevent the recurrence of misconduct." Delery cited the case of Ranbaxy, an Indian pharmaceutical company which pled guilty to charges that it had produced and distributed drugs which failed to comply with the FDA's current good manufacturing practice (CGMP) standards and falsified records. As part of the guilty plea, Ranbaxy agreed to a settlement agreement which placed heavy restrictions on three of the company's manufacturing facilities. If any of Ranbaxy's other facilities exhibited quality problems, they would be added to the CIA as well. RAPS reports, "just last week, the consent decree allowed FDA to move swiftly and respond forcefully" when it learned of a new data falsification claim made against one of Ranbaxy's facility.
Fundamentally, the DOJ wants to ensure high-level accountability for a companies' compliance efforts. For example, a 2012 CIA entered into with Abbott Laboratories regarding the company's marketing of its epilepsy drug Depakote requires Abott's CEO to "personally certify compliance" with the agreement. Abbot also agreed to report any probable violations of the Federal Food, Drug, and Cosmetic Act (FDCA).
The DOJ is not solely "interested in collecting a large fine," Delery stated. "We strive to give companies the incentive and the tools to craft better compliance practices in the future."
View our recent chart listing the pharmaceutical and device CIAs for 2014.
Compliance Programs: Best Practices
During the conference, government attorneys repeatedly stressed the vital importance of a robust compliance program. Several speakers stated that a "culture of compliance" should not be an empty phrase. Companies must have a visible, respected corporate compliance presence. Delery stated that no matter how well-designed a compliance program, there needs to be buy in at all levels of the company. Companies should ensure that executives are making informed, clear, and ethical decisions, and that there is a clear chain of command.
Perhaps most obviously, the U.S. Attorneys urged industry to cooperate with government: "Companies should be willing to self-report and take corrective measures." Once the government brings an action, the government advises companies to completely clean up and do internal investigations in order to lessen their liability to some extent. One of the responding enforcement attorneys used an example of his agencies' interactions with Temple University, where a doctor had billed for services he hadn't actually rendered. The prosecutor stated that because Temple came forward and disclosed what they had, gathered new information, and complied with the government, "criminal charges were not appropriate." Furthermore, because the university had a robust compliance program in place, the agency did not even mandate a CIA.
Ortiz suggests the following best practices:
- Encourage and reward employees reporting concerns.
- Mandate ongoing training.
- Establish ethical compensation plans for sales representatives, not entirely tied to sales.
- Conduct surprise site visits.
In regards to mitigating damage, the enforcement panel felt that they couldn't understate the importance of self-reporting.
Delery concluded his presentation on behalf of DOJ stating: "When a company or individual acts responsibly by timely and voluntarily disclosing unlawful conduct, we will give serious consideration to that disclosure in deciding whether or how to charge or resolve the matter." Furthermore, "we will credit actions taken once the government has started to investigate." One company, for example, replaced their entire C-level staff, hired dozens of compliance officers, changed the compensation structure of the company, and disclosed the questionable practices of former employees. While Delery stated that there is "no one formula for cooperation," working with DOJ would ensure that companies and their customers are "in the best possible position."
Notably, however, no U.S. Attorney could remember a situation where a voluntary disclosure had ever gone unprosecuted. The defense panel was quick to note that this revelation does not offer a lot of incentive to self-report. While a fair number of qui tams have been unsealed, and then declined by the government, cases that get voluntarily disclosed cannot go UN-disclosed.
Enforcement Priorities looking ahead to 2014:
- Manufacturing of Adulterated Drugs (Compounded Drugs) – view our recent coverage on compounding
- Durable Medical Equipment Fraud
- Home Health Care Fraud (Physical, Occupational, and Speech Therapy
- Medical Identity Theft
- Unnecessary Medical Services
- Fraudulent Medical Research
Policy and Medicine will continue to post recaps of CBI's Pharmaceutical Compliance Congress, including updates on the Physician Payment Sunshine Act.