US Attorney: Consider the Strength of Your Corporate Compliance Program
U.S. Attorney for the District of Massachusetts, Carmen Ortiz, emphasized the importance of compliance programs early on during her presentation at the 2014 CBI Pharmaceutical Compliance Congress. She noted that "compliance is key at every different level" of an entity, and that "it matters to the government what kind of compliance program" an entity has.
She noted that healthcare fraud enforcement is not just about monetary penalties, and that her office leads "fair and thorough investigations," always keeping in mind the government's main priority: patient safety. She noted that patient health is paramount to the medication they are taking and the advice their doctors are giving; pausing to note that there needs to be "legitimacy" in the practices and treatments doctors are recommending.
One of her first slides acknowledged "the importance of health care fraud investigations and prosecutions," noting that health care spending is expected to grow 6.1% in 2014 in response to many of the provisions in the Affordable Care Act (ACA) as well as the continued aging population of the baby-boomer generation.
Ortiz noted that her office and other government branches have become more experienced with health care fraud and have "greater knowledge of the industry." She noted that more "specialized units and divisions" are being created to investigate and prosecute healthcare fraud. To this effect, she made reference to the collaborations of not just FDA, HHS, OIG, but also the FBI, VA, Department of Labor, and the Postal Department. Ortiz noted that DOJ efforts have been focused on reviewing whistleblower cases, individual criminal liability, and expedited investigations in order to stay within the statute of limitations for certain offenses.
She noted that many of the cases the government has intervened in from qui tams have led to "tremendous results," and that her office has "no shortage of referrals"; seeming to suggest that the healthcare industry has "a long way to go," even though she recognized that positive changes and efforts have been made.
Ortiz noted that whistleblowers may be motivated by various influences, such as witnessing unethical or illegal practices, in which the employee alerts management and such alerts go unaddressed or fall on deaf ears. She noted that it only takes one disgruntled employee to come forward with credible allegations and support of misconduct to bring these investigations, particularly given the "lucrative incentives."
As an example, Ortiz discussed the GlaxoSmithKline (GSK) $750 million settlement involving one of its manufacturing plants in Puerto Rico, which was brought by Cheryl Eckard, a former GSK employee who worked in manufacturing. Eckard had made several complaints about hazardous conditions in the Cidra plant. Ortiz noted that Eckard made continuous complaints over 8 months, which finally culminated in GSK downsizing her.
Subsequently, Eckard took all her reports about the manufacturing problems and defects she had seen to DOJ and FDA, which eventually led to the qui tam suit being filed. Ortiz even made reference to a television segment on "60 Minutes" about this case. She noted that this kind of publicity helps the government "reach whistleblowers," and commended this kind of public "visibility."
Ortiz also made passing reference to the November 2013 $2.2 billion settlement with Johnson & Johnson, as well as related cases involving Omnicare and several other healthcare entities. Ortiz provided a detailed diagram in her presentation about how one settlement with Omnicare ($98 million) in 2009 was eventually connected to numerous other settlements and in some cases, individual convictions. In describing these cases, she emphasized that the government "really cares about wronging that affects patient care."
With respect to prosecuting individuals, she noted that the government's priority is to look "at individuals and individual culpability," where individuals have a "greedy hand in their pocket." She also noted that in some cases she has investigated, that HCPs are "equally responsible," in soliciting or looking for consulting or speaking fees where no work is done, or other payments for meals or trips, which come at the expense of the manufacturers--both literally, and eventually in the form of kickback or false claim allegations caused by those kickbacks.
In describing individual prosecutions, Ortiz discussed the Orthofix case, in which her office pursued 10 individuals, some of which had lied to a grand jury, and others who had forged physician signatures to prescribe medically unnecessary bone growth stimulators. She noted how the Vice President of Sales had put pressure on sales reps to engage in illegal conduct, and that the Vice President was well aware of these activities and in fact "hid such activity from his own compliance department" (i.e., the nature of the transactions). The Vice President was sentenced to 8 months in prison, with several others receiving 6-8 months in prison, and still others awaiting sentencing. Ortiz noted that her office received help in this case from Orthfix itself.
In the context of this discussion, Ortiz emphasized that it was her "hope" that the Sunshine Act will "effectively deter unsavory financial relationships between companies and providers." In discussing the Sunshine Act, Ortiz noted that manufacturers have to report payments to "HHS-OIG," which may have been an inadvertent mistake, since CMS is the agency responsible for collecting such reports. Nevertheless, her statements confirm speculation over the last several years that DOJ and government agencies will use Sunshine Act data to continue intervene in whistleblower cases or bring affirmative litigation against manufactures based on data that may give the appearance of impropriety.
Moving along, Ortiz noted that the government is trying to hold individuals more accountable, such as providing greater transparency through CIAs. "What comes out of these agreements," paves the way for future behavior and helps deters other behavior by providing clear guidance to the companies involved as well as the industry. She noted that the government has negotiated strong CIAs and provisions in Plea Agreements to require companies to change systems and root out malignant practices, including "clawback" provisions for executive compensation and incentive based compensation. She also made reference to transparency in research practices.
Looking towards the future, Ortiz emphasized that her approach is going to be "quite broad." She noted that a "top priority" is the manufacturing of adulated drugs, including compounding. The NECC outbreak in 2012 occurred in Massachusetts, and Ortiz made reference to numerous forms of manufacturing fraud, unhygienic facilities, unsanitary drugs; and poor manufacturing processes that result in drugs that are too potent or not potent enough, or basically ineffective.
She noted that her office continues to conduct a criminal investigation as to NECC.
Her comments confirm comments from other officials who have stated over the last several years that cGMP will be a high priority area, particularly given the globalized supply chain and new authorities given to FDA under FDASIA Title VII, as well as the recently enacted DSQA.
Ortiz also noted that her office is still seeing "a lot of qui tams" for medical device fraud," and that another "top priority" will be the prescription of medically unnecessary services. Two other high priority areas include 1) medical research; and 2) home health care services.
Compliance Programs: Best Practices
In closing, Ortiz again emphasized the importance of compliance. She noted that the government does not care how good or vibrant a compliance program looks "on paper." Ortiz emphasized that compliance programs are a "smart thing to do from a business" perspective, and at the very least effectively prevent or identify compliance violations and problems. She also noted the importance of having a compliance program in effect "before the government makes you implement one."
To this point, Ortiz referenced a "few instances" in which her office received a qui tam and did an initial inquiry. Upon that inquiry, her office learned that the "company had already discovered the problem, addressed it, and put mechanisms in place to prevent it from happening again." Here, she reiterated that "these things matter" and that when companies are "so cooperative," here office has declined to intervene or pursue an investigation.
Again, she reiterated that from her perspective, "it's all about patient safety, not profit," and that's what "we want to hear from you."
Ortiz also encouraged companies to voluntarily disclose misconduct, and noted that corporate counsel that has willingly reported misconduct to the U.S. Attorney's office are looked upon much favorably. In this case, she state that it is up to executives--"hire-ups"--who make be "OKing the bad conduct, to ensure ethical behavior within their companies. Otherwise, "these ostrich executives" will continue to look the other way or burry their heads in sand to "continue the cycle of corporate malfeasance."
She also emphasized the need for a "structured chain of command that is clear to field employees" that all business is being done through official channels. She then concluded with a focus on 3 areas.
First, she said that companies should "encourage and reward employees for reporting concerns," and that there should be access to safe and legitimate avenues to report concerns. She noted that companies should "own their internal whistleblower programs," and should not "blow off people who bring" such complaints.
Second, she noted that companies should mandate ongoing and consistent training that specifically addresses company policies and the different pressures employees face. In this light, she gave the example of sales reps who might get incentive based compensation and fear being caught for improper activities--noting the need to train these employees to ensure they operate in legal ways. In this case, Ortiz noted that compliance officers could conduct surprise site visits, and evaluations. Ortiz also noted that compliance must work with sales/marketing to achieve a "reasonable balance" while still achieving desired business results legally and ethically.
In this regard, Ortiz gave an example of how important compliance is. She noted that when she went to one facility to talk to a compliance director, the person's office was "somewhere remote" with "no window." She said to the audience, "how important could that person be?" "Who can find him? She noted that compliance has to be more visible than this, and that small and mid-sized companies also need to know how important compliance is.
She concluded by noting that the government looks most favorably to companies with "robust and effective compliance programs." She noted that while her office prosecuted Orthofix, the company still got a much for favorable settlement due to their cooperation, and the companies effort to rid out bad individuals.
Ortiz also reiterated the importance of companies that take immediate remedial actions and measures, and do not wait or hinder compliance in addressing any identified concerns. Nevertheless, she noted that with a multibillion dollar industry, "the future holds even greater enforcement and oversight." Ortiz said: "we don't think industry is full of bad actors" and "your presence here signals that," and based on recent announcements, companies are making improvements.