Life Science Compliance Update

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29 posts from October 2017

October 31, 2017

United States Senate Focuses on Opioids

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Senate Finance Committee Chairman Orrin Hatch, along with 10 of his Republican Committee colleagues, recently called on the Department of Health and Human Services (HHS) to increase safeguards against opioid fraud. In the letter, the senators request information about HHS’ measures to prevent opioid abuse among Medicare Part D providers and beneficiaries.

The letter requests details regarding the HHS Office of Inspector General’s (OIG) report issued last July, which found that one in three Medicare Part D beneficiaries received a prescription opioid in 2016 – as many as 500,000 of those beneficiaries were receiving high amounts of opioids and nearly 90,000 beneficiaries were deemed to be at serious risk. The report also identified roughly 400 prescribers with questionable opioid prescription patterns for those beneficiaries at serious risk.

The senators requested additional information of HHS regarding the OIG’s findings, including information on the most prevalent opioid related fraud schemes identified in the report; prevention efforts HHS intends to undertake in the wake of these findings; along with a request for specific congressional recommendations as to additional authority that may be needed to protect beneficiaries and prevent fraud and abuse of opioids. The senators also request further detail regarding the 400 prescribers with questionable opioid prescription patterns and the subsequent actions HHS intends to take to follow-up with these prescribers.

Finally, the lawmakers request increased engagement of HHS with the Committee to address the epidemic, including a discussion of potential regulatory and/or legislative actions in this vein. Specifically, the letter request that “HHS officials engage with the Committee on policy options including, but not limited to, review of Medicare and Medicaid payment incentives related to treatment of pain and addiction.”

The Committee’s letter came in conjunction with the recent Senate Health, Education, Labor and Pensions (HELP) hearing on the opioid epidemic at which a number of HHS officials testified, including Scott Gottlieb, MD, Commissioner of the FDA.

During the hearing, the HHS members noted that five-point Opioid Strategy the Agency has implemented, which provides the overarching framework to leverage the expertise and resources of HHS agencies in a strategic and coordinated manner. The comprehensive Opioid Strategy aims to:

  • Improve access to prevention, treatment, and recovery support services to prevent the health, social, and economic consequences associated with opioid addiction and to enable individuals to achieve long-term recovery;
  • Target the availability and distribution of overdose-reversing drugs to ensure the broad provision of these drugs to people likely to experience or respond to an overdose, with a particular focus on targeting high-risk populations;
  • Strengthen public health data reporting and collection to improve the timeliness and specificity of data and to inform a real-time public health response as the epidemic evolves;
  • Support cutting-edge research that advances our understanding of pain and addiction, leads to the development of new treatments, and identifies effective public health interventions to reduce opioid-related health harms; and
  • Advance the practice of pain management to enable access to high-quality, evidence based pain care that reduces the burden of pain for individuals, families, and society while also reducing the inappropriate use of opioids and opioid-related harms.

Will Your Whistle Be Heard at Home?

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The distinct split between the Second and Fifth Circuit Courts’ interpretation as to when whistleblower protections are allowed has now summoned the attention of the U.S. Supreme Court. Despite clarifications issued in 2015 by the SEC to shed more clarity on Dodd Frank’s anti-retaliation protection to whistleblowers who reported alleged misconduct either internally to company officials or externally to government regulatory bodies, the U.S. Supreme Court will take the case of Digital Realty Trust v. Somer in the Fall of 2017, and finally render a final verdict for when whistleblower protection becomes enforceable. During the interim, it becomes vital for Compliance Officers to have appropriate policies and procedures in place to guide employees in reporting potential misconduct and/or fraud, and to establish a tone of non-retaliation for such reporting, in order to safeguard the best interests of the public and shareholders of the company.


As a result of the financial crisis during 2007-2010, the Dodd- Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) was signed into federal law in July 2010 by President Obama to prevent the economic “meltdown” from happening again.

Ostensibly, the legislation was primarily designed to increase overall regulation of the financial industry. However, and perhaps more importantly for compliance professionals, Dodd-Frank also contained a number of enhanced provisions designed to encourage and protect whistleblowers in and outside of the financial industry. These new provisions expanded upon earlier provisions contained in the Sarbanes- Oxley Act of 2002 (“SOX”).

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October 30, 2017

Founder and Owner of Insys Arrested

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Late last week, John N. Kapoor, the founder and majority owner of Insys Therapeutics, Inc., was arrested and charged with leading a conspiracy to profit by using bribes and fraud to cause the illegal distribution of a Fentanyl spray intended for cancer patients experiencing breakthrough pain.

The superseding indictment includes allegations of RICO conspiracy, conspiracy to commit mail and wire fraud, and conspiracy to violate the Anti-Kickback law. It also includes additional allegations against former Insys executives and managers who were initially indicted in December 2016.

The Justice Department claims that Kapoor and other Insys executives offered bribes in the form of kickbacks to doctors who wrote “large numbers of prescriptions” for patients, many of whom did not have cancer. The Department also alleged that the executives defrauded insurers by forming a “reimbursement unit” dedicated to obtaining prior authorization from insurers who were reluctant to pay for the drug.

Insys allegedly encouraged doctors to write more prescriptions by hiring their friends and family members to serve as “business liaisons’’ and “business-relation managers,’’ prosecutors said. These support-staff employees worked in the doctors’ offices but were paid by Insys in what the indictment called bribes and kickbacks. The company even made a video featuring a sales rep dressed as a giant fentanyl spray bottle, rapping and dancing to a song that pushed the idea of getting doctors to prescribe higher doses, prosecutors said.

The indictment also alleges that Kapoor and the six former executives conspired to mislead and defraud health insurance providers who were reluctant to approve payment for the drug when it was prescribed for non-cancer patients.  They achieved this goal by setting up the “reimbursement unit,” which was dedicated to obtaining prior authorization directly from insurers and pharmacy benefit managers. 

Charged with racketeering conspiracy and other felonies, Kapoor is the highest-ranking pharma executive to be accused of an opioid-related crime, and his arrest may portend charges against companies far larger than Insys, which has a modest $417 million market capitalization.

In Connecticut, prosecutors have begun a criminal probe of Purdue Pharmaceutical Inc.’s marketing of OxyContin. Scores of states, cities and counties have sued companies including Purdue, Endo International Plc, and  Janssen Pharmaceuticals, alleging they triggered the opioid epidemic by minimizing the addiction and overdose risks of painkillers such as Percocet.

The charges of conspiracy to commit RICO and conspiracy to commit mail and wire fraud each provide for a sentence of no greater than 20 years in prison, three years of supervised release and a fine of $250,000, or twice the amount of pecuniary gain or loss.  The charges of conspiracy to violate the Anti-Kickback Law provide for a sentence of no greater than five years in prison, three years of supervised release and a $25,000 fine. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and other statutory factors.

Insys Reaction

A spokesman for Arizona-based Insys said this week that the company is under new management and has replaced nearly all its original sales staff. It says it takes responsibility for the actions of its former employees.

"We have taken necessary and appropriate steps to prevent past mistakes from happening in the future, and are committed to conducting business according to high ethical standards and the interests of patients," the company said in a statement Wednesday. "We also continue to work with relevant authorities to resolve issues related to the misdeeds of former employees."

Kapoor Defense Lawyer Reaction

"He is not guilty of these charges, he intends to fight it vigorously," defense attorney Brian T. Kelly said outside court. Kelly is a high-profile Boston lawyer and former federal prosecutor who successfully tried imprisoned gangster James "Whitey" Bulger.

Government Reaction

As the investigation spanned – and used the resources of – many government agencies, multiple agencies had a comment on the investigation and charges. Some of the comments are below.

“In the midst of a nationwide opioid epidemic that has reached crisis proportions, Mr. Kapoor and his company stand accused of bribing doctors to overprescribe a potent opioid and committing fraud on insurance companies solely for profit,” said Acting United States Attorney William D. Weinreb. “Today's arrest and charges reflect our ongoing efforts to attack the opioid crisis from all angles. We must hold the industry and its leadership accountable - just as we would the cartels or a street-level drug dealer.”

“These Insys executives allegedly fueled the opioid epidemic by paying doctors to needlessly prescribe an extremely dangerous and addictive form of fentanyl,” said Phillip Coyne, Special Agent in Charge for the Office of Inspector General of the U.S. Department of Health and Human Services.  “Corporate executives intent on illegally driving up profits need to be aware they are now squarely in the sights of law enforcement.”

“As alleged, John Kapoor and other top executives committed fraud, placing profit before patient safety, to sell a highly potent and addictive opioid.  EBSA will take every opportunity to work collaboratively with our law enforcement partners in these important investigations to protect participants in private sector health plans and contribute in fighting the opioid epidemic,” said Susan A. Hensley, Regional Director of the U.S. Department of Labor, Employee Benefits Security Administration, Boston Regional Office.

Congressional Reaction

Insys has also been the subject of an investigation by Sen. Claire McCaskill (D-Mo.). After Kapoor's arrest on Wednesday, McCaskill said "anyone, including top executives, who potentially violated criminal law should be aggressively prosecuted."

"Evidence from our investigation suggests that Insys was engaged in systemic fraud and took actions that directly harmed their own customers and public health as a whole. This company has repeatedly gotten away with fines that amounted to a slap on the wrist for actions that helped fuel a nationwide epidemic that's claimed hundreds of thousands of American lives," she said.

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