Life Science Compliance Update

April 07, 2017

The New Strict French Anti-Bribery Law


In early December 2016, the Sapin II law was enacted in France. The law, which is meant to promote transparency, fight against bribery, and modernize the economy, was pushed for two years by Transparency International. Corruption has long been criminally punishable under French law, so the main purpose of the new law was to issue more clear rules to prevent and detect bribery.

Company Obligations

Companies that exceed certain thresholds (and their executives) are required to adopt an anti-bribery compliance program that satisfies a variety of specific requirements set out in the law. The obligation to implement internal procedures applies to: (1) companies with their registered office in France (including French overseas territories, i.e., French Guiana, French Polynesia) that employ more than 500 employees and realize at least €100 million in revenue and (2) groups of companies that employ more than 500 employees with revenue or consolidated revenue exceeding €100 million, where the holding company has its registered office in France. In the second instance, the obligations detailed in Sapin II lie on the holding company itself, but also on subsidiaries or controlled companies, including those outside of France.

Sapin II Obligations

Companies that exceed the aforementioned thresholds have until June 1, 2017, to:

  1. Adopt a code of conduct, describing the behaviors likely to constitute bribery acts. This code should give clear and practical guidance tools to employees;
  2. Set up a whistleblowing system allowing employees to report behaviors or situations breaching the internal code of conduct. This whistleblowing system should define the process for investigating complaints in a confidential way. Sapin II also provides for certain protections for such whistle-blowers;
  3. Create a risk map, ranking and classifying the company’s risks of exposure to corruption, by sector and geographical area and taking into account the company’s major clients, suppliers or intermediaries;
  4. Run due diligence on the company’s major clients, suppliers and intermediaries;
  5. Implement internal or external accounting auditing processes to make sure that accounting books are not used to conceal corruption or influence peddling acts;
  6. Train the employees that are more at risk;
  7. Set up a disciplinary process that enables punishment for employees that breach the code of conduct; and
  8. Set up an internal process to control and evaluate the measures implemented.

Sanctions for Breach

To ensure compliance with these rules, Sapin II provides serious financial sanctions for those who do not comply. In fact, a new authority, the National Agency for Prevention and Detection of Bribery, has been established to enforce Sapin II. The Agency can issue an injunction to comply with the law as well as order the payment of fines by both the legal representative of the company (up to €200,000) and the company itself (up to €1 Million).

Non-compliance with Sapin II also carries significant reputational risk: the decision by the Anti-Corruption Agency issuing an injunction or imposing a fine can be made public under ‘name and shame’ powers.

Sapin II Brings Changes

While Sapin II does not significantly interfere with existing laws and sentencing guidelines on corruption, it does actually greatly change things in France. For one, it expanded extra-territorial reach for French prosecutors by allowing investigations into foreign companies with even a footprint in France.

The eight mandatory measures for a corruption prevention program have an effect on companies that are already complying with current French laws (they will need to consult with their employee representative organizations prior to integrating the code of conduct into internal regulations) and companies that are already complying with UK and US standards should consider how the such an obligation affects their existing framework.

Additionally, by compelling all companies with more than 50 employees to establish a whistleblower mechanism and providing “protection against retaliation” and guaranteeing confidentiality to whistleblowers, Sapin II introduces one of the strongest protection frameworks for whistleblowers.

There are a few things that differentiate the whistleblower regime from its UK and US counterparts. First, the regime applies only to disinterested parties: the law does not protect or incentivize whistleblowing by implicated parties, i.e. those who have the closest visibility of the facts. Second, the whistleblower must have firsthand knowledge of the facts. Third, with very few exceptions, whistleblowers receive immunity from criminal prosecution. Fourth, the law affords protection to those alleged to be involved by guaranteeing anonymity to named accused persons in a report until the facts are proven. Finally, unlike in the US, whistleblowers may be provided with financial support in an amount to be determined by an existing independent authority, but not rewarded.

However, whistleblower activity may be hampered by the hierarchical reporting process: whistleblowers must first use internal whistleblowing channels before blowing the whistle to the relevant regulator and finally to the press. In line with the preventive policy directive behind the law, this is designed to enable companies to react quickly to allegations.

How Can Companies Prepare?

Companies that fall under the scope of Sapin II will need to ensure that they can demonstrate that they comply with each of the eight measures listed above. Compliance is recommended to be such that an investigation by the newly-created Agency would come up clean.

Companies that do not fall under the Sapin II requirements would also do well to comply, as they can minimize the risk of bribery and, in the event of actual bribery, to mitigate their liability under separate bribery offences and/or to being able to negotiate the level of fine for such offences under the procedure of the Deferred Prosecution Agreement.

March 13, 2017

Healthcare Providers Accused of $100 Million Kickback Scheme


A dozen doctors, pharmacy owners, and marketing professionals have been accused of being involved in a sham medical study used to bilk up to $102 million from Tricare, the publicly funded federal health program for military and their family members. According to federal prosecutors, the scheme involved physicians prescribing “compounded” drugs, such as pain, scar, and migraine creams to military families. The twelve participants were charged in a thirty-five count superseding indictment.

The defendants include: Dr. Walter Neil Simmons, 47, of Mesa, Arizona; Dr. William F. Elder-Quintana, 50, of El Paso, Texas; Jeffrey Eugene Fuller, 51, of Dallas, Texas; Andrew Joseph Baumiller, 37, of Dallas, Texas; Jeffry Dobbs Cockerell, 61, of Houston, Texas; Steven Bernard Kuper, 43, of Burleson, Texas; Ravi Morisetty, 42, of Irving, Texas; Joe Larry Straw, 46, of Frisco, Texas;  Luis Rafael Rios, 50, of Killeen, Texas; and Michael John Kiselak, 49, of Southlake, Texas.

The superseding indictment alleges that from roughly May 2014 to mid-February 2016, the twelve defendants conspired to run a scheme to defraud TRICARE in connection with the prescription of compounded pain and scar creams. The scheme involved the payment of kickbacks to TRICARE beneficiaries, payment of kickbacks to prescribing physicians, and the payment of kickbacks to marketers by the owners of compounding pharmacies.

CMGRX Participants

Cesario and Cooper co-owned CMGRX, LLC, (CMGRX), a Texas limited liability company formed in September 2014. The ‘CMG’ in CMGRX stands for Compound Marketing Group. CMGRX primarily marketed compounded pain and scar creams to current and former U.S. military members and their families, on behalf of various compounding pharmacies. CMGRX’s principle marketing tool was a sham medical study through which individuals were paid monetary compensation in exchange for obtaining compounded drugs with their TRICARE prescription benefits. Cesario served as CMGRX’s CEO and Treasurer and Cooper served as its President and Secretary. Neither had any medical, nursing or pharmaceutical licensing or education. CMGRX ceased operations in mid-2015, shortly after TRICARE announced changes to its coverage of compounded drugs. From October 2014 through June 2015, TRICARE paid more than $102 million for compounded drug prescriptions generated by CMGRX.

Defendants Straw and Kiselak led marketing groups for CMGRX, recruiting military members and their families, offering them monetary compensation in exchange for obtaining compounded drugs with their TRICARE prescription benefits. Defendant Rios, a marketer and patient recruiter in Straw’s marketing group, recruited hundreds of beneficiaries on and around Fort Hood.

Per the superseding indictment, Cesario, Cooper, Straw, Rios, Kiselak and their coconspirators paid TRICARE beneficiaries for obtaining and filling prescriptions for compounded drugs, principally compounded pain creams, scar creams, migraine creams, and vitamins. They disguised these payments to TRICARE beneficiaries as “grants” for participating in a medical study they referred to as a TRICARE-approved “Patient Safety Initiative” or “PSI Study” to evaluate the safety and efficacy of compounded drugs. However, the PSI Study was not approved by TRICARE, was not overseen by a qualified physician or medical professional, had no control group, and was not designed to gather any useful scientific data relating to the safety and efficacy of any drug. Its true purpose was to compile a list of TRICARE beneficiaries who had filled prescriptions so that Cesario, Cooper and their coconspirators could calculate how much to pay the beneficiaries.

To further disguise the source of those kickbacks to TRICARE beneficiaries, Cesario and Cooper directed the creation of a charity and funneled the payments to the beneficiaries through the charity. Kiselak introduced Cesario and Cooper to an individual who helped them create the “Freedom from Pain Foundation” and registered it as a tax-exempt charitable foundation. The foundation, however, was funded entirely by payments from Cesario and Cooper, or business accounts they controlled, and from November 2014 to June 2015, they paid approximately $2.8 million to the foundation, most which was used to pay TRICARE beneficiaries and doctors.

Doctors Involved

Defendant Simmons served as the Chief Medical Officer for CMGRX and helped Cesario and Cooper create the PSI Study. Defendant Elder-Quintana worked as a contract physician with CMGRX., and Cesario and Cooper paid him to prescribe compounded drugs to TRICARE beneficiaries. Some of the payments were made directly to Elder, while others were made to Aztec Medicus, PLLC, a company he owned and controlled. Elder wrote thousands of prescriptions for compounded drugs to TRICARE beneficiaries who he never met in person and for whom he conducted only a cursory consultation via telephone. In an effort to disguise physician kickbacks, Cesario, Cooper and their coconspirators funneled some payments through the Freedom from Pain Foundation, under the false premise that the physicians were providing consulting services in connection with the PSI Study.

Pharmacies Involved

Trilogy Pharmacy, a compounding pharmacy in the TRICARE network, paid Cesario, Cooper, Straw, Rios, Kiselak and other CMGRX employees kickbacks in exchange for sending prescriptions for compounded drugs to Trilogy. Baumiller worked closely with Fuller, Cesario and Cooper to disguise these kickbacks as employee wages. Defendant Cockerell owned and operated 360 Pharmacy Services, a compounding pharmacy in the TRICARE network. 360 Pharmacy paid kickbacks to Cesario and Cooper in exchange for sending prescriptions to them.

Defendant Kuper owned and operated FW Medical Supplies LLC, a compounding pharmacy in the TRICARE network that did business under the name Dandy Drug. Dandy Drug paid kickbacks to Cesario and Cooper in exchange for referring prescriptions to them. Defendant Morisetty owned and operated Dena Group, LLC, a compounding pharmacy in the TRICARE network that did business under the name Alpha Pharmacy. Alpha Pharmacy paid kickbacks to Cesario and Cooper in exchange for referring prescriptions to them.


Each defendant is charged with one count of conspiracy to commit health care fraud, which carries a maximum statutory penalty of ten years in federal prison and a $250,000 fine. Cesario and Cooper are also each charged with fourteen counts of payment and/or receipt of illegal remuneration. Each of the remaining defendants, except for Simmons, is charged with at least one count of payment and/or receipt of illegal remuneration. The maximum statutory penalty, upon conviction for each of those counts is five years in federal prison and a $250,000 fine. Restitution may also be ordered.

The superseding indictment also includes a forfeiture request, which would require the defendants upon conviction to forfeit any property traceable to the offense, including real estate in several cities in Texas and Jacksonville, Florida; funds in bank accounts and investment accounts; numerous vehicles; boats and recreational vehicles; numerous firearms; jewelry and artwork; and other various investments to the United States.

Other Probes

There have been at least two other federal probes claiming that certain pharmacies are paying kickbacks to doctors who have ordered expensive compound drugs for their patients. One probe involved a California pharmacy that billed the state’s workers’ compensation program for pricy markups. Another probe involved a Florida doctor who was indicted on a charge of taking kickbacks for sending prescriptions, billed to Tricare and Medicare, for creams costing as much as $21,000 for a one-month supply.

March 10, 2017

Sanofi Settles Vaccine Antitrust Dispute


Sanofi Pasteur Inc., has agreed to pay $61.5 million in a five-year long class action brought by doctors alleging that the drug company violated antitrust laws with contracts for its pediatric vaccines, according to an agreement filed in federal court in New Jersey in late January. Specifically, the plaintiffs claimed the drug company held a dominant position in five pediatric vaccine markets, including a complete monopoly with quadrivalent meningococcal vaccine Menactra from 2005 to February 2010, when a competitor was introduced. At that point, Sanofi began bundling Menactra with other pediatric vaccines and substantially increasing the prices. 

According to the suit, Sanofi customers who bought a certain percentage of all four pediatric vaccines received a “loyalty discount” that reduced prices back to where they had been prior to the entry of the Novartis’ vaccine onto the market. Customers who did not buy enough of the four vaccines allegedly paid much more, according to the suit.

The lawsuit class was composed for 25,000 physician practices, 1,000 hospitals, 2,000 pharmacies, and 100 wholesalers. The suit received class certification in September 2015. The class was defined as anyone who purchased Menactra directly from Sanofi or its subsidiaries such as VaxServe Inc. 

Buyers in exclusive contracts for Sanofi vaccine bundles faced a penalty if they used Menveo instead of Menactra, the suit claimed. The penalty—ranging from 15.8% to 34.5%—would then apply to all the Sanofi vaccines a particular customer bought. The vaccines Sanofi put in those bundles included its Hib vaccines Pentacel and ActHIB, "for which there are no reasonably adequate medical substitutes," the suit claimed.

Sanofi defended its bundled sales approach in court documents, however. The company's "contracting and pricing practices did not constitute anticompetitive bundling,” Sanofi said in a court filing. Instead, the bundles helped competition and “benefited consumers by, among other things, lowering vaccine prices.” Sanofi also argued that Novartis was “both a profitable and successful competitor.”

The class action, on the other hand, said the practice “unfairly” hurt Novartis’ ability to compete with its meningococcal entrant, according to the complaint.

Sanofi fought the case for years, and even filed a counterclaim, but finally agreed to pay $61.5 million (and abandon the counterclaim) to settle and wrap up the lawsuit. The counterclaim argued that the class “engaged in unlawful collective action through membership” in physician buying groups, “purportedly causing vaccine prices to fall below competitive levels.” A Sanofi spokesperson said the company “has vigorously denied and continues vigorously to deny the plaintiffs’ claims and any allegation of wrongdoing.” The settlement does not require Sanofi to admit any fault.

“Despite Sanofi’s strong defenses, [our company] recognizes that continued litigation is likely to be extraordinarily expensive and time-consuming and thus has agreed to enter into this Settlement Agreement to avoid the further expense, inconvenience, risk and distraction of burdensome and protracted litigation,” according to a statement by Sanofi.

The potential settlement comes in advance of a trial, and has yet to receive approval. 


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