Life Science Compliance Update

March 28, 2016

Respironics Settlement and Corporate Integrity Agreement

One more False Claims Act case has been settled; this time Respironics, Inc., who allegedly violated the False Claims Act by paying kickbacks to durable medical equipment suppliers that bought its services. Respironics, who makes breathing masks for people who suffer from sleep apnea, allegedly provided free customer support through its medSage call center to suppliers whose customers used Respironics masks. Medical product suppliers that sold masks made by Respironics' competitors had to pay for the call center services based on the number of patients who used masks manufactured by other companies. Such a setup essentially forced suppliers into using Respironics masks. It is a violation of the law to induce medical suppliers to use a particular company's product for any government-covered medical service. Since the masks could be covered by Medicaid, Medicare, or Tricare programs, doing so came under the purview of the Anti-Kickback Statute.

This settlement also resolves a qui tam lawsuit that was originally brought by Dr. Gibran Ameer, who has worked for different medical equipment companies and who was once presented with the concept from Respironics, immediately realizing the arrangement resembled illegal kickbacks. Dr. Ameer will receive $5.38 million out of the federal share of the recovery.

According to Special Agent in Charge Derrick L. Jackson of the Department of Health and Human Services, "Medical equipment manufacturers that boost profits by providing kickbacks to suppliers will be held accountable for their improper conduct. We will continue to investigate such business arrangements, which threaten the integrity of federal health care programs."

Alicia Cafardi, spokeswoman for Respironics stated that the company had a "good-faith believe" that it wasn't doing anything wrong when it "bundled" the call center service in the price of its sleep apnea masks. She also stated that Respironics has snce "made a business decision" to restructure the call center pricing. Medical supply companies who use the call center service now pay a flat monthly price for each patient, regardless of whether the patient uses a Respironics mask.

The settlement comes to approximately $34.8 million, including $34.14 million in payments to the federal government and approximately $660,000 to various state governments (including Washington, D.C. and twenty-nine states that joined the lawsuit) based on their Medicaid participation.

According to Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Department of Justice's Civil Division stated, "the payment of illegal remuneration in any form to induce patient referrals threatens public confidence in the health care system. Americans deserve to know that when they are prescribed a device to treat a serious health care problem, the supplier's judgment has not been compromised by illegal payments from equipment manufacturers."

As part of the settlement Respironics entered into a five year Corporate Integrity Agreement. As part of the agreement Respironics will establish a compliance department including hiring a compliance officer, compliance training for the boards of directors, management and all staff, and review of procedures to ensure compliance with federal law.

Respironics Complaint

Respironics Corporate Integrity Agreement

March 04, 2016

Healthcare Company Boards Must Understand How to Manage Risk

In the Corporate Integrity Agreement (CIA) entered into by Olympus Corporation of the Americas, the Office of Inspector General (OIG) included a twist with respect to the training required to be provided to the company's Board of Directors. The CIA states:

The training shall address the unique responsibilities of health care industry Board members, including the risks, oversight areas, and strategic approaches to conducting oversight of a health care entity. This training may be conducted by an outside compliance expert hired by the Board and should include a discussion of the OIG's guidance on Board member responsibilities.

Olympus Corporation of the Americas CIA, at § III.C.2. While not unique – the same language also appears in the 2015 CIA with Millennium Health, LLC – this provision may signal a broader concern by the OIG that the Boards of healthcare companies are not sufficiently informed on the scope of their roles in overseeing the operation and effectiveness of a company compliance program.

In its 2015 Practical Guidance for Health Care Governing Boards on Compliance Oversight, the OIG spelled out its expectations for the role of the Board in overseeing a company's compliance program. Central to that role is the Board's responsibility to stay informed on compliance matters. The OIG stated:

A Board can raise its level of substantive expertise with respect to regulatory and compliance matters by adding to the Board, or periodically consulting with, an experienced regulatory, compliance, or legal professional. The presence of a professional with health care compliance expertise on the Board sends a strong message about the organization's commitment to compliance, provides a valuable resource to other Board members, and helps the Board better fulfill its oversight obligations.

The OIG's Practical Guidance went on to state that it "sometimes requires entities under a CIA to retain an expert in compliance or governance issues to assist the Board in fulfilling its responsibilities under the CIA."

Over the past several years, the OIG has used its CIAs with life sciences companies to evolve – albeit in a somewhat piecemeal approach – the role of the Board of Directors in overseeing the development and implementation of a compliance program. I detailed the OIG's changing expectations in an article entitled The Evolution of Board Responsibility for Compliance Program Oversight.

Apart from the language noted above relating to Board training, the Olympus CIA includes Board requirements typical of previous CIAs, including a provision requiring that the Olympus Board adopt a resolution concluding that the company has implemented an effective compliance program.

The Olympus CIA also requires that the Board submit to the OIG a description of any materials that it reviewed or other steps that it took to support its conclusion regarding the effectiveness of the company's compliance program. Those other steps could include the engagement of an independent compliance expert but the Olympus CIA – unlike certain other CIAs – does not require that the Olympus Board engage an independent compliance expert to evaluate the effectiveness of the company's compliance program.

In addition to the CIA, Olympus entered into a three-year Deferred Prosecution Agreement (DPA) and agreed to pay $623.2 million to settle criminal charges and civil claims that it paid kickbacks to physicians and hospitals in violation of the Anti-Kickback Statute. The CIA and DPA both require that Olympus engage an independent monitor to evaluate its compliance with the terms of the agreements. Perhaps if Olympus – or more importantly the company's Board – had invested in independent compliance expertise before the fact, it could have avoided the cost of the enforcement action.

About the Author:

Brian Dahl, the Principal at Dahl Compliance Consulting LLC, focuses his practice on assisting life sciences companies and their Boards manage risk, including by developing, implementing, and evaluating the effectiveness of their Corporate Compliance Programs.  He previously served in senior compliance roles for Teva and Takeda.

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December 04, 2015

Sanofi Corporate Integrity Agreement 2015

Sanofi recently signed their latest Corporate Integrity Agreement (CIA) to settle the latest round of charges of violating the Anti-kickback statute. This is a far-reaching settlement involving Sanofi US Services Inc. and Sanofi-Aventis U.S., LLC (Sanofi US); Aventis, Inc.; and Genzyme Corporation (Genzyme) and will impact Sanofi until September 2, 2020.

This CIA is a condition precedent for other agreements set by Sanofi and the United States to resolve allegations that between 2005 and 2009, Sanofi US violated the False Claims Act by giving physicians free units of its knee-injection Hyalgan® in violation of the Anti-Kickback Statute, to induce the physicians to purchase and prescribe the product. The settlement also resolves allegations that Sanofi US submitted false average sales price reports for Hyalgan® that failed to account for free units contingent on Hyalgan® purchase. The government alleged that those false average sales price reports caused government programs to pay inflated amounts for Hyalgan® and a competing product.

This agreement was signed on September 2, 2015, but was not made public on the Health and Human Services Office Inspector General's website until late November.

At first glance, this Sanofi CIA might look similar to the GlaxoSmithKline and Johnson & Johnson CIA's. However, as we have seen many times from the OIG, there are several subtle, but important, differences.

The differences and nuances cover a wide range of topics, from the scope and breadth of this CIA, to a puzzling departure relating to certifications, to differences in training requirements. For a more in-depth review of the recent Sanofi CIA, see the December issue of Life Science Compliance Update (subscription required).

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