Policy and Medicine

Companies Add Recoupment of Executives Bonuses to Compliance Cases

In two recent settlements involving off-label promotion and corporate integrity agreements (CIA) with HHS-OIG, new provisions were added that dealt with the “clawing back” of executive bonuses.  Specifically, in the GlaxoSmithKline and Par Pharmaceuticals settlement, HHS-OIG noted that “company executives may have to forfeit annual bonuses if they or their subordinates engage in significant misconduct, and sales agents are now being paid based on quality of service rather than sales targets.” 

These newly created financial recoupment programs put at risk of forfeiture and recoupment an amount equivalent to up to 3 years of annual performance pay (i.e., annual bonus, plus long term incentives) for an executive who is discovered to have been involved in any significant misconduct (Executive Financial Recoupment Program).  This financial recoupment program applies to both covered executives who are either current employees or who are former employees at the company at the time of a Recoupment Determination.  

In light of these recent developments, Pensions&Investments reported that six pharmaceutical companies developed a “set of principles on the recoupment of executive incentive compensation in the event of corporate compliance or other violations.”  The members of the working group of investors and companies, led by the $52.4 billion UAW trust and Johnson & Johnson, believe the principles “will help deter unethical and inappropriate behavior” at corporations.

 Aside from Johnson & Johnson, the other companies endorsing the principles are Amgen Inc., Bristol-Myers Squibb Co., Eli Lilly and Co., Merck & Co. Inc. and Pfizer Inc. 

“As a result of the endorsement, shareholders proposals filed by the New York State Common Retirement Fund, Albany, at Amgen and Bristol-Myers Squibb, and the $127.5 billion New York City pension funds at Johnson & Johnson and Merck, were withdrawn.  Both funds are members of the coalition.”  Key principles include: 

• the discretion of the board compensation committee whether to claw back incentive-based compensation already paid or
• otherwise recoup or reduce compensation that has not yet vested or has not yet been paid
• the compensation committee having full discretion “to determine if a material violation of company policy related to the sale, manufacture or marketing of health-care services, has caused significant financial harm to the company and should therefore trigger consideration of a possible recoupment of incentive compensation”  

In addition, the principles “extend beyond the individuals responsible for the compliance failures to potentially include supervisors who failed to appropriately manage or monitor the risk.”  The Wall Street Journal noted that clawbacks “aim to deter unnecessary risk-taking and misconduct” and “have gained traction since the financial crisis, with support from the Dodd-Frank financial-overhaul law of 2010.” 

The principles include public disclosure concerning decisions to recoup compensation in compliance with Securities and Exchange Commission (SEC) rules.  “The drug industry emerged several years ago as a target for shareholders seeking tough clawback policies, according to Patrick McGurn, special counsel at Institutional Shareholder Services, a prominent proxy adviser,” reported WSJ. 

“Properly designed, compensation policies can be effective antidotes to compliance violations by affirming accountability that has real consequences,” Meredith Miller, chief corporate governance officer for the UAW Retiree Medical Benefits Trust, said in the statement.  Thomas P. DiNapoli, New York state comptroller and sole trustee of the $152.9 billion New York State Common Retirement Fund, said in the statement, “We believe these principles strengthen the alignment between shareholders and management by providing potent but balanced disincentives for bad behavior.” 

Ms. Miller in an interview said, “This type of collaborative working is unprecedented in corporate governance and the recoupment principles (set) a new standard” for health-care and other corporations.  “Pfizer’s similar policies, already in place, served as a template for the working group and the principles adopted by the compensation committees and boards of the other companies, Ms. Miller said.” 

Bristol-Myers said the policy change "codifies and expands" its long-standing practice of including recoupment provisions in its compensation agreements and will give "the company an additional tool to ensure employee accountability,” reported WSJ. 

Lilly said the change reflects its commitment to “maintaining a culture of high ethics and compliance.”  “Merck & Co., meanwhile, said the policy would discourage excessive risk taking and better link pay with performance.”  Johnson & Johnson said it has agreed in principle with expanded clawbacks, but doesn't have a timetable for adopting a concrete policy.

HHS OIG: Listing of Pharmaceutical and Device Corporate Integrity Agreements

Below is a list in alphabetic order of the major pharmaceutical and medical device manufacturer corporate integrity agreements (CIAs) entered into with the Office of the Inspector General (OIG) for the U.S. Department of Health and Human Services (HHS).  For reader’s reference, most CIAs are typically for five (5) years, so the close date will be approximately five years from the start date, unless the manufacturer has violated the terms of its CIA or entered into a second or third CIA. 

#	Company	Start Date	End Date or Closed
1.	Abbot Laboratories	5/7/2012
2.	Allergan	8/30/2010
3.	Amgen Inc.	12/14/2012
4.	AstraZeneca LP	4/27/2010
5.	Sanofi Aventis	8/30/2007	Closed 1/28/2013
6.	Bayer Healthcare LLC	11/25/2008
7.	Biomet, Inc	9/27/2007	Closed 1/9/2013
8.	Biovail Corp n/k/a Valeant Pharmacetucals International	9/11/2009
9.	Boehringer Ingelheim Pharmaceuticals Inc	10/22/2012
10.	Boston Scientific Corp.	12/23/2009
11.	Bristol Myers Squibb Company	9/26/2007	Closed 12/12
12.	Cephalon, Inc. (Teva)	9/29/2008
13.	Cell Therapeutics, Inc.	12/22/2007
14.	Depuy Orthopaedics, Inc.	9/27/2007	Closed 2/01/2013
15.	Elan Corp	12/15/2010
16.	Eli Lilly and Co.	1/14/2009
17.	Forest Labs	9/15/2010
18.	GlaxoSmithKline	6/28/2012
19.	Ivax Pharmaceuticals, Inc.	10/30/2009
20.	Medtronic	5/31/2009
21.	Merck & Co, Inc.	11/22/2011
22.	Novartis Pharmaceuticals Corp	9/29/2010
23.	Novo Nordisk Inc.	5/31/2011
24.	Ortho-McNeil-Janssen Pharmaceuticals, Inc.	06/06/2012
25.	Orthofix International, N.V.	4/28/2010
26.	Otsuka America Pharmaceutical, Inc.	3/25/2008
27.	Pfizer, Inc.	8/31/2009
28.	Purdue Pharma L.P.	7/31/2007	Closed 1/23/2013
29.	Quest Diagnostics, Inc.	4/14/2009
30.	Synthes, Inc.	9/23/2010
31.	UCB, Inc.	5/24/2011
32.	Wright Medical Technology	9/29/2010

Amgen Settlement and Corporate Integrity Agreement

Adding to the long list of pharmaceutical settlements involving off-label promotion, Amgen Inc., the world’s largest biotechnology company, recently entered into a settlement agreement with the U.S. Department of Justice to resolve criminal liability and false claim act allegations involving its improper promotion of certain drugs.  Amgen, a biotechnology company, agreed to pay $762 million—the single largest criminal and civil False Claims Act settlement involving a biotechnology company in U.S. history, according to the announcement.  

Amgen entered a guilty plea before U.S. District Judge Sterling Johnson of the Eastern District of New York to a criminal information charging the company with illegally introducing a misbranded drug, Aranesp, into interstate commerce.  Under the Food, Drug and Cosmetic Act (FDCA), it is illegal for drug companies to introduce into the marketplace drugs that the company intends will be used “off-label,” i.e., for uses or at doses not approved by the FDA.  The conduct occurred between 2002 and 2007.   

Aranesp is an erythropoiesis-stimulating agent (ESA) that was approved by the FDA in 2001 at calibrated doses for particular patient populations suffering from anemia.  In order to increase sales of Aranesp and reap the resulting profits, Amgen illegally sold the drug with the intention that it be used at off-label doses that the FDA had specifically considered and rejected, and for an off-label treatment that the FDA had never approved.  Under the terms of the criminal plea agreement, Amgen will pay a criminal fine of $136 million and criminal forfeiture in the amount of $14 million. 

Aranesp, remains one of Amgen’s largest drugs with sales of $2.3 billion in 2011.  Its sales, and that of a related older red blood cell booster Epogen, have declined significantly over the past few years amid safety concerns, stricter usage guidelines and reimbursement restrictions.  The government said the illegal practices were undertaken in part to help Amgen take market share from Johnson & Johnson's similar anemia drug Procrit. 

In particular, Amgen illegally introduced Aranesp into the oncology and nephrology ESA markets, intending that it be used for patients suffering from anemia due to chronic kidney disease or chemotherapy at off-label, unapproved doses that were larger and less frequently administered than those approved by the FDA for these patient populations.  Amgen also illegally introduced Aranesp into the oncology ESA market intending that it be used to treat anemia caused by cancer, irrespective of whether the patient had been prescribed chemotherapy - a use which the FDA had never approved and which the FDA subsequently determined caused an increased risk of death.   

In particular, in 2007, the FDA mandated that a “black box” label be added to Aranesp’s label, warning that Aranesp “increased the risk of death . . . in patients with active malignant disease [cancer] receiving neither chemotherapy nor radiation.”  At approximately the time that the FDA issued the black box warning, Amgen ceased its promotion of Aranesp for the treatment of anemia caused by cancer rather than the cancer’s treatment. 

Of particular interest, the United States contended that Amgen used journal articles that were insufficient to support the safety and efficacy of the off-label uses at issue, and improperly obtained listings in medical compendia in an effort to establish that the off-label uses were medically accepted, and thereby eligible for coverage by federal health care programs.  Specifically, Amgen sought and obtained the dosage’s listing in the U.S. Pharmacopeia’s Drug Information, a compendium allowing the Centers for Medicare and Medicaid Services (CMS) to reimburse for its off-label use, noted medpage Today. 

“As part of its strategy to increase sales of Aranesp, Amgen instructed its sales representatives to distribute laminated reprints of the Aranesp compendia listing for the [once monthly] QM dose to healthcare professionals with the intent that the healthcare professionals would use Aranesp for QM dosing," the criminal complaint read. 

For the civil settlement, Amgen has agreed to pay $612 million ($587.2 million to the United States and $24.8 million to the states) to resolve claims that it caused false claims to be submitted to Medicare, Medicaid and other government insurance programs.  The federal civil settlement agreement encompasses allegations that Amgen: (1) promoted Aranesp and two other drugs that it manufactured, Enbrel and Neulasta, for off-label uses and doses that were not approved by the FDA and not properly reimbursable by federal insurance programs; (2) offered illegal kickbacks to a wide range of entities in an effort to influence health care providers to select its products for use, regardless of whether they were reimbursable by federal health care programs or were medically necessary; and  (3) engaged in false price reporting practices involving several of its drugs.   

“The government raised important concerns in the criminal prosecution. Amgen acknowledges that mistakes were made, and we did not live up to our standards,” Amgen SVP and chief compliance officer, Cynthia M. Patton, said in a statement. 

"I am pleased a settlement was reached to conclude this matter. With the emphasis and investment we have made in compliance,  I am confident about Amgen's continued adherence to the provisions in this agreement," said Robert A. Bradway, chief executive officer at Amgen. "Amgen remains dedicated to advancing science to dramatically improve people's lives. We are committed to meeting the expectations of the government and the healthcare community as we fulfill our mission in serving the needs of patients.”  It remains yet to be seen whether HHS-OIG will attempt toe exclude any Amgen executives, as was the case for Purdue Pharma and several other recent cases.  

Corporate Integrity Agreement  

As part of the global settlement, Amgen has also agreed to enter into a 98-page Corporate Integrity Agreement (CIA) with HHS-OIG that will govern its conduct, and ensure careful oversight of its branding and marketing practices.  The five-year CIA includes provisions designed to increase accountability of individuals and Board members, to increase transparency, and to strengthen Amgen’s compliance program.  Reuters noted that corporate officers will be “on the hook” for compliance failures within that five-year period, prosecutors said. 

The CIA requires that a committee of Amgen’s board of directors annually review the effectiveness of the company’s compliance program and that executives in key areas certify to compliance.  It also requires that Amgen post on its company website information about payments to doctors.  Under the CIA, Amgen must establish and maintain a centralized risk assessment and mitigation program and policies relating to research, publications and Amgen’s interactions with federal payors.   The CIA has the following requirements for independent medical education.   

• all Independent Medical Education activity funding requests are reviewed, tracked, and evaluated by the centralized Healthcare Compliance Operations organization to ensure that the request meets compliance criteria;
• funding decisions are based on objective criteria such as the qualifications of the requestor, the quality of the Independent Medical Education activity program, and pre-established educational goals;
• Independent Medical Education activity funding is provided only pursuant to a written agreement with the funding recipient, and payments to the Independent Medical Education activity funding recipient are consistent with the written agreement; and
• Independent Medical Education activity programs funded by Amgen are developed and implemented independently of Amgen staff involvement 

Amgen must monitor at least 30 Independent Medical Education activities.  In the period January 1, 2013 through December 31, 2013, Monitoring Personnel from Amgen must attend and review at least 150 speaker programs. 

Amgen must continue to post, on a quarterly basis, on its company website the following information with respect to all independent medical education grants and healthcare donations: (i) the name of the recipient; (ii) the program name; and (iii) the amount of the grant or donation. 

Whistleblower Case 

The government built its case on testimony from and evidence gathered surreptitiously by whistleblowers—in particular, Milwaukee rep Jill Osiecki, who wore a wire to sales meetings at the behest of HHS investigators, noted MMM.  Osiecki told the New York Times that when she joined the firm in 1990, it had “good science, good products, strong ethics,” but that corporate culture changed for the worse around 2000, “when new management came in and Aranesp was approved, setting up a fierce marketing battle with Johnson & Johnson and its rival anemia drug, Procrit,” the Times reported.  That was the year that Kevin Sharer took over as CEO of the company. He was succeeded in that role, and subsequently as chairman, this year by Robert Bradaway, and is due to retire from the board of directors at the end of the year.  

Osiecki told the Times that reps were instructed to make “homemade bread” presentations to docs, so that the spreadsheets couldn’t be pinned on the company, and advised not to leave presentations behind after events.  Disgusted, she contacted HHS’s Office of the Inspector General in August 2004 to report these practices.  HHS OIG asked her to wear a wire, and she did, letting the department monitor 13 events over the course of 15 months.  She said she was fired in 2005 after revealing that she had held on to a potentially incriminating voice mail message.  

“I’d hear speakers jokingly tell participants to turn off their tape recorders, or express the hope that no one was recording their session,” said Jill Osiecki, a former rep who recorded 13 meetings for federal investigators.  “Those comments were always followed by uproarious laughter.”  That’s the most sensational bit of Osiecki’s official statement to the press.   

Osiecki filed her whistleblower suit in 2004 and helped the feds gather evidence of Amgen’s marketing misbehavior. Other whistleblowers also filed suit, accusing the company of paying kickbacks, in the form of free doses doctors could sell for extra profit, and promoting off-label use of Aranesp, the anemia drug, and Enbrel, an arthritis and psoriasis treatment, as well as other drugs. 

Assembling a viable case against Amgen--or any drugmaker engaged in marketing misbehavior--isn't easy, Osiecki points out in her statement.   “I’ve seen how difficult and expensive it is to discover and prosecute the fraud I witnessed,” she said.  “Without insiders who can provide a road map ... the [g]overnment may not be able to stop the illegal behavior.” 

Another whistleblower in the case—Kassie Westmoreland, a former Amgen sales representative—claimed that Amgen had overfilled vials of Aranesp as a way of providing doctors with free medicine.  The doctors could bill Medicare and private insurers for this extra amount, providing the doctors with more profit.  The suit said that this was intended to induce doctors to buy Aranesp for their practices rather than Procrit, a competing anemia drug from Johnson & Johnson.

Boehringer Ingelheim Settlement and Corporate Integrity Agreement

While it has been a few months since the last large settlement involving the off-label promotion of pharmaceutical products, the Department of Justice and the Office of the Inspector General (OIG)  for the Department of Health and Human Services (HHS) recently announced a $95 million settlement with Boehringer Ingelheim Pharmaceuticals Inc (or BIPI). 

The Justice Department’s total recoveries in False Claims Act cases since January 2009 are over $13.8 billion, and are another product of the government’s Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced by Attorney General Eric Holder and Kathleen Sebelius, Secretary of HHS, in May 2009. 

The settlement resolves allegations relating to the improper promotion of the stroke-prevention drug Aggrenox, the chronic obstructive pulmonary disease (COPD) drugs Atrovent and Combivent, and the hypertension drug Micardis, the Justice Department announced in late October.   

According to the government’s allegations, Boehreinger promoted each of the three drugs for uses that were not medically accepted indications and were not covered by federal health care programs.  Specifically, the settlement resolves allegations that Boehreinger promoted   Aggrenox for certain cardiovascular events such as myocardial infarction and peripheral vascular disease; that Combivent was marketed for use prior to another bronchodilator in treating COPD; and that Micardis was marketed for treatment of early diabetic kidney disease.   The uses were not for medically accepted indications and were not covered by federal health care programs. 

Additionally, the settlement resolves allegations that Boehringer knowingly promoted the sale and use of Combivent and Atrovent at doses that exceeded those covered by federal health care programs and that Boehringer knowingly made unsubstantiated claims about the efficacy of Aggrenox, including that it was superior to Plavix.  Finally, the agreement resolves allegations that the company paid kickbacks to health care professionals to induce them to prescribe Aggrenox, Atrovent, Combivent and Micardis. 

Typical with other large off-label settlements, Boehringer has agreed to enter into an expansive Corporate Integrity Agreement (CIA) that provides for procedures and reviews to be put in place to avoid and promptly detect conduct similar to that which gave rise to the settlement.  Inspector General Daniel Levinson noted that, “OIG is overseeing a Corporate Integrity Agreement to improve the transparency of company relationships with physicians and accountability of Board members and corporate executives.” 

Corporate Integrity Agreement  

OIG’s CIA with Boehringer contains the typical boilerplate provisions and definitions as other pharmaceitucal company CIA’s.  Below is a brief summary of some of the relevant provisions in the CIA.

The CIA defines “Third Party Educational Activity” as “any continuing medical education (CME), disease awareness, or other scientific, educational, or professional program, meeting, or event supported by Boehringer, including but not limited to, sponsorship of symposia at medical conferences.” 

Boehringer’s CIA requires that the Board of Directors of the company be “responsible for the review and oversight of matters related to compliance for the review and oversight of matters related to compliance.”  In addition, a number of executive employees of the company are required to certify in writing compliance with the CIA. 

The CIA also requires Boehringer to have policies and procedures in place regarding the sponsorship or funding of grants (including educational grants) or charitable contributions.  The policies and procedures must be designed to ensure that BIPI’s funding and/or sponsorship complies with all applicable Federal health care program and FDA requirements.  Similarly, the company must have policies and procedures in place regarding the “funding of, or participation in, any Third Party Educational Activity.”  Such policies and procedures must “be designed to ensure that BIPI’s funding and/or sponsorship of such programs satisfies all applicable Federal health care program and FDA requirements.  Specifically, their policies and procedures require:  

1. Boehringer disclose its financial support of the Third Party Educational Activity and, to the extent feasible consistent with subsection III.B.3.l.4 below, any financial relationships with faculty, speakers, or organizers at such Activity;
2. as a condition of funding, the third party shall agree to disclose Boehringer’s financial support of the Third Party Educational Activity and to require faculty, speakers, or organizers at such Activity to disclose any financial relationship with Boehringer
3. the Third Party Educational Activity have an educational focus;
4. the content, organization, and operation ofthe Third Party Educational Activity be independent of Boehringer’s control;
5. Boehringer supports only Third Party Educational Activity that is non-promotional in tone/nature; and
6. Boehringer’s support of a Third Party Educational Activity shall be contingent on the provider’s commitment to provide information at the Third Party Educational Activity that is fair, balanced, accurate and not misleading 

The CIA also requires policies and procedures regarding authorship of journal articles or other publications about Government Reimbursed Products or about therapeutic areas or disease states that may be treated with Government Reimbursed Products, including, but not limited to, the disclosure of any and all relationships between the author and Boehringer, the identification of all authors or contributors (including professional writers) associated with a given publication, and the scope and breadth of research results made available to each author or contributor. 

Field Force Monitoring and Review Efforts

The company must also fulfill a number of requirements regarding Field Force Monitoring and Review Efforts.  First, Boehringer must maintain processes to require all speakers to complete training and enter written agreements that describe the scope of work to be performed, the speaker fees to be paid, and compliance obligations for the speakers (including requirements that the speaker may only use BIPI approved materials and may not directly or indirectly promote the product for off-label uses.)   

In addition, BIPI must maintain a centralized electronic system through which all speaker programs are administered.  This system must establish controls regarding eligibility and qualifications of speakers and venues for the programs and require that speakers are paid according to a centrally managed, pre-set rate structure determined based on a fair-market value analysis conducted by BIPI.  BIPI must maintain a comprehensive list of speaker program attendees through its centralized system.  In addition, BIPI must track and review the aggregate amount (including speaker fees, travel, and other expenses) paid to each speaker in connection with speaker programs conducted during each Reporting Period.  The company will also have to conduct live audits of 75 speaker programs each year.   

Monitoring of Non-Promotional Activities 

Boehringer will have to conduct audits of 30 Publication Activities; 20 Researcher arrangements with healthcare providers; 20 advisory board arrangements; and 20 other types of Consultant arrangements.  The targeting of each of these activities will be done on both a risk-based targeting approach and on a sampling approach.  

The company will also have to conduct audits on at least 30 medical education grants.  Monitoring Personnel conducting the Grants Monitoring Program must review proposal documents (including grant requests), approval documents, contracts, payments and materials relating to the grant office’s review of the requests, and documents and materials relating to the grants and any events or activities funded through the grants in order to assess whether the activities were conducted in a manner consistent with BIPI’s Policies and Procedures. Results from the Grant Monitoring Programs, including the identification of potential violations of policies, shall be compiled and reported to the Ethics and Compliance Department for review and follow-up as appropriate. 

Reporting of Physician Payments and Other Transparency 

The CIA, mostly consistent with the Physician Payment Sunshine Act proposed regulations, requires the company to also post certain payments on a public website. 

BIPI must also post on its company website the following information with respect to both grants and charitable contributions to U.S.-based HCPs and HCIs: 1) the ultimate recipient organization’s name, to the extent known by BIPI; 2) a brief description of the program for which the grant or charitable contribution was requested; and 3) the amount of the grant or charitable contribution. 

CME Grant Disclosure 2011 and 1st ½ of 2102

We have compiled a chart of companies that disclose their educational grant payments for  2011 and 2012.  Once the final Physician Payment Sunshine Act regulations are, it is likely that more companies will begin to post such payments to teaching hospitals in anticipation of the rules to assist with implementation and compliance. It should be noted that many companies are posting rolling grants payments rather than cumulative grants payments. This means that current postings may not reflect historical transparency posting, but instead current year or last 4 quarters (2 common methods used).  So, for example, Janssen Pharmaceuticals has posted grants payments since 2010 but only current year Q1-Q2 (the most recent report) is available on our site.

Company	2012	2011	2010	2009	2008
Abbott		Q1	Q1	Q1
		Q2	Q2	Q2
		Q3	Q3	Q3	Q3
		Q4	Q4	Q4	Q4
Allergan	Q1 & Q2	Q1 & Q2
		Q3 & Q4	Q3
Amgen	Q1	Q1	Q1	Q1	Q1
	Q2	Q2	Q2	Q2	Q2
		Q3	Q3	Q3	Q3
		Q4	Q4	Q4	Q4
Amilyn	Q1 & Q2	2011	Q1	Q1
			Q2	Q2
			Q3	Q3
				Q4
Amilyn Lilly Grant Office			Q1	Q1
			Q2	Q2
			Q3	Q3
				Q4
Astellas Pharma US, Inc.	Q1	Q1	Q1	Q4
	Q2	Q2	Q2
		Q3	Q3
		Q4	Q4
Astra Zeneca	Q1& Q2 2012	Q1 & Q2 2011	Q1 & Q2 2010	Q1 & Q2 2009	Q1 & Q2 2008
		Q3 &Q4 2011	Q3 &Q4 2010	Q3 &Q4 2009	Q3 &Q4 2008
Bristol-Myers Squibb	Q1	Q1	Q1
	Q2	Q2	Q2
		Q3	Q3
		Q4	Q4
GlaxoSmithKline	Q1 & Q2 2012	Full Year	Full Year	Full Year	Full Year 2008
Genentech		Q1	Q1
		Q2	Q2
			Q3
			Q4
Forest Labs	Q1	Full Year	Full Year
Johnson and Johnson Companies
Biosense Webster	Q1 2012; Q2-Q4 2011
Janssen Biotech	Q1 & Q2	Q1 & Q2 2011
Cordis	Q1 2012; Q2-Q4 2011
Depuy Mitek, Inc.	Q1 2012; Q2-Q4 2011
Depuy Orthopaedics, Inc.	Q1 2012; Q2-Q4 2011	Q1 2011 – Q1 2010
Depuy Spine, Inc.	Q1 2012; Q2-Q4 2011	Q1 2011 – Q2 2010
Codman and Shurtleff, Inc.	Q1 2012; Q2-Q4 2011	Q1 2011 – Q2 2010
Ethicon	Q1 2012; Q2-Q4 2011	Q1 2011 – Q2 2010
Ethicon Endo Surgery, Inc.
Janssen Pharmaceuticals, Inc.	Q2
Janessen Biotech, Inc.		Q1 2011
Janssen Therapeutics	Q2
Therakos	Q1 2012; Q2-Q4 2011
Eli Lilly		Full Year	Full Year	Full Year
Merck	Q1	Q1	Q1	Q1	Q3
	Q2	Q2	Q2	Q2	Q4
		Q3	Q3	Q3
		Q4	Q4	Q4
Pfizer	Q1 &Q2	2011	2010	2009	2008
Sanofi Aventis	Q1	Q1	Q1	Q1
		Q2	Q2	Q2
		Q3	Q3	Q3
		Q4	Q4	Q4
Shire	Q1	Q1	Q1	Q1
	Q2	Q2	Q2	Q2
		Q3	Q3	Q3
		Q4	Q4	Q4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senate Finance Committee Open Letter Seeks Input to Fight Fraud

The Senate Finance Committee recently posted an open letter on its website to the health care sector soliciting industry stakeholder insights on ways to combat fraud, waste, and abuse in the Medicare and Medicaid programs.  The letter comes shortly after the Committee held a hearing, which the members questioned government officials from the Department of Health and Human Services’ Office of the Inspector General (HHS-OIG), the Centers for Medicare & Medicaid Services, and the Government Accountability Office about the effectiveness of fraud-fighting efforts.  

The open letter now invites a broader audience, including the private sector, to opine on the best ways to prevent and detect unlawful conduct and waste involving government health care programs.  The Committee is requesting actors in the health care sector to submit “white papers” that address potential improvements in the following categories: 

• Program Integrity Reforms to Protect Beneficiaries and Prevent Fraud and Abuse
• Payment Integrity Reforms to Ensure Accuracy, Efficiency and Value
• Fraud and Abuse Enforcement Reforms to Ensure Tougher Penalties Against Those Who Commit Fraud 

The white papers should be submitted via email by June 29th to ProgramIntegrityWhitePapers@finance.senate.gov.  The Committee members plan to have their staff review the white papers and then compile a summary document highlighting key proposals later in 2012. 

This letter is the most recent instance where the government has sought the expertise of the private sector in addressing fraud, waste, and abuse.  As we noted back in February, OIG issued a report related to the Pharmaceutical Compliance Roundtable, where it convened compliance professionals in the pharmaceutical industry.  

At the roundtable, companies discussed their experiences with Corporate Integrity Agreements (CIAs) and other compliance efforts initiated by the government with HHS-OIG representatives.  Prevention is becoming the new focus of fraud-fighting efforts, and the government needs private sector cooperation to achieve its goals in this area. 

Abbott Settlement and Corporate Integrity Agreement

Continuing the recent trend of large legal settlements with pharmaceutical companies, the Department of Justice (DOJ) this week announced that Abbott Laboratories Inc. (Abbott), pleaded guilty and agreed to pay $1.5 billion to resolve its criminal and civil liability arising from the company’s unlawful promotion of the prescription drug Depakote for uses not approved as safe and effective by the Food and Drug Administration (FDA). 

 

According to the DOJ press release, the resolution– the second largest payment by a drug company – includes a criminal fine and forfeiture totaling $700 million and civil settlements with the federal government and the states totaling $800 million.  Abbott also will be subject to court-supervised probation and reporting obligations for Abbott’s CEO and Board of Directors.  

 

Background 

 

The FDA is responsible for approving drugs as safe and effective for specified uses.  Under the Food, Drug and Cosmetic Act (FDCA), a company in its application to the FDA must specify each intended use of a drug.  A company’s promotional activities must be limited to only the intended uses that FDA approved.   In fact, promotion by the manufacturer for other uses – known as “off-label” uses – renders the product misbranded. 

 

 The FDA approved Depakote for only three uses: epileptic seizures, bipolar mania and the prevention of migraines.  The FDA never approved the drug as safe and effective for the off-label use of controlling behavioral disturbances in dementia patients.  In 1999, Abbott was forced to discontinue a clinical trial of Depakote in the treatment of dementia due to an increased incidence of adverse events, including somnolence, dehydration and anorexia experienced by the elderly study participants administered Depakote. 

 

Abbott pleaded guilty to misbranding Depakote by promoting the drug to control agitation and aggression in elderly dementia patients and to treat schizophrenia when neither of these uses was FDA approved.  In an agreed statement of facts filed in the criminal action, Abbott admits that from 1998 through 2006, the company maintained a specialized sales force trained to market Depakote in nursing homes for the control of agitation and aggression in elderly dementia patients, despite the absence of credible scientific evidence that Depakote was safe and effective for that use.  In addition, from 2001 through 2006, the company marketed Depakote in combination with atypical antipsychotic drugs to treat schizophrenia, even after its clinical trials failed to demonstrate that adding Depakote was any more effective than an atypical antipsychotic alone for that use. 

 

“Today’s settlement demonstrates our continued scrutiny of the sales and marketing practices of pharmaceutical companies that put profits ahead of patient health,” said U.S. Food and Drug Administration Commissioner Margaret Hamburg, M.D.  “The FDA will continue its due diligence and hold pharmaceutical companies accountable for marketing practices that undermine the drug approval process.”

 

Abbott has pleaded guilty to a criminal misdemeanor for misbranding Depakote in violation of the FDCA.  Under the plea agreement, Abbott will pay a criminal fine of $500 million, forfeit assets of $198.5 million, and submit to a term of probation for five years.   In addition, Abbott will also pay $1.5 million to the Virginia Medicaid Fraud Control Unit.  

 

As a condition of probation, Abbott will report any probable FDCA violations to the probation office, its CEO will certify compliance with this reporting requirement, and its board will report annually on the effectiveness of the company’s compliance program. 

 

In addition, Abbott agrees that during the term of probation, the company will not compensate sales representatives for off-label sales, will ensure that continuing medical education (CME) grant-making decisions are not controlled by sales and marketing, will require that letters communicating medical information to healthcare providers be accurate and unbiased, and will have policies designed to ensure that clinical trials are approved by the company’s medical or scientific organizations and published in a consistent and transparent manner. 

 

Corporate Integrity Agreement 

 

In addition to the criminal and civil resolutions, Abbott has also executed a Corporate Integrity Agreement(CIA) with the Department of Health and Human Services, Office of Inspector General (HHS-OIG).  The five-year CIA requires, among other things, that Abbott's board of directors review the effectiveness of the company's compliance program, that high-level executives certify to compliance, that Abbott maintain standardized risk assessment and mitigation processes, and that the company post on its website information about payments to doctors.  Abbott is subject to exclusion from federal health care programs, including Medicare and Medicaid, for a material breach of the CIA and subject to monetary penalties for less significant breaches. 

 

“As a result of OIG’s joint investigation with our federal and state partners, Abbott Laboratories will enter one of the pharmaceutical industry’s largest settlements and pay $1.5 billion for unlawfully promoting its drug Depakote, including to nursing home patients with dementia,” said HHS Inspector General Daniel R. Levinson.  “Our integrity agreement will hold Abbott accountable for preventing future violations of federal health care laws and FDA requirements, which will protect federal programs, taxpayers and our most vulnerable patients.” 

 

The CIA, among other things, has relevant provisions regarding continuing medical education (CME).  The CIA uses the boilerplate language to define the term “Third Party Educational Activity” as “any continuing medical education (CME), disease awareness, or other scientific, educational, or professional program, meeting, or event governed by Federal health care programs and/or FDA requirements and supported by PPG, including but not limited to, sponsorship of symposia at medical conferences.” 

 

“Covered persons” include “all contractors, subcontractors, agents, and other persons who perform any of the Covered Functions on behalf of PPG, including, but not limited to third party vendors who provide services relating to the Covered Functions (e.g., for speaker programs or medical education programs.)” 

 

Under the CIA, Abbott must implement written policies and procedures that address the “sponsorship or funding of grants (including educational grants) or charitable contributions.  These Policies and Procedures shall be designed to ensure that PPG’s funding and/or sponsorship complies with all applicable Federal health care program and FDA requirements.” (p. 14). 

 

Abbott must also must implement written policies and procedures that address funding of, or participation in, any Third Party Educational Activity.  These Policies and Procedures must be designed to ensure that PPG’s funding and/or sponsorship of such programs satisfies all applicable Federal health care program and FDA requirements. The Policies and Procedures must require CME grant-making decisions to be approved by Abbott’s financial or other organizations separate from sales and marketing and that financial support shall be provided only to programs that foster increased understanding of scientific, clinical or healthcare issues.” (p. 14).  The Policies and Procedures must require that: 
 

 

1)    Abbott disclose its financial support of the Third Party Educational Activity and, to the extent feasible consistent with the CIA, any financial relationships with faculty, speakers, or organizers at such Activity;

2)    as a condition of funding, the third party must agree to disclose Abbott’s financial support of the Third Party Educational Activity and to require faculty, speakers, or organizers at such Activity to disclose any financial relationship with Abbott;

3)    the Third Party Educational Activity have an educational focus;

4)    the content, organization, and operation of the Third Party Educational Activity (including the faculty, educational methods, materials, and venue) be independent of Abbott’s control;

5)    Abbott support only Third Party Educational Activity that is non-promotional in tone/nature; and

6)    Abbott’s support of a Third Party Educational Activity must be contingent on the provider’s commitment to provide information at the Third Party Educational Activity that is fair, balanced, accurate and not Misleading. (p. 15).  

 

Abbot must also develop and implement a monitoring program for medical education grants.  Grant requests must be submitted to a grant management department(s) in the finance organization(s) (or another organization that is separate from sales and marketing) and all such requests shall be processed in accordance with standardized criteria developed by the grant management department(s).  Abbott must continue the medical education grant process described above (or an equivalent process) throughout the term of the CIA, and must notify the OIG in writing at least 60 days prior to the implementation of any new process or system subsequent to the Effective Date. 

 

To the extent not already accomplished, within 120 days after the Effective Date,

 

Abbott must establish a Grants Monitoring Program through which it must conduct audits for each Reporting Period of at least 30 medical education grants in the United States.

 

The Grants Monitoring Program will select grants for review both on a risk-based targeting approach and on a sampling approach.  Abbott U.S. compliance personnel (or other appropriately trained Abbott personnel who are independent from the monitored functional area) will conduct Grants Monitoring by reviewing proposal documents (including grant requests), approval documents, contracts, payments and materials relating to the grant office’s review of the requests, and documents and materials relating to the grants and any events or activities funded through the grants in order to assess whether the activities were conducted in a manner consistent with Abbott’s Policies and Procedures.  Results from the Grant Monitoring Program, including the identification of potential violations of policies, will be compiled and reported to the U.S. Compliance Department for review and follow-up as appropriate. 

 

Abbott represented in the CIA that it posts, at least annually, information on its company website regarding educational grants and charitable donations to U.S medical and other health care professional organizations, patient organizations, academic institutions, hospitals, medical education companies and other scientific associations in amounts of more than $200.  The information posted on the company website includes: (1) definitions for the types of grants and donations posted; (2) list of recipients in alphabetical order; and (3) payment amount and purpose.   

 

Under the CIA, Abbott must continue to post (and provide updates to) the above-described information about Abbott-supported educational grants and charitable donations throughout the term of this CIA. Abbott must notify the OIG in writing at least 60 days prior to any change in the substance of its policies regarding the funding of such educational grants and charitable donations or posting of the above-referenced information relating to such funding. 

 

Conclusion 

 

This resolution is part of the government's emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by Attorney General Eric Holder and Kathleen Sebelius, Secretary of HHS.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.   

 

One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover more than $7.4 billion since January 2009 in cases involving fraud against federal health care programs.  With the settlement announced today, the Justice Department's total recoveries in False Claims Act cases since January 2009 will exceed $10.2 billion.   During this same time, the department has secured $3.9 billion in criminal fines, forfeiture, disgorgement, and restitution relating to violations of the FDCA.