Recently at the CBI Pharmaceutical Compliance Congress a group of State, DOJ and US Attorneys thoroughly reviewed the life cycle of a Qui Tam case and the questions companies should be asking themselves about their compliance programs.
The enforcement panel at CBI included four U.S. Attorneys and two government health care fraud officials:
- Zane Memeger (E.D.Pa.)
- William C. Killian (E.D. Tn.)
- Sanford Coates (W.D. Ok.)
- Bill Nettles (D. S.C.)
- Ben Singer, Deputy Chief, DOJ Criminal Division, Fraud Section; and
- Rebecca Martin, Deputy Chief, Civil Frauds Unit (S.D.N.Y.)
Bringing Parallel Criminal and Civil Actions
In the opening discussion, Nettles explained how his office evaluates the civil and criminal aspects of healthcare fraud. He first emphasized that his office has "shifted focus a lot" on white collar and healthcare fraud cases, noting that he was putting a lot of resources into this area. Nettles explained that his "white collar team" will make a decision early on "based on evidence" whether to pursue civil or criminal charges in parallel.
Ms. Martin noted that qui tam's are sometimes referred through an agency, and that her office will assess these complaints "jointly" with the criminal division. In looking at parallel prosecution, she noted that her office will look at "intent," and what level is necessary to support the civil or criminal case. She said they will also look at the "level of evidence," such as whether it comes from an agency, relator, other witnesses, or documents. Ms. Martin also noted whether the "conduct is so bad" that it "screams criminal;" then it may be a question of whether civil will be involved, which can also depend on the government's "limited resources." Ms. Martin also noted that if the fraud is ongoing, a criminal action may be chosen because "an arrest" can resolve the ongoing nature of misconduct. Finally, she noted that decisions are also made from the perspective of how to "maximize public perception and the deterrent value" of each case.
Coates noted that there is not much communication between his civil and criminal divisions, but when cases come in, there has to be communication, and his office eventually decides whether to pursue in parallel. On this point, Nettles noted that when the government "talks about money," it turns into a whole different discussion, because money "often has a more deterrent effect than penalties" he noted.
Killian, similar to Ortiz, noted that his office's focus has been on patient harm. He noted that if he can prove patient harm, or prove some other criminal aspect of a case, "were going" for it. Examples, he noted, were misbranded drugs. He noted that while it may be harder to prove the actual misbranding offense, a "conspiracy" charge or general criminal conspiracy offense may be easier to bring. Specifically, he noted that healthcare fraud conspiracies may be easier because there is not necessarily a requirement to prove an "over act," as in normal criminal conspiracies. He also noted that his office is bringing criminal actions under the Wire Fraud statute, since "every submitted claim on the planet" is virtually done electronically.
Killian also noted that criminal actions may be premised on money laundering statutes or false statements. On the latter point, he noted that when the government comes to investigate, and company officials or employees lie, this would be a criminal charge to bring. Finally, he also noted criminal actions for the illegal distribution of controlled substances. Killian noted that cases have increased significantly in his office, going from 6 in 2008 to 26 civil cases in 2014 (presently). He emphasized that if healthcare fraud is getting to eastern Tennessee, "it's everywhere."
Killian noted that his office will analyze qui tams or cases in conjunction with civil, and noted that certain criminal information can't be shared with the civil side, such as grand jury information.
Singer, from DOJ's Criminal Fraud Unit, noted that there are 38 prosecutors that are fully devoted to healthcare fraud, which also act as a supplement to the various health care fraud teams throughout U.S. Attorney's Offices. Singer noted that one area they have been looking into recently is medical identity theft. Additionally, he noted DOJ's strike forces, which are set up in 10 cities across the U.S., and have led to 345 felony charges and 234 convictions (46 of which were at trial). He noted that the average prison sentences for these charges has been over 4 years, and that they have brought criminal penalties and fines in excess of $1 billion just in these 10 cities.
Memeger noted that he and his office are communicating regularly with other U.S. Attorney Offices, such as Boston. He even noted that he and other offices have begun training smaller U.S. Attorney's offices, where there may not have previously been a health care fraud presence. In fact, he reference training the South Carolina office of Mr. Nettles. Memeger noted that "all" U.S. Attorney's Offices are looking at healthcare fraud.
He particularly emphasized how important it is to have an effective compliance program versus just a program "on paper." Memeger noted that compliance has been on his radar for a number of years and that his office is beginning to see "repeat offenders." In such cases, Memeger began to reference what appeared to be his U.S. Attorney's manual and the principles for prosecuting business entities. He began to list several of the factors he and his office will consider such as:
- The nature and seriousness of the conduct;
- How pervasive the conduct is (e.g., isolated or systemic);
- History of misconduct;
- Whether there was any timely or voluntary disclosure;
- Collateral consequences; and
- The presence and effectiveness of a compliance program
Ask the Hard Questions
Memeger noted that he is asking businesses "hard questions," such as:
Does the company have a compliance officer with the actual authority to investigate and address compliance?
- Are issues being brought to this officer and investigated?
- Does the compliance officer have resources to investigate?
- Does the compliance officer have access to information to allow them to "do the right thing"?
Does company have a good "track record" or "culture of compliance"?
- When you look at the documents, the company history, and talk to witnesses, Memeger noted that these items and evidence will tell him whether there actually is a culture of compliance.
Does the company train management, executives and all its employees?
- Is this training updated and how freqently?
- Are senior employees and all other employees trained when changes happen in the regulatory environment?
- Are they trained on how these changes apply to them and their individual functions?
- Are compliance measures being implemented to ensure patient safety?
Does the company actively encourage employees to report wrongdoing?
- What happens after such reports are made?
- Does the company discipline, reprimand, or fire that employee?
How often does the company review, update, or analyze their program?
- If it is not that frequent, Memeger noted that this "raises issues."
In summary, Memeger emphasized that he was "very interested" in compliance, both in terms of what inside and outside counsel are doing to ensure that the right answers to the questions asked above are given.
As an example of compliance, Memeger use a recent case involving an ophthalmologist who was practicing at Temple University in Philadelphia. Memeger noted that the physician had engaged in healthcare fraud by billing for services not actually rendered. As a result, Temple identified this issue and came forward to Memeger's office, which eventually prosecuted the physician criminally, which resulted in prison and financial penalties. Memeger noted that the University came to his office and conducted an addition investigation on behalf of his office, and that Temple was open to Memeger's suggestions in terms of compliance and conducting the investigation. As a result, Memeger did not pursue criminal charges against Temple, only civil remedies, and there was no CIA. Memeger emphasized that Temple 1) had an effective compliance program; 2) identified issues; and 3) resolved these problems over the course of the investigation.
Ms. Martin discussed the importance of self-disclosure, noting that entities do not need to be "perfect," but rather, they need to show the government that their compliance programs and responsible officials can 1) detect; and 2) immediately respond and offer remedies to any compliance issues or violations. She noted that having effective compliance programs can save entities lots of money that is eventually used during investigations and settlements. She also noted that when companies internally fix problems identified, this demonstrates to the government that the company is a "good actor."
She made passing reference to the recently unsealed Novartis cases, noting that in one of the complaints, the government is alleging violations of Novartis' 2010 CIA and other problems with their compliance programs. In light of the Novartis case, Ms. Martin emphasized important factors and considerations, such as 1) were employees involved with the compliance violations disciplined, or were they promoted even though they violated policies?; and 2) what kind of compliance monitoring and oversight was really happening? Were they just looking at data, or were they actually enforcing policies? These are two factors Ms. Martin said she and her office pay "a lot" of attention to.
Nettles emphasized that when healthcare fraud cases come to his office, the fact that an entity self-disclosed "permeates" in all of the decision making. He noted that self disclosure "is brought up every time the case is discussed."
Coates emphasized the impact healthcare fraud cases are having, making reference to the recent Wyeth Rapamune settlement that was handled through his office. He noted how the qui tam that came into his office "sat for a while," almost one year, but then got attention when they "realized what we had." Coates noted that it was "so significant," that he became personally involved. He noted that these kinds of cases will start to spread around the country and no longer be focused in the traditional districts, particularly since this is a higher priority for U.S. Attorney's.
Memeger also emphasized the importance of the J&J Risperdal settlement, which his office was also a part of. His key takeaways from this case were that patient safety is of the "utmost importance" to the government. Memeger noted that when his office is deciding whether to pursue a case, patient safety is always at the forefront. In the J&J case, he emphasized that the company's targeting of elderly patients, downplaying of certain risks, in misrepresenting certain studies all factored into his office's decision to intervene.
In this respect, Killian acknowledged the importance of press releases, and instructed the audience to "look at the facts that constituted the conduct that lead to settlement." He noted that making such facts public is another way to emphasize the importance of the healthcare fraud work that is being done.
Moving forward, Singer noted that qui tams have continued to grow, going up 70% over the last four years. He also noted that there will be more work and more enforcement given the increased enrollment of patients into government funded programs.