Life Science Compliance Update

September 20, 2017

False Claims Act Mid-Year Review: Significant Life Science Settlements, Post-Escobar Developments & Industry Round Up

False-Claims-Act-Atlanta-Medical-Clinic-“AMC”-And-Dr.-Timothy-Dembowski-Have-aAreed-to-Pay-For-Violated-Medicare-Rules-And-The-False-Claims-Act

Several significant False Claims Act settlements and judgments in the first six months of 2017 suggest this year will result in the eighth year of over $3 billion in FCA recoveries. Additionally, recent judicial decisions in FCA suits have further refined the test outlined in the Supreme Court’s 2016 Escobar decision, statistical sampling has resulted in significant FCA judgments, and the government continues to explore new frontiers for FCA liability.

The False Claims Act (“FCA”) continues to be a powerful tool for the government (and relators) to curb fraudulent conduct. FCA settlements and judgments to date in 2017 have surpassed $1.5 billion in recoveries. This rate suggests that for an eighth consecutive year the government is on track to collect more than $3 billion total from FCA cases.

As in the past, several significant FCA settlements and judgments this year have targeted the life science industry. Additionally, several decisions in the first half of 2017 helped refine the Supreme Court’s consequential Escobar decision, demonstrated willingness by the government to apply statistical sampling to calculate recoveries, and further refined the heightened pleading standards required for FCA suits. Finally, government scrutiny of pharmaceutical manufacturers related to donations to charitable patient assistance programs (“PAPs”) signals the possibility of burgeoning FCA risk and underscores the importance of compliance.

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September 12, 2017

FDA Warns Cipher Over “Misleading” Marketing Materials

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The United States Food and Drug Administration (FDA) Office of Prescription Drug Promotion (OPDP) sent a warning letter to Cipher Pharmaceuticals over promotional materials for its combination immediate- and extended-release opioid tramadol hydrochloride, ConZip.

The warning letter, addressed to Cipher President and CEO Robert Tessarolo, states that marketing materials for ConZip directed at healthcare providers are “false or misleading” because they omit “important risk information” regarding the use of ConZip and because of other “material facts.”

The FDA said the promotional materials for ConZip make claims about its efficacy, such as "All Day Pain Relief," but fail to mention any of its risks, which include addiction and the potential for abuse and life-threatening respiratory depression.

The FDA also notes that the materials do not communicate any information about risks associated with use of the product. The letter states, "by omitting the risks associated with ConZip, including serious and potentially fatal risks, the detail aid fails to provide material information about the consequences that may result from the use of the drug and creates a misleading impression about the drug's safety, a concern heightened by the serious public health impacts of opioid addiction, abuse and misuse.”

The FDA also says the promotional materials leave out important parts of ConZip's indication, which specifies that the drug should be reserved for patients for whom alternative treatment options, such as nonopioid analgesics or immediate-release opioids, are ineffective, not tolerated, or would be otherwise inadequate to provide sufficient pain relief.

In the letter, the FDA requested the company: (1) stop distributing the promotional materials, (2) provide the agency with a list of all other materials that make similar representations of the drug, and (3) develop a plan of action to disseminate "truthful, non-misleading, and complete corrective messages about the issues discussed in this letter to the audience(s) that received the violative promotional materials,” on or before September 8, 2017.

The OPDP closed the letter by reminding the company,

The violations discussed in this letter do not necessarily constitute an exhaustive list. It is your responsibility to ensure that your promotional materials for ConZip comply with each applicable requirement of the FD&C Act and FDA implementing regulations. Failure to correct the violations discussed above may result in FDA regulatory action, including seizure or injunction, without further notice.

After sending eleven warning letters last year, the OPDP only issued two so far in 2017. That would continue a years-long trend of declining activity since 51 letters were sent to drug makers in 2010.

Last year's total of eleven letters was boosted by a late-year burst of six letters that came in the month of December, so 2017 may still wind up matching the number of letters issued in 2016. As we’ve discussed before, the continuing drop in warning letters to industry may reflect a change in focus for the FDA.

September 05, 2017

DOJ Announces Another FCA Settlement - Sightpath Medical and TLC Vision Corporation

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In late August 2017, the United States Department of Justice (DOJ) announced a $12 million settlement with Sightpath Medical and TLC Vision Corporation, as well as the former CEO of both entities, James Tiffany. The suit was brought by Kipp Fesenmaier, former vice president of the company, in 2013 for allegedly violating the False Claims Act and the Anti-Kickback Statute. Fesenmaier claimed that Sightpath knowingly took advantage of Medicare by using extravagant trips and social events to entice doctors to use its products and services, which were then billed to government healthcare programs.

The complaint alleges that the companies paid kickbacks to physicians in various forms, including travel, entertainment, and improper consulting agreements. The complaint specifically refers to examples of trips such as luxury skiing vacations and high-end fishing, golfing, and hunting trips. The complaint alleges that these various items of value were provided to induce the physicians to use products and services supplied by the company. The companies supply intraocular lenses, as well as ophthalmic surgical equipment and services to medical facilities. The products and services are used by ophthalmologists for eye surgeries, including cataract surgeries.

The United States further alleged that James Tiffany directed much of the conduct at issue, particularly between 2010 and 2013 when he was CEO of Sightpath and TLC, and that he was directly involved in setting up and participating in several of the trips with physicians who were either Sightpath customers or potential customers. In addition, Tiffany directly participated in establishing and continuing the lucrative consulting agreements with physicians and physician practices.

According to the settlement agreements, from 2006 to 2015, the Sightpath Entities provided physicians items of value to induce the use of Sightpath Entities’ products and services, which resulted in the submission of false claims to the United States for ophthalmological products and services. Additionally, the Sightpath Entities entered into consulting agreements with physicians and physician practices for services that were never performed or not properly tracked, resulting in payments in excess of fair market value.

The U.S. attorney’s office also intervened in an underlying lawsuit against the Cameron-Ehlen Group, Inc., which does business as Precision Lens. Sightpath and Precision Lens supply surgical equipment and services for ophthalmologists, including tools used in cataract surgeries performed in “ambulatory surgical centers.”

As part of the FCA Agreement and in exchange for a release of OIG’s permissive exclusion authority, Sightpath has agreed to enter into a 5-year corporate integrity agreement (CIA) with OIG. Although not a signatory to the CIA, TLC is participating in the CIA as a “covered person.” In its statement Monday, Sightpath said it reached the agreement to avoid the “delay, expense and uncertainty of litigation.” The company said it is “continually reviewing and enhancing our compliance and conduct policies and procedures to meet the expectations of our customers and the requirements of our industry.”

Tiffany's lawyer told the Business Journal that his portion of the settlement would be paid by the company. In a statement, Sightpath — which admitted no wrongdoing in the deal — said it was "pleased to resolve this civil matter and move forward with a focus on helping our physicians and facilities provide exceptional patient care."

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