Life Science Compliance Update

November 11, 2015

HHS OIG Enforcement Actions on the Horizon Utilizing Open Payments, Advises Companies on Compliance

Pharmaceutical and device companies can expect federal agencies to begin pursuing enforcement actions against companies that fail to comply with Open Payment reporting requirements within the next year, according to Mary Riordan, senior counsel at the Health and Human Services' Office of Inspector General. The Affordable Care Act provides for penalties for manufacturers who fail to timely, accurately or completely report the information and for those who knowingly fail to timely, accurately or completely fail to report financial arrangements.

Moreover, Riordan, the keynote speaker at this year's Annual Pharmaceutical Compliance Congress and Best Practices Forum in October, noted for the audience, the Open Payments system is a very easily searchable public database with information that will be of interest to the public, law enforcement, the media, researchers, and many others. It's important for companies to be aware of and have controls around financial relationships the company has to ensure it can provide appropriate answers to questions that will inevitably come its way.

To ensure compliance with reporting requirements, Riordan advised the audience to set up meaningful controls around relationships and arrangements that could implicate kickback regulations, use the information collected about these relationships as a tool to improve compliance efforts, integrate compliance efforts into business operations, and develop monitoring and risk-assessment programs. Here's what the HHS-OIG senior counsel had to say about how to act on this advice.

Identify and Establish Meaningful and Effective Controls Around Relationships

Do you know all of the types of financial relationships that your company has with prescribers, purchasers, or recommenders of your product that could potentially implicate the kickback statute? Is there a legitimate need for those relationships? Are there processes and controls in place to make sure relationships are lawful and don't run afoul of kickback statutes? A company should ask and be able to answer all of these questions, Riordan told the audience.

Before establishing controls, the company must identify all relationships or arrangements, including contractual arrangements with healthcare providers such as speakers, consultants, and researchers. Also included are payments or transfers of value that the company makes to physicians or others: meals provided at speaker programs, food provided to physician officers, and gifts or educational items given to healthcare practitioners. Less common but still important are discount or rebate arrangements with individuals or entities in a place to recommend the use or prescription of the company's products, including specialty pharmacies, formulary decision makers, pharmacy benefit managers.

After identifying relationships and arrangements, companies should consider all implications of such arrangements and ensure their policies are consistent with applicable compliance requirements. For example, "while discount and rebate arrangements can raise issues under the anti-kickback statute, they can also implicate price reporting obligations in connection with Medicaid Drug rebate program and Medicare program," Riordan explained. "Make sure that company's methodologies for calculating average sales price, average manufacturer's price, best price, as applicable, are sound and legally compliant."

Use the Open Payments System As a Compliance Tool

Companies should think about ways the Open Payments system could be a tool in its ongoing compliance efforts, said Riordan. Companies should generate aggregate reports several times a year to review aggregate payments to individual physicians and use those reports to identify outliers to, for example, determine if the amount or number of payments are legitimate. Reports can also be helpful in identifying trends or spikes in number or amount of payments in geographic regions or for particular types of physicians.

"Your companies have spent a lot of time, effort, and resources to comply with open payments reporting requirement and I would recommend that you capitalize on those investments and use the information for compliance purposes as well," Riordan explained.

Weave Compliance Efforts Into Business Operations

Compliance cannot be the responsibility of just the compliance officer or department, said Riordan. Nor should it be just something that is discussed once or twice a year at the time of trainings or certifications. Compliance must be the responsibility of everyone, including the board of directors, which has a fiduciary duty to actively oversee and support compliance efforts at company. "Individuals across the organization, but especially in the sales, marketing, and medical affairs area really have to be involved in and accountable for compliance," Riordan advised.

Compliance officers should speak with business units and gain an understanding of the challenges they face and structure compliance in a way that is good for both the business and the company.

According to Riordan, the standard compliance program has a compliance officer with all the necessary support and resources, written policies and procedures, and a strong training program that is meaningful for employees (one that uses a variety of training methods, provides instruction and materials relevant to individual job functions), and a well-established and well-used program to appropriately discipline employees engaged in noncompliant behavior.

Programs can underscore individual accountability and make individuals accountable for compliance by, for example, requiring annual certifications from executives of the companies and managers in key business units or, as OIG has already seen, set up a series of subcertifications so that certifications for lower level staff provides the basis for certifications for executives. Companies can also set up a system of reward and discipline relating to compliance, using employee evaluations and bonuses within that system. For example, the completion of compliance training and the absence of any compliance incidents could be prerequisites to receiving a bonus. And according to Riordan, they should be.

Establish Monitoring Policies, Risk-Assessment Program

All of the above is not enough alone; compliance has to be monitored and tested. Companies should use monitoring programs to determine if the program is having the desired effect and if not, identify and fix those areas of vulnerability. "There's no single way to audit a company's practices. But instead, you have to understand your company's operations in order to develop monitoring methods that make sense for your company's operations," explained Riordan.  

Companies should also establish risk-assessment programs and through them, routinely assess their risks and implement measures to reduce those risks. Think holistically about the organization and the risks it faces based on the culture of the company, the size of the organization, the way the organization is structured, and the products the company has.

A good risk assessment program is effective at assessing and identifying risks, helps lead to the development of a plan to monitor and mitigate the risks, and provides for the implementation of mitigation plans.


November 04, 2015

HHS OIG Issues 2016 Work Plan

The Department of Health and Human Services Office of Inspector General recently released its 2016 Work Plan. OIG's annual Work Plan summarizes new and ongoing reviews and activities that OIG plans to pursue with respect to HHS programs and operations during the current fiscal year and beyond.

The OIG was created to detect fraud, waste, and abuse; to identify opportunities to improve healthcare program economy; and to hold "accountable those who do not meet program requirements or who violated Federal health care laws." The OIG conducts audits and investigation, and can impose civil monetary penalties where appropriate, so their Work Plan is often of great interest to those working with Federal healthcare programs. As a summary of some of the OIG's current enforcement initiatives, the Work Plan can serve as a useful resource for companies to use in planning internal audits and in training.

Similar to previous Work Plans, the 2016 Plan covers a broad array of projects related to CMS programs, organized by type of provider and federal reimbursement scheme. Of note, many of OIG's focal points from their 2015 Work Plan again appear in the 2016 version. This list outlines new issues in the 2016 Work Plan, as well as certain carryovers from the 2015 Plan.


OIG once again listed an extensive list of priorities for hospitals in 2016, many of which are continuations from the 2015 Work Plan. The Plan places a priority on the reconciliation of outlier payments and new inpatient admission criteria, which implicates the "two midnight policy."

OIG once again stated that they would make reviewing Medicare costs associated with defective medical devices a priority. They will review Medicare claims to identify the impact on beneficiary safety and quality of care, as well as the costs to Medicare, resulting from additional use of medical services associated with defective medical devices. OIG will focus on making a determination of a reasonable means of tracking services from the recall of the medical devices in question.

This year, the OIG added a new priority for determining whether Medicare payments for replaced medical devices were made in accordance with Medicare requirements. Per federal regulations, the replacement of implanted devices requires reductions in Medicare payments, and prior OIG reviews have determined that MACs have made improper payments to hospitals for inpatient and outpatient claims for replaced medical devices.

Medical Equipment and Supplies

A new priority for this year is determining whether potential savings can be achieved by Medicare and its beneficiaries if osteogenesis stimulators are rented over a 13-month period rather than acquired through a lump-sum purchase. This priority is in addition to a continuation of a previous priority of determining whether potential savings can be achieved by Medicare if certain power mobility devices are rented over a 13-month period rather than acquired through a lump-sum purchase.

Prescription Drugs

OIG revised their priorities for Part B payments for drugs purchased under the 340B program. OIG will determine the financial impact on 340B-covered entities, the Medicare program, and Medicaid beneficiaries of three different shared savings arrangements that would enable Medicare and its beneficiaries to share in the cost savings resulting from 340B discounts. Previous OIG work found that some Medicare payments to providers for 340B-purchased drugs substantially exceeded the providers' costs. Policymakers have questioned whether some of the savings mandated through the 340B Program should be passed on to Medicare and its beneficiaries.

OIG will also continue to review the oversight actions that CMS and its claims processing contractors take to ensure that payments for Part B drugs meet the appropriate coverage criteria and identify challenges that contractors face when making coverage decisions for drugs.

Medicare Part D – Prescription Drug Program

As a new priority for this year, HHS OIG will focus on Medicare Part D beneficiaries' exposure to inappropriate drugs pairs. OIG will do this by determining whether Medicare Part D beneficiaries are being prescribed drugs that should not be prescribed in combination with other drugs, including drugs that have a severe interaction when used in combination with other drugs and drugs that should not be co-prescribed with component drugs.

OIG is revising their priority of reviewing financial interests reported under the Open Payments Plan. OIG will determine the number and nature of financial interests that were reported to CMS under the Open Payments Program and will also determine the extent to which CMS oversees manufacturers' and GPOs' compliance with data reporting requirements and whether the required data for physician and teaching hospital payments are valid.

Another new priority this year is evaluating the extent to which pharmacy reimbursement for brand-name drugs under Medicare Part D changed between 2010 and 2014 and comparing the rate of change in pharmacy reimbursement for brand name drugs under Medicare Part D to the rate of inflation for the same period.

False Claims Act Cases and Corporate Integrity Agreements

When adequate evidence of violations exists, OIG staff works closely with prosecutors from the DOJ to develop and pursue federal False Claims Act cases against both individuals and entities that defraud the government. OIG determines whether to invoke their exclusion authority on the basis of the defendant's conduct.

Providers' Compliance with Corporate Integrity Agreements

OIG often negotiates compliance obligations with health care providers as part of the settlement of Federal health care program investigations arising under false claims statutes and review a variety of types of information submitted by providers to determine whether their compliance mechanisms are appropriate and identify problems and establish a basis for corrective action.

Important Advisory Opinions and Other Industry Guidance

OIG responds to requests for formal advisory opinions on applying the anti-kickback statute and other fraud and abuse statutes to specific business arrangements or practices. Advisory opinions can provide meaningful advice on statutes as they relate to specific factual situations. OIG also issues special fraud alerts and advisory bulletins about practices that they determine are suspect. Examples are found on OIG's website at:


Importantly, this article only addresses a handful of the issues OIG seeks to address in the coming year.

View the 2016 Work Plan

View the 2015 Work Plan

August 17, 2015

OIG Continues Scrutiny of Physician-Owned Distributors of Spinal Devices with New Report: Overlap Between Physician Owned Hospitals and PODs


Last week, the Department of Health and Human Services Office of Inspector General (OIG) followed up on its recent scrutiny into physician-owned distributorships (PODS) with a study entitled “Overlap Between Physician-Owned Hospitals and Physician-Owned Distributors.” In it, OIG reviewed 12 hospitals that had self-identified as physician-owned and reported having purchased spinal devices from PODs. The agency used publicly available information, including the Web sites for hospitals and PODs, as well as State business registration websites, and information from CMS's Provider Enrollment, Chain and Ownership System (PECOS) to attempt to determine whether a physician had an ownership interest in both a hospital and a POD that sold spinal devices to the hospital.

In their report (available here) OIG notes that they identified one physician with an ownership interest in both a hospital and a POD. However, OIG concluded that “[t]he limited information that is available to identify physicians who have concurrent ownership interests in PODs and hospitals raises concern about transparency among Medicare providers and the vendors that sell them implantable devices.” Transparency, according to OIG, is important to ensure that providers do not violate the Anti-Kickback Statute or the Stark Law, and also helps to ensure public safety. “One of the primary criticisms of PODs is that ownership may affect physicians’ clinical decisionmaking, such as influencing them to perform unnecessary surgeries or to choose a device in which they have a financial interest rather than another device that may be more appropriate for the patient,” OIG writes.

Open Payments

A noteworthy aspect of the report is the government’s continued articulation that Open Payments will be a useful enforcement tool. OIG writes that “there is limited transparency with regard to ownership information for PODs and, to a lesser extent, of hospitals. CMS’s implementation of the Physician Payments Sunshine Act (Sunshine Act) may improve the information available to identify the physician-owners of PODs.”

The Sunshine Act requires manufacturers and group purchasing organizations to report to CMS any ownership and investment interests that are held by physicians. CMS has published two sets of data so far, most recently 2014 transfers of value and ownership interests. “OIG will monitor CMS’s Sunshine Act database and determine how best to assess its impact on transparency within Medicare,” the agency concludes.

OIG also states that their report is being issued directly in final form because it contains no recommendations. If you have comments or questions about this report, please provide them within 60 days. Please refer to report number OEI-01-14-00270 in all correspondence.

Recent Scrutiny Into PODs

PODs, which are medical device distributors that are owned, at least in part, by physicians who use the devices, have attracted scrutiny from Congress and the HHS-OIG. A 2011 Congressional report entitled Physician Owned Distributors (PODs): An Overview of Key Issues and Potential Areas for Congressional Oversight stated that “[t]he very nature of PODs seem to create financial incentives for physician investors to use those devices that give them the greatest financial return and that, in the process, patient treatment decisions may be based on personal financial gain.” In 2013, the HHS-OIG issued a Special Fraud Alert specifically targeting physician-owned entities as well, stating that PODs “are inherently suspicious under the anti-kickback statute.”

In 2014, the Department of Justice sued Reliance Medical Systems over an alleged kickback scheme involving PODs, whereby physician investors would be paid based on the number of Reliance spinal implants they used. On May 22, one of the neurosurgeons named in the complaint, Dr. Aria Sabit, admitted that the financial incentives provided by the PODs "caused him to compromise his medical judgment and cause serious bodily injury to his patients by performing medically unnecessary spine surgeries on some of the patients in whom he implanted [the] spinal implant devices," states DOJ


Preview | Powered by FeedBlitz


November 2015
Sun Mon Tue Wed Thu Fri Sat
1 2 3 4 5 6 7
8 9 10 11 12 13 14
15 16 17 18 19 20 21
22 23 24 25 26 27 28
29 30