Life Science Compliance Update

May 31, 2016

E&C Subcommittee Hearing, HHS OIG and GAO Reports on Medicare and Medicaid Fraud Enforcement – More Work to Be Done

On May 24, 2016, the House Energy and Commerce Subcommittee on Oversight and Investigations held a hearing entitled, "Medicare and Medicaid Program Integrity: Combatting Improper Payments and Ineligible Providers." The hearing also coincided with a series of reports released by the Health and Human Services (HHS) Office of Inspector General (OIG) related to Centers for Medicare and Medicaid Services (CMS) oversight in the federal programs, as well as with a report issued by the Government Accountability Office (GAO) relating to CMS.

Opening Statements

Full Committee Chairman Fred Upton and Subcommittee Chairman Tim Murphy opened the hearing, and they, along with some of their politically-aligned colleagues noted the work of both the OIG and the GAO and highlighted the need for CMS to continue to implement recommendations made by the agencies. Both Chairmen expressed concern about improper payments, including Rep. Murphy mentioning the approximately $89 million in improper payments and Rep. Upton mentioned improper payments to locations that do not exist.

Subcommittee Ranking Member Diana DeGette (D-CO) said in her opening remarks that fraud and abuse in Medicare and Medicaid was a "longstanding, pervasive challenge." She mentioned she was encouraged by recent successes of CMS implementing program integrity efforts that were brought about by the Affordable Care Act (ACA) and that these new tools should greatly enhance CMS' ability to achieve antifraud goals.


Testimony was elicited first from Ann Maxwell, the Assistant Inspector General at the Office of Evaluation and Inspections within HHS OIG. She testified that oversight of provider enrollment in both Medicare and Medicaid is critical. She believes that enrollment in the program is truly "where is starts" and that once they are enrolled, providers essentially have a "green light" to start billing CMS. She also noted that she had some concerns about the different information about the same providers between Medicare and Medicaid; she believes that it was hard to know who you are doing business with "if you can't even get the name right."

Dr. Seto Bagdoyan, the Director of Audit Services with the GAO discussed that his office had recommended that CMS improve address verification processes. He believes that such a move will help to prevent future instances of CMS making incorrect payments to non-existent addresses.

The Deputy Administrator at the Center for Program Integrity at CMS, Dr. Shantanu Agrawal, noted that there are efforts underway to improve payment accuracy including site visits, automated risk based screening efforts, and targeted enforcement efforts. He said that CMS' work so far as resulted in a $2.4 billion program savings.


Ensuring Access to Quality Medicaid Providers Act

This legislation, which would require the states to report Medicaid provider terminations to CMS, received bipartisan support from the Subcommittee. Ranking Member Diana DeGette encouraged her colleagues in the Senate to take the bill up, following its passage in the House of Representatives.

Improper Payment Rate

The vast majority of the hearing's discussion focused on improper payments in both Medicare and Medicaid. Improper payments occur when federal fund go to the wrong recipient, when the recipient receives the incorrect amount of funds (overpayments and underpayments), documentation is not available to support a payment, or the recipient uses federal funds in an improper manger. A recent OIG report found that HHS had a payment error rate of 12% in FY 2015.

Prior Authorization

Dr. Agrawal mentioned that CMS was increasing the use of prior authorization, which requires the service to be approved by CMS prior to the service being rendered. Dr. Agrawal feels as though it is a useful tool and that while he may be open to more focused prior authorization usage, he thinks that the agency needs more experience before begin able to do so successfully.

The OIG and GAO Reports


The HHS OIG released three reports: "Medicaid: Vulnerabilities Related to Provider Enrollment and Ownership Disclosure," "Medicare: Vulnerabilities Related to Provider Enrollment and Ownership Disclosure," and "Medicaid Enhanced Provider Enrollment Screenings Have Not Been Fully Implemented."

The first report resulted in seven recommendations being made by OIG to resolve issues revolving around disclosure and ownership information. Those seven recommendations included CMS: working with State Medicaid programs to identify and correct gaps in their collection of required provider ownership data; require State Medicaid programs to verify the completeness and accuracy of provider ownership information; and work with State Medicaid programs to review providers that submitted nonmatching owner names and take appropriate action.

The second report ended with four recommendations for CMS, including: reviewing providers that submitted nonmatching owner names and take appropriate actions; educate providers on the requirement to report changes of ownership; and increase coordination with State Medicaid programs on the collection and verification of provider ownership information in Medicare and Medicaid.

The third report included six recommendations, all of which CMS concurred with. The recommendations included: CMS assist the states in implementing fingerprint based criminal background checks for all high risk providers; enable the States to substitute Medicare screening data by ensuring the accessibility and quality of Medicare data; and strengthen minimum standards for fingerprint-based criminal background checks and site visits.


The GAO report, titled "Continued Action Required to Address Weaknesses in Provider and Supplier Enrollment Controls," highlighted progress that CMS has made in implementing previous recommendations related to oversight of providers that are enrolling in the agency's Provider Enrollment, Chain and Ownership System (PECOS).


May 02, 2016

Do Gold-Standard CIAs Get Blue Ribbon Approval?

Corporate Integrity Agreements are thought to set the standard for compliance programs, but when viewed against the norms set out by a new report from the Ethics and Compliance Initiative's Blue Ribbon Panel, CIAs fall short. This article is the first in a series examining the gap between the compliance programs outlined in CIAs and the Blue Ribbon Panel ethics and compliance (E&C) guidelines, and what companies can do to move their program from a CIA-standards based program to a Blue Ribbon "high-quality" E&C program.

Corporate integrity agreements have long set the standard for comprehensive and effective compliance programs within the life science community. It also is where those seeking to stay ahead of government enforcement look for guidance on how to build their programs. Given that in the event of an investigation, federal officials will look for these elements, they are important considerations for companies looking to maintain an effective compliance program that is eligible for mitigating credit under the Federal Sentencing Guidelines. However, when viewed against the standards set out in the Ethics and Compliance Initiative's (ECI) new report, CIAs fall short of meeting the "exemplary" standard set out by the ECI's Blue Ribbon Panel of practitioners, former enforcement officials, academics, legal experts and public officials. The draft special report issued by ECI's Blue Ribbon Panel in December guides organizations wishing to improve their ethics and compliance ("E&C") programs, identifying what panelists believe to be the characteristics of "exemplary" E&C efforts.8 According to the Blue Ribbon Panel, there are five principles of a high-quality E&C program ("HQP")

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April 19, 2016

Public Citizen Study Shows Significant Reduction in Pharmaceutical Settlements 2014 - 2015

Public Citizen updated that report, and issued a new report, which included settlements for all years, starting in 1991, through 2015. This new report found that there was a nearly eighty percent drop in settlements between companies and state governments in 2014-2015 from 2012-2013. Federal financial penalties also dropped in that same time period: in 2012 to 2013, $8.7 billion was collected, compared to $2.4 billion in financial penalties in 2014 to 2015.

As some of our readers may recall, in late 2012, Public Citizen published a study of all major financial settlements and court judgments between pharmaceutical manufacturers and the federal and state governments from 1991 through July 18, 2012. At the time of that report's publication, over $30 billion was paid by the pharmaceutical industry to settle allegations of numerous violations, including alleged off-label marketing and defrauding of Medicare and Medicaid.

The 2016 study also indicated that over the course of the twenty-five years that were examined, the companies that had the most expensive learning lessons were GlaxoSmithKline ($7.9 billion in financial penalties) and Pfizer ($3.9 billion in penalties). Pfizer had the most settlements over that time period, followed by Merck in second place, and tied for third place were GSK, Novartis, and Bristol-Myers Squibb.

While the report does mention that eighty-eight percent of the settlements referenced were civil, not criminal, it fails to mention - or even entertain the idea that - civil settlements often do not resolve the issue of guilt and payment of a civil settlement is not the same as admitting guilt to the alleged wrongdoing.

Of the settlements found in the report, the most common violation by companies was overcharging of government health insurance programs. The violation that resulted in the largest financial penalties was the unlawful promotion of drugs.


Public Citizen is claiming that the aforementioned decrease in amount of money pharmaceutical companies have paid to settle charges for violating federal healthcare laws means there needs to be an increase in enforcement efforts.

However, our interpretation is that the decrease in settlements is actually due to an increase in awareness of corporate compliance. As we have seen, and have documented in our sister publication, corporate compliance has received a renewed focus by many companies, including large compliance departments at many United States corporations. PhRMA agrees with that assessment, stating, "the report makes scant mention of the tens of millions of dollars companies spend annually to develop and maintain state-of-the-art legal compliance programs."

PhRMA continued their statement, "among its many methodological flaws, the report aggregates all settlements involving the pharmaceutical industry, with little regard as to whether the companies actually broke the law. Civil settlements rarely resolve the question of guilt. Yet the report glosses over its own finding that 88 percent of the settlements reported were civil, not criminal."

Another reason for the decline in settlements may be that the courts are becoming more demanding when it comes to whistleblowers being able to successfully prove a False Claims Act case, or possibly that the Department of Justice (DOJ) and the Food and Drug Administration (FDA) are starting to back off off-label marketing claims as free speech defenses have begun to collect successful momentum.

PhRMA continues to advocate for conversations on how to direct healthcare enforcement to "promote ethical corporate conduct, patient safety, innovation, and security of the public [treasury]," believing (as do we) that such conversations are "important and necessary." However, effective conversations on those topics are more difficult to have when reports are published with conclusions based on faulty reasoning, like the reasoning shown in this report.

Our interpretation of this study, and the decrease in settlements, is that compliance officers are worth their weight in gold. Each pharmaceutical company and device company should have at least one compliance officer who is kept abreast of all actions taken by the company, to help continue this downward trend of settlements.


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