Life Science Compliance Update

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.

Analysis

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.

March 28, 2016

Respironics Settlement and Corporate Integrity Agreement

One more False Claims Act case has been settled; this time Respironics, Inc., who allegedly violated the False Claims Act by paying kickbacks to durable medical equipment suppliers that bought its services. Respironics, who makes breathing masks for people who suffer from sleep apnea, allegedly provided free customer support through its medSage call center to suppliers whose customers used Respironics masks. Medical product suppliers that sold masks made by Respironics' competitors had to pay for the call center services based on the number of patients who used masks manufactured by other companies. Such a setup essentially forced suppliers into using Respironics masks. It is a violation of the law to induce medical suppliers to use a particular company's product for any government-covered medical service. Since the masks could be covered by Medicaid, Medicare, or Tricare programs, doing so came under the purview of the Anti-Kickback Statute.

This settlement also resolves a qui tam lawsuit that was originally brought by Dr. Gibran Ameer, who has worked for different medical equipment companies and who was once presented with the concept from Respironics, immediately realizing the arrangement resembled illegal kickbacks. Dr. Ameer will receive $5.38 million out of the federal share of the recovery.

According to Special Agent in Charge Derrick L. Jackson of the Department of Health and Human Services, "Medical equipment manufacturers that boost profits by providing kickbacks to suppliers will be held accountable for their improper conduct. We will continue to investigate such business arrangements, which threaten the integrity of federal health care programs."

Alicia Cafardi, spokeswoman for Respironics stated that the company had a "good-faith believe" that it wasn't doing anything wrong when it "bundled" the call center service in the price of its sleep apnea masks. She also stated that Respironics has snce "made a business decision" to restructure the call center pricing. Medical supply companies who use the call center service now pay a flat monthly price for each patient, regardless of whether the patient uses a Respironics mask.

The settlement comes to approximately $34.8 million, including $34.14 million in payments to the federal government and approximately $660,000 to various state governments (including Washington, D.C. and twenty-nine states that joined the lawsuit) based on their Medicaid participation.

According to Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Department of Justice's Civil Division stated, "the payment of illegal remuneration in any form to induce patient referrals threatens public confidence in the health care system. Americans deserve to know that when they are prescribed a device to treat a serious health care problem, the supplier's judgment has not been compromised by illegal payments from equipment manufacturers."

As part of the settlement Respironics entered into a five year Corporate Integrity Agreement. As part of the agreement Respironics will establish a compliance department including hiring a compliance officer, compliance training for the boards of directors, management and all staff, and review of procedures to ensure compliance with federal law.

Respironics Complaint

Respironics Corporate Integrity Agreement

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