Life Science Compliance Update

April 26, 2017

The Murky Future of Physician Owned Distributorships (“PODs”)?

On January 9, 2017, a physician was sentenced for his role in a criminal health care fraud scheme totaling approximately $2.8 million and focused on False Claims Act (FCA) related allegations concerning  this physicians’ participation in very complex and elaborate physician-owned distributorships (PODs). PODs are described by the government as physician-owned entities that derive revenue from selling, or arranging for the sale of, implantable medical devices ordered by their physician-owners for use in procedures the physician-owners perform on their patients at hospitals or ambulatory surgical centers. In recent years, PODs have been subjected to heightened regulatory scrutiny and oversight because of the potential for abuse, fraud, and conflicts of interest; as a result, the future of PODs remains highly uncertain.

When someone says PODs, it is natural to think of a sci-fi movie. For the life sciences industry, PODs have another connotation; physician-owned distributorships. Physician-owned distributorships are “physician-owned entities that derive revenue from selling, or arranging for the sale of, implantable medical devices ordered by their physician-owners for use in procedures the physician-owners perform on their patients at hospitals or ambulatory surgical centers.”

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April 24, 2017

TEVA - Using Legitimate Distributor Payments to Conceal Bribes

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On December 22, 2016, the Securities and Exchange Commission (SEC) announced that Teva Pharmaceutical Industries Limited had agreed to pay more than $519 million to settle parallel civil and criminal charges that it violated the Foreign Corrupt Practices Act (FCPA) by paying bribes to foreign government officials in Russia, Ukraine, and Mexico. The interesting aspect of this settlement is as the government alleges, the bribes were concealed in the form of legitimate payments to distributors.

It has been a long time coming. The U.S. Department of Justice (“DOJ”) and the Securities and Exchange Commission (“SEC”) have been investigating the Israeli drug giant, Teva Pharmaceutical Industries Limited (“Teva”) for alleged Foreign Corrupt Practices Act (“FCPA”) violations since 2012. Four years later and right before Obama left office, the SEC finally announced a settlement with Teva.

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April 21, 2017

Going Back to the Roots of the False Claims Act - Baxter Settles cGMP Allegations

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While False Claims Act cases are relatively common in the life science industry, FCA cases for cGMP violations are not. This article explores the most recent case involving Baxter Healthcare Corporation and some of its troubling implications.

It was the darkest hours of March 1863, and things were not going well for the Union Army. Confederate victories continued to pile up, and President Lincoln had yet to find a leader for the Army of the Potomac who could best Robert E. Lee. To make matters worse, there was a steady stream of reports coming from the front that the Union Army suffered from substandard equipment despite the mighty industrial advantage the North possessed. Wartime profiteering was at an all-time high.

A frustrated President and Congress decided to act, and on March 12, 1863, President Lincoln signed the False Claim Act (“FCA”) into law. At the heart of the new law was the concept of using rogues to catch the parasites by allowing private individuals to sue on behalf of the Government and then to share in the recovery.

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