Life Science Compliance Update

April 19, 2016

A Basic Geometry Lesson - FDA’s Off-label Losses

Lon - FDA's Off-label

The new decision in United States v. Vascular Solutions, Inc., provides the third point in a curve of the FDA's regulation of off-label promotion. This article provides a detailed explanation of the case, including the relevant jury instruction, an overview of the 2014 FDA Guidance document on scientific and medical publications, and possibilities for next steps for compliance officers

It is a fundamental tenet of geometry that three points are needed to determine a curve. Concerning the Food and Drug Administration ("FDA") and its regulation of off-label promotion versus the First Amendment, with United States v. Vascular Solutions, we now have our third point in the curve.

In Vascular Solutions, the government charged both Vascular Solutions and its president, Howard Root, with selling medical devices without FDA approval and with conspiring to defraud the United States by concealing the allegedly illegal activity.40 The government alleged that Vascular Solutions and Root engaged in a campaign to promote the Vari-Lase devices for ablation of perforator veins when the devices were only approved for use in superficial veins.


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March 29, 2016

More Legal Trouble Ahead for Horizon Pharma

Horizon Pharma has been in the spotlight for questionable ties to specialty pharmacies and its patient assistance programs. Recently, however, they were hit with an expected class action securities lawsuit over related allegations.

A suit has been filed on behalf of injured investors in the United States District Court for the Southern District of New York on behalf of investors who purchased Horizon stock between March 13, 2014 and February 26, 2016. In the pleadings, claims were made that Horizon "made materially false and misleading statements to investors" and hid unsavory information about its patient assistance programs.

According to the suit, Horizon set up its Prescriptions Made Easy (PME) plan, also known as HorizonCares, to "artificially inflate" prices for similar drugs, and that sales revenues from drugs sold through the PME program could not be sustained at those inflated levels. As a result, Horizon released financial statements that were "materially false and misleading at all relevant times," which opened Horizon up to more regulatory pushback.

According to the complaint, the PME program utilized specialty pharmacies to fill prescriptions for more common drugs, such as prescriptions for acne or arthritis pain. The prices were considered "artificially inflated" because typically when a prescription is sent to a specialty pharmacy, the likelihood that an insurer or pharmacist will try to switch the product from a Horizon product to a less-expensive generic is slim. It is interesting that Horizon is one of the only companies who work in the pain therapeutic area but does not have an opioid.

Materially False and Misleading Statements

The suit alleges that Horizon made materially false and misleading statements, and "failed to disclose material adverse facts about the Company's business, operations, prospects and performance. Specifically, Horizon allegedly made false or misleading statements about the following:

  • Horizon's PME program was designed to artificially inflate the prices of minor differentiation standard retail drugs;
  • Sales revenues from drugs sold through the PME were unsustainable at the inflated price levels;
  • Horizon's use of the PME program left the Company subject to increased regulatory risks;
  • Horizon received a subpoena from the U.S. Attorney for the Southern District of New York in November 2015; and
  • As a result of the foregoing, Horizon's statements about its business, operations, and prospects were false and misleading and/or lacked a reasonable basis.

Questions and Concerns Listed in Complaint

In every class action suit, the lead plaintiff, in his or her complaint, must list common questions of law and fact that exist to all members of the Class and are more relevant and important than any questions that solely affect individual class members. This complaint lists the following questions of law and fact:

  • Whether the federal securities laws were violated by defendants' acts as alleged herein;
  • Whether statements made by defendants to the investing public during the Class Period misrepresented material facts about the business, operations and management of Horizon;
  • Whether the Individual Defendants caused Horizon to issue false and misleading financial statements during the Class Period;
  • Whether defendants acted knowingly or recklessly in issuing false and misleading financial statements;
  • Whether the prices of Horizon securities during the Class Period were artificially inflated because of the defendants' conduct complained of herein; and
  • Whether the members of the Class have sustained damages and, if so, what is the proper measure of damages.

The suit alleges that Horizon's actions took a toll on investors, as once the true details entered the market about the patient assistance programs, the price of the stock sharply dropped, leaving investors with monetary damages.

The case does not yet have a lead plaintiff, and multiple national law firms can be found requesting lead plaintiffs contact them, all hoping for a piece of a presumably large settlement pie.

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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