Life Science Compliance Update

135 posts categorized "Medical Legal"

April 14, 2015

Doctor's Article Counters The "Myths That Undermine Medical Research"


Thomas Stossel, American Cancer Society Professor of Medicine at Harvard Medical School and a visiting scholar at the American Enterprise Institute, recently wrote an article entitled “Myths that undermine medical research.” Stossel raises important points to counter three prevailing myths about the drug and device industry.  View the article, as published in the

If you or a loved one suffers from a serious and debilitating disease and hope for improved treatment or—even better—a cure, the recent history of medical progress should be encouraging. Over the years I have practiced medicine, U.S. longevity has increased by a decade, deaths from the commonest killer, cardiovascular disease, have dropped by 60 percent, and cancer deaths, the second most prevalent cause, are at an all-time low. HIV-infected individuals, once doomed, live normal albeit medicated lives. Arthritis sufferers previously condemned to pain, crutches and wheelchairs enjoy relative comfort and mobility. Unfortunately, three pernicious myths conspire to undermine such optimism.

Myth 1: Non-profit foundation—or government-subsidized university research is the main reason for this medical progress.

Myth 2: Private industry easily exploits this research to develop medical products—for which it overcharges. If industry spent less on marketing and more on research it could charge less.

Myth 3: Billions of dollars in settlement fees paid to the Justice Department by companies accused of marketing drugs for uses not approved by the Food and Drug Administration (FDA) prove that industry marketing is corrupt.

The truth regarding the first myth is that four-fifths of new drugs and most medical devices approved by the FDA originated from inventions solely created by companies. Among many examples, an industry researcher discovered the first cholesterol-lowering statin drug. Statins, in large measure, account for the reduction in heart attacks and strokes.

Publicly supported academic research certainly advances medical knowledge. But converting that knowledge to clinical benefits isn’t straightforward. Helping patients justifies public research funding, but obtaining such funding depends far more on impressing grant review committees with the novelty and virtuosity of research than with its practical medical applications. I know, because following these precepts has certainly contributed to my success. I have had continuous government research funding for over 45 years, have published research papers in prestigious scientific journals, won prizes, and been elected to elite scientific societies. Yet no one has lived one second longer or better as a direct result of my research accomplishments.

My efforts to remedy this deficiency illustrate why the second myth—that developing treatments and cures is cheap and easy—is wrong. Clinically relevant discoveries usually emerge unexpectedly, as did one of mine that may lead to a life-saving therapy. But because academics deciding what research to support don't value the trial and error experimentation that advances such projects, it took decades of persistent effort before investors were willing to take the risk of developing it in startup companies, the route most academic research must take to benefit patients.

That risk is huge. Over my lifetime, the inflation-adjusted cost of introducing new drugs has increased 100-fold, now averaging over $2.5 billion per FDA approval. The principal reason for the rising cost is more stringent FDA testing requirements engrafted on biology’s variability. Unlike complex machines we engineer to behave predictably, our bodies evolved to respond idiosyncratically. This inconsistency enables our species to survive assaults by microorganisms that can adapt quickly to kill or disable susceptible individuals. But it also means that nine out of ten drug candidates informed by our best research efforts fail in clinical trials. There’s no easy solution other than for companies to have as many shots on the elusive product introduction goal as possible. To offset these tough odds, the industry has to be sufficiently profitable to finance as many development attempts as possible. And although vilified, marketing not only sustains profits but also provides caregivers with essential information. This information, supervised by the FDA, is far, more rigorous than what academics publish in medical journals.

Recent research discussed in Health Affairs questions whether current profits are sufficient to sustain medical innovation. Large companies may survive by ceasing medical product development and defaulting to selling pet food. Startup companies, however, like the one developing my potential treatment can only turn their lights out.

The myth that the billions of dollars confiscated from companies by the ubiquitous class action lawsuit settlements address real crimes also is false. The settlements often result from prosecutors perverting “false claims” litigation designed to punish contractors who bill the government for unperformed services. Physicians frequently—and appropriately—prescribe FDA approved drugs for unapproved uses. Since physicians, not companies, are the ones “billing” by writing prescriptions, the prosecutors have to prove at trial that corporate marketing practices forced physicians to prescribe for an unapproved indication. The notion that highly educated and trained physicians, concerned about their reputations, are so gullible is patently absurd. So, why do companies always settle these dishonest lawsuits? It’s because false claims convictions carry a draconian penalty called debarment, something media accounts never mention. A debarred company cannot do any business involving the federal government. No medical products manufacturer extensively involved in sales to federal programs, such as Medicare for example can afford to risk such an outcome.

These myths compromise medical progress. They encourage product excise taxes, price controls, weakening of essential patent protection, and other political rent-seeking schemes that erode essential corporate profitability. A prime example is the legislation recently drafted by my state’s senator, Elizabeth Warren (D-Mass.), in which she proposes to force companies settling prosecutions to subsidize government research. I’d love more funding for research—but not at the expense of diverting funds from the development of treatments and cures for my sick patients and punishing the medical industry for non-existent crimes.

**Myths that undermine medical research, by Thomas Stossel, available: 

Stossel’s book, Pharmaphobia: How the Conflict of Interest Myth Undermines American Medical Innovation is being published by Rowman & Littlefield in April.


April 07, 2015

DOJ Targets Physicians For Accepting Bribes In Exchange For Referrals


Last week we posted a comprehensive look at the increased scrutiny into laboratories that engage in referrals with physician practices. That article looked at the (forthcoming) multi-million dollar settlement between the Department of Justice and Health Diagnostic Laboratories to settle an investigation into the lab’s practice of paying physicians to send their patients’ blood for testing.  A new crop of enforcement actions, however, implicate the group on the other side of the referral equation: doctors. 

On April 2, the Office of Inspector General announced two enforcement actions against doctors for their relationship with a New Jersey-based lab. The U.S. Attorney’s Office for the District of New Jersey is in charge of the cases and stated that the two doctors accepted bribes in exchange for “test referrals as part of a long-running and elaborate scheme operated by Biodiagnostic Laboratory Services LLC (BLS), of Parsippany, New Jersey.”

View the DOJ press releases: Here and Here

Brett Halper of Glen Head, New York, pleaded guilty before U.S. District Judge Stanley R. Chesler in Newark federal court to one count of accepting bribes. “Including Halper, 38 people – 26 of them doctors – have pleaded guilty in connection with the bribery scheme, which its organizers have admitted involved millions of dollars in bribes and resulted in more than $100 million in payments to BLS from Medicare and various private insurance companies,” states DOJ. “The investigation has so far recovered more than $10.5 million to date through forfeiture.”

According to documents filed in this and related cases and statements made in court, Halper admitted that from January 2011 through April 2013, he accepted bribes in return for referring patient blood specimens to BLS and was often paid in excess of $5,000 per month. Halper’s referrals generated approximately $2,900,000 in lab business for BLS. The bribery count to which Halper pleaded guilty carries a maximum potential penalty of five years in prison and a $250,000 fine. Sentencing is scheduled for June 30, 2015.

Angelo Calabrese of Pine Brook, New Jersey, previously pleaded guilty before U.S. District Judge Stanley R. Chesler to a one count of accepting bribes. Judge Chesler imposed the sentence today in Newark federal court. Calabrese admitted accepting more than $130,000 in bribes to refer at least $600,000 in lab business to BLS. From 2010 through 2013, Calabrese received over $4,500 per month from BLS through sham consulting and rental agreements. In addition to the prison term, Judge Chesler sentenced Calabrese to serve one year of supervised release and ordered him to pay a fine of $5,000. As part of his guilty plea, Calabrese must forfeit $334,000.


When it comes to laboratory referral arrangements, the government has stated that their main concern is that physicians will do business with the lab that pays the most, rather than the best lab, and that physicians would order tests that are not medically necessary, particularly if the payment arrangement is tied to the number of referred tests.

This concern has manifested itself in a constant stream of enforcement actions and alerts. Since last year, the government has:

  • Published a Special Fraud Alert on Laboratory Payments to Referring Physicians, which addresses compensation paid by labs to referring physicians and physician group practices for blood specimen collection, processing, and packaging, and for submitting patient data to a registry or database.

  • Prosecuted several physicians for accepting payments from labs for referrals

  • Engaged in a high-profile investigation of Health Diagnostic Laboratories, Inc. over the payment practices

  • Issued Advisory Opinion 15-04, which found that an exclusive arrangement between a laboratory and its referring physician practices could violate the Anti-Kickback statute.

 This is clearly an area of interest. 


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