Life Science Compliance Update

July 31, 2015

Avoiding Medicare Fraud & Abuse: A Roadmap for Physicians


The Centers for Medicare and Medicaid Services (CMS) published a “roadmap for physicians” to submit proper claims for reimbursement. The guide, which walks through pertinent fraud and abuse laws and certain best practices for physicians, in turn provides manufacturers a helpful, convenient compliance tool as well.

View: Avoiding Medicare Fraud & Abuse: A Roadmap for Physicians

The Federal False Claims Act (FCA) protects the Federal Government from being overcharged or sold substandard goods or services . The FCA imposes civil liability on any person who knowingly submits, or causes to be submitted, a false or fraudulent claim to the Federal Government . The “knowing” standard includes acting in deliberate ignorance or reckless disregard of the truth or falsity of the information related to the claim . An example may be a physician who knowingly submits claims to Medicare for medical services not provided . Civil penalties for violating the FCA may include fines of up to three times the amount of damages sustained by the Government as a result of the false claims plus $11,000 per claim filed . Under the Federal criminal statutes, FCA criminal penalties for submitting false claims may include fines, imprisonment, or both.

The Anti-Kickback Statute makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce or reward referrals of items or services reimbursable by a Federal health care program . Where a provider offers, pays, solicits, or receives unlawful remuneration, the provider violates the Anti-Kickback Statute . Remuneration includes anything of value such as cash, free rent, expensive hotel stays and meals, and excessive compensation for medical directorships or consultancies . If an arrangement, however, satisfies certain regulatory safe harbors, it may not implicate the Anti-Kickback Statute . Civil penalties for violating the Anti-Kickback Statute may include penalties of up to $50,000 per kickback plus three times the amount of kickback . Criminal penalties for violating the Anti-Kickback Statute may include fines, imprisonment, or both

The Physician Self-Referral Law (Stark Law) prohibits a physician from making a referral for certain designated health services to an entity in which the physician (or an immediate member) has an ownership/investment interest or with which he or she has a compensation arrangement, unless an exception applies. Penalties for physicians who violate the Stark Law may include fines as well as exclusion from participation in all Federal health care programs.

The Criminal Health Care Fraud Statute prohibits knowingly and willfully executing, or attempting to execute, a scheme or artifice in connection with the delivery of or payment for health care benefits, items, or services to: Defraud any health care benefit program; or Obtain (by means of false or fraudulent pretenses, representations, or promises) any of the money or property owned by, or under the custody or control of, any health care benefit program. Penalties for violating the Criminal Health Care Fraud Statute may include fines, imprisonment, or both.

The Exclusion Statute requires OIG to impose exclusions from participation in all Federal health care programs on health care providers and suppliers who have been convicted of: 1. Medicare fraud, as well as any other offenses related to the delivery of items or services under Medicare; 2. Patient abuse or neglect; 3. Felony convictions for other health care-related fraud, theft, or other financial misconduct; or 4. Felony convictions for unlawful manufacture, distribution, prescription, or dispensing of controlled substances. OIG also has discretion to impose permissive exclusions on a number of other grounds. Excluded physicians may not bill directly for treating Medicare and Medicaid patients, nor may their services be billed indirectly through an employer or a group practice.

The Civil Monetary Penalties (CMP) Law imposes CMPs for a variety of health care fraud violations, and different amounts of penalties and assessments may be authorized based on the type of violation at issue . Penalties range from $10,000 to $50,000 per violation . CMPs can also include an assessment of up to three times the amount claimed for each item or service, or up to three times the amount of remuneration offered, paid, solicited, or received

In addition to outlining the various fraud and abuse laws, CMS provides insight into a number of areas of physician practice. The guide includes information on physician relationships with payers; physician relationships with other providers; and physician relationships with vendors.

CMS provides recommendations about a number of common situations involving industry-physician interaction. These are reprinted below.

Free Samples

CMS states: Many drug and biologic companies provide physicians with free samples that the physicians may give to patients free of charge. It is legal to give these samples to your patients for free, but it is illegal to sell the samples. The Federal Government prosecutes physicians for billing Medicare for free samples. If you choose to accept samples, you will need reliable systems in place to safely store the samples and ensure that samples are not commingled with your commercial stock.


“Some pharmaceutical and device companies use sham consulting agreements and other arrangements to buy physician loyalty to their products,” states CMS. “As a practicing physician, you may have opportunities to work as a consultant or promotional speaker for the drug or device industry.”

“ For every financial relationship offered to you, evaluate the link between the services you can provide and the compensation you will receive.” CMS recommends that physicians “test the propriety of any proposed relationship by asking the following questions”:

  • Does the company really need your particular expertise or input?
  • Does the company’s monetary compensation represent a fair, appropriate, and commercially reasonable exchange for your services?
  • Is it possible the company’s monetary compensation is for your loyalty so you will prescribe its drugs or use its devices?

“If your contribution is your time and effort or your ability to generate useful ideas and the payment you receive is fair market value compensation for your services without regard to referrals, then, depending on the circumstances, you may legitimately serve as a bona fide consultant,” states the guide. “If your contribution is your ability to prescribe a drug or use a medical device or refer your patients for particular services or supplies, the proposed consulting arrangement likely is one you should avoid as it could violate fraud and abuse laws.”

Academic Institutions – and the Myriad of Conflict-of-Interest Disclosures

Academic institutions also may impose various restrictions on the interactions their faculty members or affiliated physicians have with industry. Many of the relationships discussed in this document are subject to conflict-of-interest disclosure policies. Even if the relationships are legal, you may have an obligation to disclose their existence. Rules about disclosing and managing conflicts of interest come from a variety of sources, including grant funders, such as states, universities, and the National Institutes of Health, and from the Food and Drug Administration (FDA) when you submit data to support marketing approval for new drugs, devices, or biologics. If you are uncertain whether a conflict exists, ask someone. You always can apply the “newspaper test” and ask yourself whether you would want the arrangement to appear on the front page of your local newspaper.

Continuing Medical Education

You are responsible for your Continuing Medical Education (CME) to maintain state licensure, hospital privileges, and board certification. Drug and device manufacturers sponsor many educational opportunities for physicians. It is important to distinguish between CME sessions that are educational in nature and sessions that constitute marketing by a drug or device manufacturer. If speakers recommend use of a drug to treat conditions for which there is no FDA approval or use of a drug by children when the FDA has approved only adult use, you should independently seek out the empirical data that support these recommendations. NOTE: Although physicians may prescribe drugs for off-label uses, it is illegal under the Federal Food, Drug, and Cosmetic Act for drug manufacturers to promote off-label uses of drugs. VI. Compliance Programs

CMS also outlines the basics of Open Payments and how physicians can register with the system in order to review any payments attributed to them.


By outlining its expectations for physicians, CMS provides a useful guide for companies to understand the appropriate ways to engage with healthcare providers.



July 30, 2015

Congressional Briefing on the Importance of Medical Communication


This past month, the House of Representatives convincingly passed the 21st Century Cures Act. This bill contains important provisions related to how life science companies can communicate information about their products to patients, doctors, and payers. As the Senate contemplates a similar measure, it is important that legislation includes provisions that are needed to update the current regulatory constraints on communicating the latest medical information to those most in need.

The Coalition for Healthcare Communication provided a great writeup of a recent congressional briefing, sponsored by the Medical Information Working Group, that addressed the limitations and challenges of the current legal and regulatory framework, how this affects patient access to critical therapies, and how Congress can improve regulatory oversight of medical information.  

During the hearing, Sandra Raymond, CEO and president of the Lupus Foundation of America, spoke to the importance of open channels of communication for doctors looking to best treat patients with lupus. She stated that for patients with lupus, current treatments primarily are off-label uses of drugs approved for other purposes, such as immunosuppressants, anti-malarials and steroids. Without a steady flow of information from companies about these uses, physicians are “uninformed about the current treatments for a disease they don’t understand well,” she said. “The result? Patient care is impacted.” Raymond told congressional staffers that regulators need to balance patient benefit and risk to determine appropriate healthcare communications, permit adequate directions for use on approved and alternative uses, and encourage approval for additional instructions.

Alan Bennett, senior counsel at Ropes & Gray. and co-leader of the Medical Information Working Group, also weighed in from the legal perspective. Currently, the regulation of medical information seems trapped in the past, with a promotional system that was “designed in the 1970s for 1970s conditions” that do not account for significant changes in reimbursement, technology, and evolving case law regarding free speech, according to told the Coalition for Healthcare Communication that MIWG wants to work with the FDA on making the regulation of medical information communication more clear and expansive.

“This would be a major change in the way the agency regulates, and major changes tend to take a lot of time, but recent First Amendment developments and marketplace factors, such as reimbursement and technology, are causing the FDA to pay attention,” Bennett said.

At the briefing Bennett highlighted three recent cases — Sorrell v. IMS Health Inc.U.S. v. Caronia, and Amarin Pharma Inc. et al. v. U.S. Food and Drug Administration et al. – that are bolstering the First Amendment right to speech or to hear a message. Although the Amarin case is still pending, Bennett noted that “if it comes out in favor of greater First Amendment rights, the agency will have to address that.”

Bennett also touched on other major issues that affect medical information communication:

  • Payer communication. Congress thought that enacting Section 114 of the Food and Drug Administration Modernization Act of 1997 would allow companies to disseminate healthcare economic information to payers for formulary decision making, but in practice, the provision “remains unclear and FDA has muddied the waters further,” he said. He added that companies need a roadmap so dissemination is not ambiguous and companies can communicate with payers late in the FDA approval process to ensure that their drugs can be covered upon approval.
  • Scientific Exchange. “Everyone relies on this, but no one really knows what it is,” Bennett said. “It is clear at the margins, but there are a lot of activities that go on between the poles,” he remarked.
  • Definition of Labeling (and Advertising). The statute provides some definition, but that definition has been broadened by the FDA, according to Bennett. “We want the FDA to align its definition with the statute and case law,” he said.
  • Substantial Evidence Standard for Claims. For comparative claims, the regulations state that claims based on any study that is not a randomized, controlled clinical trial is automatically false and misleading, even for an on-label claim, Bennett explained. “There are data today that didn’t exist in the 1970s – real-world data – that companies ought to be able to use to support claims,” he said. “The standard needs to be more flexible.”
  • Intended Use. If a company knows its product is being used off-label, communicating that intended use is against the law, according to Bennett. Although the FDA is not enforcing this provision, “it is still on the books for the Justice Department to use and it needs to be clarified, especially when the standard of care for various conditions is an off-label use of an approved drug.”
  • Guidelines. The FDA’s guidelines for unsolicited requests for information and textbook dissemination need to be updated and streamlined so that truthful and non-misleading information about treatments can be communicated in a timely and effective manner, Bennett told briefing attendees.

The bottom line, Bennett added, is that “a patient’s role in his or her own healthcare has become more important, so that patient and his or her physician should have access to the best information, for which companies are the most valuable source.”

Bennett also asserted that addressing this issue legislatively “is appropriate and necessary to provide the FDA with guidance to align with the statute and the Constitution,” he said. Although the House’s 21st Century Cures legislation “is a start, more comprehensive changes are essential and Congress needs to address the specific issues we have raised.”

Thanks to the Coalition for Healthcare Communication for their coverage of this important event. 


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