Beyond Sunshine: Looking Ahead to Fraud and Abuse Risks Raised by Transparency Reports

Transcription

1 BEIJING BRUSSELS CHICAGO DALLAS FRANKFURT GENEVA HONG KONG LONDON LOS ANGELES NEW YORK SAN FRANCISCO SHANGHAI SINGAPORE SYDNEY TOKYO WASHINGTON, D.C. Beyond Sunshine: Looking Ahead to Fraud and Abuse Risks Raised by Transparency Reports February 20, 2013 Meenakshi Datta, Partner (312)

2 Agenda Potential Fraud and Abuse Risks of Transparency Reports AKS Risks Price Reporting Risks Executive Liability Risks International Considerations Voluntary Disclosure Cautionary Tales Risk Mitigation 2

3 Fraud and Abuse Risks of Transparency Reports Lawmakers have framed the Sunshine Act as a transparency initiative However, information published pursuant to the Act will undoubtedly be used against manufacturers to establish liability under key fraud and abuse laws: Sophisticated data analytics will be used by the government to detect and prosecute health care fraud Sunshine reporting requirements closely correlate with traditional areas of risk under key fraud and abuse laws Proposed certification requirements could provide a basis for establishing both corporate and individual liability Lessons learned from manufacturers which have disclosed, either voluntarily or pursuant to Corporate Integrity Agreement requirements 3

4 Fraud and Abuse Risks: Government Use of Data Analytics HHS and DOJ hosted the seventh regional Health Care Fraud Prevention Summit.... [The] Summit focused on the latest technological advancements, including data analytics, now being used to identify, prevent, and prosecute fraud. HHS Office of Inspector General ( OIG ) Semiannual Report to Congress, Fall 2012 [The] Affordable Care Act provides additional tools and resources to help fight fraud.... The administration is already using tools authorized by the Affordable Care Act, including enhanced screenings and enrollment requirements, increased data sharing across government, expanded overpayment recovery efforts and greater oversight of private insurance abuses. HHS Press Release, Feb. 14, 2012 The [new CMS] Command Center will gather experts from all different areas clinicians, data analysts, fraud investigators, and policy experts into the same room to build and improve our sophisticated new predictive analytics that spot fraud, and to then move quickly on a lead.... Dr. Peter Budetti, CMS Deputy Administrator and Director the Center for Program Integrity Federal officials have said they would inspect and audit drug company records to make sure the reports were accurate and complete. The New York Times, Jan. 23,

5 Fraud and Abuse Risks: Potential Areas of Liability Area of Risk Anti Kickback Statute ( AKS ) False Claims Act ( FCA ) Price Reporting Considerations Individual Liability Potential Penalties For individuals, violation may result in up to 5 years imprisonment, a criminal fine of up to $250,000, or both for each violation For corporations, violation may result in a criminal fine of up to $500,000 for each violation Other penalties may also apply, including the imposition of civil monetary penalties, exclusion from participation in federal health care programs ( FHCPs ), or liability under the False Claims Act May result in exclusion and/or civil penalties of up to $11,000 per claim, plus up to three times the actual damages sustained by the government as a result of the violation Misreported prices can result in the FHCPs overpaying for the manufacturer s products and lead to significant FCA and other possible liability for the manufacturer Depending on the nature of the underlying misconduct, the OIG may be required or authorized to exclude an individual from participation in the FHCPs 5

6 Fraud and Abuse Risks: AKS Under the Sunshine Act reporting requirements, manufacturers must designate their payments based on enumerated categories which closely correspond to traditional risk areas under the AKS, including: Research payments Educational payments Consulting arrangements Speaker fees - Travel - Gifts - Entertainment Qui tam relators and plaintiffs attorneys could conceivably use these presorted reports to raise AKS based and price reporting based FCA claims against applicable manufacturers 6

7 Fraud and Abuse Risks: AKS Key Pharma Cases ( ) Sunshine Payment Category Activity Alleged Total N.D. Ga. E.D. Pa. W.D. Va. D. Mass. E.D. Wis. M.D. La. W.D. La. E.D. Pa. M.D. Fla. D. Mass. E.D. Pa. E.D. Ky. D. Md. Travel Education Faculty Fee Speaker Fee Honoraria Gift Entertainment All Expense Paid Travel, Conferences CME Sponsorship, Speaker Fees Cash, Other Gifts, Entertainment Education Educational Grants 10 X XX X XX X X X X 10 X XX X XX X X X X 9 X XX XX X X X X 4 X X X X X Research Charitable Contributions Market Studies Charitable Contributions 2 X X X X 1 X 7

8 Potential Areas of Liability: AKS Key Device Cases ( ) Sunshine Payment Category Alleged Activity Total D. Mass S.D. Tex. N.D. Ohio D. Colo. N.D. Ill. S.D. Fla. D. Colo. D. Mass W.D. Tex. Research Gift Entertainment Travel Education Other Clinical or Market Study Fees Cash, Other Gifts, Entertainment All Expense Paid Travel, Conferences Arrangements Relating to Competitor Products 5 X X X X X 5 X X X X X 4 X X X X 3 X X X Gift Free Equipment 3 X X X Other Free Advertising and Referral Services 2 X X Education Free Training 2 X X Charitable Contribution Charitable Donations 1 X 8

9 Fraud and Abuse Risks: Price Reporting The Sunshine Act may increase manufacturer exposure to potential price reporting risks If an investigator or qui tam plaintiff discovers suspicious payments, the payments may be characterized as disguised discounts that the manufacturer failed to consider for purposes of its price reporting obligations For example: The payment of consulting fees above fair market value may be viewed as a discount that must be taken into account for government price reporting obligation purposes Likewise, the provision of non bona fide charitable contributions, in cash or in kind, could be perceived to be a discount offered to induce purchases, thus raising both price reporting and AKS risks 9

10 Fraud and Abuse Risks: Executive Liability New strategies for targeting individuals: We are going to start to use that authority [to exclude individuals] in the appropriate circumstances to get high level executives out of companies, so that the company has a better shot at changing its behavior, so that it does not become a recidivist.... It's our expectation that in the next several months you will begin to see the fruits of that new strategy. Lewis Morris, Chief Counsel of OIG, Quoted in Fortune, June 16, 2010 We think that one of the challenges we need to address is having executives understand that they will be held personally accountable for schemes that are then hatched and pushed downstream... Although there are challenges to building a criminal case against a high level executive there's a lot of plausible deniability built into these large companies it's an area where we and our partners at the Department of Justice are focusing on, because we recognize that the way we are going to change corporate cultures is by focusing on individuals. Id. 10

11 Fraud and Abuse Risks: Executive Liability Year Company Alleged Violations Penalties 2007 Purdue Frederick Conspiring to illegally market the pain medication Oxycontin for unapproved uses The President and the Chief Scientific Officer of received fines of $19 million and $8 million, respectively, and were excluded from participation in the FHCPs for 15 years 2008 Bryan Corp. Directing the company to sell an unapproved product The President/Owner received fines of $7.5 million, and 5 years imprisonment, followed by up to 3 years of supervised release 2009 Pfizer Instructing sales staff to market Bextra for unapproved uses and for encouraging staff to make false safety claims 2009 InterMune Taking a lead role in disseminating misleading information about a company product District Sales received a $75,000 fine and 2 years probation The CEO was found guilty of wire fraud and sentenced in 2011 to 6 months home confinement and fined $20, Globus Medical Marketing products without prior regulatory approval The CEO agreed to pay FDA $450,000 11

12 Fraud and Abuse Risks: Executive Liability CMS final regulations require attestation by a manufacturer officer: Attestation. Each report, including any subsequent corrections to a filed report, must include an attestation by the Chief Executive Officer, Chief Financial Officer, Chief Compliance Officer, or other Officer of the applicable manufacturer or applicable group purchasing organization that the information reported is timely, accurate, and complete to the best of his or her knowledge and belief. 42 C.F.R (e). This requirement could be viewed as targeting those subject to liability under the Park doctrine Certification of the Sunshine Act reports could be used by an aggressive prosecutor as a means to prove that the individual knew or should have known of fraudulent or illegal activity 12

13 Fraud and Abuse Risks: International Considerations Country Covered Entities Items Subject to Disclosure Disclosure Mechanism France Draft Decree Slovakia Law No. 362/2011 Netherlands Code of Conduct on Transparency of Financial Relations Japan Pharmaceutical Manufacturers Association Code United Kingdom Code of Practice for the Pharmaceutical Industry Australia Code of Conduct & Guidelines 13 Life sciences companies Producers and mass distributors of pharmaceuticals Pharmaceutical manufacturers Trade association member companies Trade association member companies Trade association member companies Contracts with certain types of health care entities (e.g., health care professionals, hospitals, medical students) Names of health care professionals attending company-sponsored academic meetings Costs for marketing and non-monetary benefits provided to health care professionals Payments issued to health care professionals, partnerships or institutions exceeding 500 in the aggregate Expenses related to R&D, research support, honoraria, meetings, publications, and hospitality Payments issued to health care professionals for meeting attendance, consulting services, and market research Payments issued to health care professionals Expenses related to meetings and symposia Company website Government website Centralized register Company website Company website Trade association website

14 Voluntary Disclosure: A Cautionary Tale (I) [E]arlier this year, Medtronic began listing payments to doctors on its website, a practice that will become law when the Physician Payment Sunshine Act goes into effect.... The Journal Sentinel used that database to check payments made this year to a core of prominent doctors who have published research about BMP 2 since its approval. Last year, a Journal Sentinel investigation found that doctors who had financial relationships with Medtronic produced substantially better results with Infuse in the clinical trial leading to its FDA approval than doctors who did not have financial ties to the company. 14

15 Voluntary Disclosure: A Cautionary Tale (I) Medtronic letter from Senators Grassley and Baucus June 21, 2011 ` 15

16 Voluntary Disclosure: A Cautionary Tale (II) Sanofi public disclosure 2009 Q3 16

17 Voluntary Disclosure: A Cautionary Tale (II) Society of Hospital Medicine comments to FDA May 26, 2010 While SHM supports the development and availability of generic products, we think that untested generic substitution for [low molecular weight heparins] is not in our patients best interest. We are also concerned about the immunogenicity risks of LMWH products, which can be critical to patient safety. 17

18 Voluntary Disclosure: A Cautionary Tale (II) Sanofi letter from the Senate Committee on Finance Aug. 11, 2010 ` 18

19 Voluntary Disclosure: A Cautionary Tale (III) Biotronik press and State of Las Vegas inquiry April The devices sudden popularity was apparently not left to chance. In mid 2008, Biotronik hired several cardiologists who implant heart devices at the Las Vegas hospital as consultants, paying them fees that may have reached as high as $5,000 a month, company documents reviewed by The New York Times indicate. Those doctors then did the rest. Gov. Brian Sandoval on Monday asked state health officials to look into whether the dealings between the doctors and a company called Biotronik had involved improper billing practices or patient safety issues, according to a spokeswoman, Mary Sarah Kinner. The inquiry follows a report on Sunday in The New York Times that heart device specialists at a Las Vegas practice started using Biotronik implants in nearly all their patients in 2008 after company documents showed they became consultants to the device maker, getting up to $5,000 a month in fees.

20 Voluntary Disclosure: Watchdog Triggers Local Media Investigations ProPublica Database For decades, drug companies kept the names of their speakers and how much they paid them secret. But over the past two years, companies have begun posting this information on their web sites, some as the result of legal settlements with the federal government. ProPublica took these disclosures and assembled them into a single, comprehensive database that allows patients to search for their physician. 20

21 Risk Mitigation Strategies Consider implementing polices and procedures to cover, among other topics: Annual spend limits Periodic (e.g., monthly or quarterly) transparency evaluations to monitor spend /progress at pre established benchmarks and to avoid potentially suspect payment amounts or trends at year end Implementation of periodic internal audits (e.g., monthly or quarterly) for certain payment categories, focusing on areas of high risk A pre disclosure analysis of payment data over time to monitor any potential questionable growths in payment or other trends 21

22 Risk Mitigation Strategies (cont d) Establish a transparency or disclosure committee analogous to a pricing committee with key company personnel to monitor: Company payment trends Compliance with data collection requirements Other areas affecting transparency reports (e.g., conduct of sales representatives) Utilize assumptions letters and/or establish internal assumptions If CMS adopts its proposal to permit assumptions letters, consider documenting and disclosing reasonable assumptions to CMS when submitting transparency reports Exercise due diligence at the executive level to attest to the accuracy of transparency reports 22 Establish an appropriate and reasonable checks and balances compliance framework throughout the data collection and payment trend evaluation process

23 Risk Mitigation Strategies (cont d) In preparing for the Sunshine Act in the U.S., manufacturers cannot ignore the patchwork of transparency rules proliferating overseas Multinational life sciences companies in particular should consider the implementation of a global system to track physician payments as the list of international disclosure requirements continues to grow 23

24 Questions? Meenakshi Datta (312)