With the announcement of a recent settlement between the Department of Justice (DOJ) and drugmaker GlaxoSmithKline for the drug Avandia, in what will be the largest settlement yet–$3 billion—for alleged “off-label” promotion, it appears that the Obama Administration and federal health and law enforcement agencies are continuing their tremendous pressure and scrutiny on life sciences company.
This means that companies need to begin quickly implementing compliance programs, particularly those mandated by corporate integrity agreements. Implementation of such program entails rigorous training and education of all levels of employees, from executives to sales, and everything in between, especially because it would appear that prosecution of companies will only grow with respect to many provisions of the Affordable Care Act.
For example, earlier this month, DOJ’s Assistant Attorney General Tony West gave a keynote address at the Twelfth Annual Pharmaceutical Regulatory and Compliance Congress in Washington, DC. West addressed a crowd of compliance officers, pharmaceutical and health care executives, physicians, nurses, legal counsel and other industry professionals, who he acknowledged “play an integral role in ensuring that the medicines we rely on to ease pain, heal sickness and improve lives are the safest in the world.”
He noted to that these individuals, “make good companies better by your advice and guidance; by your commitment to a level playing field that recognizes that fair competition and ethical compliance are the foundation of a vibrant, successful pharmaceutical industry.”
West first acknowledged that having a compliance program “in name only” isn’t enough, and that “the best compliance policies are wasted if a company lacks the corporate culture and the employee support system to encourage self-reporting and honest self-assessment.” He maintained that. “where nearly one in every ten health care dollars is spent on your products, reducing fraud is not only good for business, it’s essential to the sustainability of a sound, efficient health care system on which millions of Americans depend.”
DOJ and Fraud
West then moved into a discussion about the Justice Department’s “comprehensive approach” to health care fraud, an approach he said, “that aims to secure better, quality coverage at lower costs for all of us: patients, health care providers, businesses and taxpayers.” He pointed to the “Affordable Care Act—with its innovative reforms, anti-fraud measures, and improvements to the overall health care process—as part of that comprehensive approach; as is the President’s recent Executive Order, which focuses on better managing prescription drug shortages to ensure that patients get the medicines they need in the event of low supply.”
He asserted that, “these efforts aim to reduce the costs of delivering quality health care while extending coverage by achieving efficiencies and implementing key reforms.” West also talked about the Health Care Fraud Prevention and Enforcement Action Team, or “HEAT,” which since May 2009, has “aggressively battled health care fraud.”
He noted how “HEAT is an effort led by Attorney General Eric Holder and Health and Human Services (HHS) Secretary Kathleen Sebelius that has, over the last two years, synergized the health care fraud prevention and enforcement efforts of HHS and DOJ as never before.” West noted how he and his colleague, Criminal Division Assistant Attorney General Lanny Breuer, have dedicated much of their time and attention to HEAT, and today, when it comes to health care fraud, there is unprecedented coordination, greater information- and data-sharing, and closer collaboration between these two key federal agencies.”
West also talked about the success the HEAT team has had over the past three years. He noted that “for every dollar Congress has provided for health care enforcement over the past three years, we have recovered nearly seven, and since HEAT’s inception, the Justice Department’s Civil Division has worked with HHS, as well as U.S. Attorneys’ Offices and state law enforcement offices around the country, to open more health care fraud investigations, charge more criminal health care fraud defendants, and obtain more money on behalf of taxpayers – over $8 billion in settlements, judgments, penalties and fines – than ever before.”
He noted that this “record-breaking recovery reflects the broad approach” the Civil Division has taken with respect to health care fraud enforcement over the last two-and-a-half years—an approach that includes not only the off-label marketing and False Claims Act cases with which many of you are familiar, but other, equally important enforcement efforts, as well.
For example, he noted the newly-reorganized Consumer Protection Branch, which has dedicated a team of DOJ professionals to pursue counterfeit pharmaceutical fraud. West also mentioned that DOJ is “pursuing drug diversion schemes that undermine the integrity of the legitimate drug supply chain and threaten the safety and quality of pharmaceuticals.”
He also discussed prosecuting providers that pay illegal kickbacks, which he noted, “can damage the trust relationship between doctor and patient by creating an unwelcome conflict of interest.” West also explained that the DOJ is “taking a closer look at fraud in the home health care industry,” and that he personally has “taken a particular interest in cracking down on elder abuse in nursing homes.” He described certain details of cases the DOJ has uncovered such as “nursing homes that failed to dispense prescribed medications; facility residents whose basic needs were so neglected they suffered from dehydration and malnutrition; bed-ridden patients who were so long ignored by nursing home staff that they developed bed sores infected by maggots, leading to amputations.”
Pharma and Fraud
West then shifted his speech to discuss what he called DOJ’s “most significant enforcement work, both civilly and criminally, which involves health care fraud in the pharmaceutical industry.” He said it is the most significant for 3 reasons.
“First, the money involved in this industry’s participation in health care is staggering, and we all share in the responsibility of making sure that money isn’t wasted on fraud or abuse. Health care spending in the United States surpassed $2.5 trillion in 2009, and, according to independent estimates, 10% of that ‒ $250 billion ‒ was spent on prescription drugs. Not an insignificant amount.”
“Second, this industry’s importance increases as the number of Americans who use pharmaceutical products continues to grow. Nearly two-thirds of Americans use prescription medicines on a regular basis, including 90% of seniors. That’s almost 200 million people in this country who are depending on the safety and efficacy of the products many of your companies manufacture. This is a significant responsibility.”
“And, finally, given the size, scope and reach of the pharmaceutical industry, we know that the victories we achieve when fighting fraud here will have a profound impact—not just on the health care economy, but on the lives of countless Americans.”
West asserted that these three reasons are why DOJ and the Administration have “not hesitated to demand more accountability in our health care fraud cases, holding providers, companies and physicians responsible in connection with fraud violations, and meeting those violations with serious civil and, if appropriate, criminal sanctions, including felony charges where the law and facts provide.”
He acknowledged how DOJ has “aggressively pursued cases where we find products marketed off-label for purposes not approved as safe and effective by the FDA, like those involving Novartis, where allegations regarding the illegal marketing of Trileptal were resolved for $422 million; or Pfizer and Pharmacia & Upjohn’s 2009 $2.3 billion settlement involving Bextra and other drugs, the largest health care fraud settlement in history.”
Additionally, he mentioned investigations into companies whose failures in drug manufacturing lead to products that materially differ from the strength, purity, or quality of what was required. In order to get accountability from companies, West asserted that DOJ “will consider prosecutions against individuals, including misdemeanor prosecutions under the Park doctrine, which provides that responsible corporate officers can, in appropriate circumstances, be held strictly liable for criminal violations of the Food, Drug, and Cosmetic Act.”
Nevertheless, West emphasized that DOJ “can’t enforce our way out of the health care fraud challenge,” but rather, seeks “to promote a culture of compliance by emphasizing deterrence.” He explained that, “a comprehensive approach to health care fraud requires preventative efforts and strong compliance programs,” which he said that many companies “currently promote.”
He added that compliance “requires guidance and dialogue between government and the private sector. It requires creativity when negotiating resolutions, such as non-monetary measures that give companies the tools to build and maintain real change; tools that allow them to reduce recidivism and meaningfully prevent and detect violations in the future.”
For example, West noted that DOJ “may ask courts to impose post-conviction supervision over companies, or consider using our own civil authority to obtain injunctions toward the same end.” He also emphasized that DOJ “will work with regulating agencies in monitoring compliance with consent decrees and will not hesitate to bring contempt actions when illegal practices re-occur or consent decree requirements are ignored.”
Despite what seemed to be mostly an aggressive speech, West did recognize that fighting health care fraud also “means being fair” and “acknowledging when companies and individuals do the right thing and voluntarily disclose wrongdoing to law enforcement officials.” He even took the time to point out that, “most health care companies and providers are trying to play by the rules.”
West noted how, “Navigating the complexities of the health care landscape is not always easy, and many companies and individuals in this industry do their best to get it right.” He said that the Administration knows that “most of the public’s health care dollars are being spent legitimately, in ways that soothe suffering and improve the quality of our lives.”
He said that DOJ encourages companies to “come forward and voluntarily disclose any instances of fraud,” and that throughout his tenure in the Civil Division he has credited early disclosure by companies. West explained that “when a company or individual acts responsibly by timely and voluntarily disclosing unlawful conduct, DOJ will consider that disclosure in deciding whether or how to charge or resolve a health care fraud matter.”
He also said that DOJ will “take into account the extent to which a company or individual cooperates once an investigation has begun. Because that kind of cooperation –producing documents and information quickly and completely, for example – allows DOJ to complete our investigation and the resolve each case more efficiently and expeditiously.”
Conclusion
In concluding his remarks, West noted while the DOJ and the life sciences industries serve different missions; approach the health care landscape from different vantage points; and employ different methods and use different tools—both groups share a common goal. That goal, he said, is “the notion that a competitive health care marketplace, undistorted by fraud, is good for patients and providers alike; a goal that recognizes the unique public trust that all of us in this room share, as stewards, participants and consumers of that health care marketplace.”
He asserted that companies presence at the meeting demonstrated their commitment to that goal. West closed by noting that, while it may not be able possible “to eliminate all waste, fraud, and abuse from our health care system,” DOJ and the industry can bring together their “combined expertise, commitment, energy and creativity to this task, and can move closer to the day when all Americans get the safest, most efficient, highest quality health care available; care they need, and care they deserve.”