In his remarks at the CBI Pharmaceutical Compliance Congress, Assistant Attorney General, Civil Division, Stuart Delery emphasized that some of his “top priorities” are to enforce the Food, Drug, and Cosmetic Act; the False Claims Act; and other laws protecting the safety and well-being of patients and the general public.” Delery noted that while the HEAT team has seen judgments and settlements under the FCA and FDCA over $20 billion since 2009, the “monetary results tell only part of the story.”
Delery noted that “If a pharmaceutical company pays kickbacks to physicians who prescribe its drugs, patients lose confidence that their doctors are making independent judgments about treatment options. If a Medicare provider bills for unnecessary services, taxpayers lose faith that our money is being well spent and health care becomes more expensive for everyone. If a manufacturer markets its products for uses that were never approved as safe and effective by the FDA, we worry that our loved ones might be receiving treatments that will harm them rather than help them, and that they may not elect the treatment with the best chance for a cure.”
Delery emphasized that his office is “pursuing a broader range of health care fraud matters than ever before,” including cases of elder abuse in nursing homes and bringing criminal and civil cases against companies that harm seniors by providing grossly deficient care. He noted that DOJ has pursued doctors who put patients at risk by performing unnecessary procedures to increase their bills, like a Florida dermatologist who performed thousands of unnecessary skin surgeries, participated in an illegal kickback scheme, and ultimately paid one of the largest False Claims Act settlements ever by an individual – $26.1 million.
The Assistant Attorney General also noted that his office has gone after the manufacturers of defective medicines or medical devices, such as a criminal and civil cases against a Boston Scientific subsidiary for knowingly selling defective cardiac defibrillators. He also noted lawsuits against companies that produce sterile products in non-sterile conditions. Delery, however, shifted from enforcement and talked about the need for government and industry to be “allies and partners.” Accordingly, he focused his remarks on three ways in which the Civil Division’s anti-fraud enforcement interests align with the interests of corporate compliance officers, executives, and advisors.
Ethical Corporate Structures, Not “Compliance in Name Only”
First, he noted that industry and government have a common interest in promoting an ethical corporate culture instead of maintaining a compliance program in name only. No matter how well-designed a compliance program is, “it cannot achieve its goals without achieving buy-in at all levels of the company. People must have the right incentives to see, report, and fix problems,” Delery emphasized.
Delery noted that a “common thread” in many of DOJ’s cases is that “numerous individuals – ranging from executives to safety technicians – saw signs that misconduct was taking place and did not act.” For example, Delery referred to the May 2013 Ranbaxy case, in which the generic drug manufacturer pleaded guilty to felony charges relating to producing and distributing adulterated drugs from two of its manufacturing facilities in India. “Ranbaxy acknowledged that it had continued to distribute drugs that had failed critical tests, violated current Good Manufacturing Practices, and falsified records to cover up systematically incomplete testing, sometimes performing stability tests weeks or months after the dates reported to the FDA.”
The conduct that gave rise to Ranbaxy’s guilty plea took place over a period of years, during which the company received early warnings that something was wrong. The company hired auditors and started to investigate evidence of abuses. “But its actions never translated into real change,” Delery noted. Four years after the first signs of trouble, those problems led the “company to distribute an epilepsy drug that failed tests, had unknown impurities, and would not maintain its expected shelf life. The ultimate result was a $500 million resolution – the largest drug safety settlement ever with a generic drug manufacturer.”
Delery focused on the fact that “Ranbaxy’s compliance operation could have done more than it did – its auditors, for instance, said that the company badly needed cGMP training.” However, as Delery pointed out, “that training never happened.” He reiterated that “policies alone are not enough,” which is why DOJ has “put a renewed emphasis on identifying non-monetary measures that will help us to prevent the recurrence of misconduct.” For example, he noted that the Ranbaxy civil consent decree called, among other things, for the company to establish an Office of Data Reliability that would work with its manufacturing, testing, approval, and compliance operations to ensure that all future drug applications are audited for accuracy before submission. As a result of this consent decree, FDA was able to move swiftly, just this past week, and respond forcefully when it learned of problems at yet another Ranbaxy facility.
Non-monetary measures were also a key feature of the $1.5 billion criminal and civil resolution in 2012 with Abbott Laboratories for conduct relating to its epilepsy drug Depakote. Delery emphasized important provisions in HHS-OIG’s CIA, such as requiring that Abbot’s CEO personally certify compliance with this reporting requirement. The CIA also demands that Abbott institute policies to ensure that its scientific research and publications foster increased understanding of scientific, clinical, or healthcare issues.
Delery asserted that DOJ is “not interested in merely collecting a large fine and moving on to the next case.” He noted that his office strives to “give companies the incentives – and the tools – to craft better compliance practices in the future.”
Investigative Transparency
Second, Delery discussed the importance of being transparent about the conduct DOJ investigates, a common theme of the Obama Administration. He noted that DOJ’s efforts have a “profound impact, not only on the pharmaceutical industry, but also on the lives of countless Americans,” and that each victory helps to deter others from following the same path.
He noted that DOJ will continue to emphasize the importance of explaining the conduct that has given rise to the settlements we negotiate because this transparency “benefits the industry by clarifying the factual basis for the actions we take,” and hopefully, “prompting other companies to avoid the same risks to patient health and safety,” he noted.
“Being transparent about our enforcement efforts also means distinguishing conduct that is lawful and even beneficial from conduct that is illegal and harmful. For example, we recognize the value of giving doctors the freedom to decide, in consultation with their patients, what treatments to use. And we acknowledge the importance of an open dialogue in which pharmaceutical companies and physicians share truthful information about a product’s likely effects.” However, when a “company crosses the line and distributes its products intending them to be used in ways that are not approved as safe and effective by the FDA, we will act aggressively,” Delery noted.
In this regard, he noted the November 2013 $2.2 billion settlement with Johnson & Johnson. Delery emphasized that “[m]isbranding like this undermines the regulatory regime that we rely on to ensure that medicines and medical devices are safe” and “can have catastrophic consequences for patients.” Thus, he noted, “the government will continue to bring these cases, and why we think it is so important that the public – and the industry in particular – understand the conduct at issue.”
Corporate Compliance is Good Business
Finally, Delery noted that DOJ and industry have a common interest in ensuring that corporate compliance not only is the right thing to do but also is a winning business strategy. He noted that “most pharmaceutical companies are trying to play by the rules, that navigating the health care landscape is not always easy, and that many companies and individuals do their best to get it right.” As a result, he noted that “the decision to come forward is the right one,” and that when “a company or individual acts responsibly by timely and voluntarily disclosing unlawful conduct, we will give serious consideration to that disclosure in deciding whether or how to charge or resolve the matter. Likewise, we will credit actions taken once the government has started to investigate.”
Ultimately, Delery noted that DOJ will “continue to insist on resolutions that eliminate any economic incentive to engage in and attempt to conceal unlawful conduct,” and that his office will “continue to seek criminal penalties, against both companies and individuals, under appropriate circumstances.”