CVS’ Caremark and EndoGastric Solutions Enter into Corporate Integrity Agreements, OIG Adds More Detailed “Successor Liability” Section to CIAs

The Office of Inspector General (OIG) for the U.S. Department of Health & Human Services has been busy in 2014. By our count, OIG has issued about 15 corporate integrity agreements (CIAs) so far this year. OIG negotiates CIAs with health care providers and other entities as part of the settlement of Federal healthcare program investigations arising under a variety of civil false claims statutes. Providers or entities agree to the obligations, and in exchange, OIG agrees not to seek their exclusion from participation in Medicare, Medicaid, or other Federal health care programs.

According to OIG, CIAs typically last five years and include requirements to:

• Hire a compliance officer/appoint a compliance committee;
• Develop written standards and policies;
• Implement a comprehensive employee training program;
• Retain an independent review organization to conduct annual reviews;
• Establish a confidential disclosure program;
• Restrict employment of ineligible persons (someone currently ineligible to participate in the Federal healthcare programs or Federal procurement or nonprocurement programs);
• Report overpayments, reportable events, and ongoing investigations/legal proceedings; and
• Provide an implementation report and annual reports to OIG on the status of the entity’s compliance activities.

We covered Endo Pharmaceuticals’ CIA last month, and two other settlements also seemed worthwhile to check out.

CVS’ Caremark

CVS’ Caremark, a pharmacy benefit management company (PBM), agreed to pay the government and five states $4.25 million to settle allegations that it knowingly failed to reimburse Medicaid for prescription drug costs paid on behalf of Medicaid beneficiaries, who also were eligible for drug benefits under Caremark-administered private health plans. Caremark is operated by CVS Caremark Corp., one of the largest PBMs and retail pharmacies in the country. A PBM administers and manages the drug benefits for clients who offer drug benefits under a health insurance plan.

Caremark served as the PBM for private health plans that insured some individuals receiving prescription drug benefits under both a Caremark-administered plan and Medicaid. According to the Department of Justice (DOJ) press release, when an individual is covered by both Medicaid and a private health plan, the individual is called a “dual eligible.” DOJ states: “Under the law, the private insurer, rather than the government, must assume the costs of health care for dual eligibles. If Medicaid erroneously pays for the prescription claim of a dual eligible, Medicaid is entitled to seek reimbursement from the private insurer or its PBM, in this case Caremark.”

Caremark allegedly used a computer claims processing platform called “Quantum Leap” to cancel claims for reimbursement submitted by Medicaid for dual eligibles. The government alleged that Caremark’s actions caused Medicaid to incur prescription drug costs for dual eligibles that should have been paid for by the Caremark-administered private health plans rather than Medicaid. The settlement arose from a lawsuit filed by Janaki Ramadoss, a former Caremark quality assurance representative, under the qui tam provisions of the False Claims Act.

Caremark entered into a CIA with the OIG, effective March 25, 2014. Under the CIA, Caremark is required to maintain its current compliance program and to undertake a series of additional compliance measures, including training and monitoring procedures and maintaining a disciplinary process for compliance obligations for at least 5 years.

EndoGastric Solutions, Inc.

EndoGastric Solutions Inc., a Redmond, Washington-based device manufacturer, agreed to pay the government $5.25 million to resolve allegations that it violated the False Claims Act. The government alleged that Endo Gastric misled healthcare providers about how to bill federal healthcare programs for a procedure using the company’s EsophyX device, which is intended to treat acid reflux disease. The device was developed as an alternative to a more invasive procedure that requires incisions in the abdomen.

According to the Department of Justice, the government alleged that EndoGastric Solutions knowingly caused health care providers to bill for the less invasive EsophyX procedure using codes applicable to the more invasive procedure, which provided for a higher level of reimbursement. As a result, federal health care programs allegedly paid more than they should have for the procedures using EsophyX.

The government also alleged that EndoGastric Solutions knowingly paid illegal remuneration to certain physicians for participating in patient seminars and co-marketing agreements to induce them to use EsophyX, in violation of the Federal Anti-Kickback Statute.

“A medical device manufacturer violates the law when it advises physicians and hospitals to report the wrong codes to federal health insurance programs in order to increase reimbursement rates,” said U.S. Attorney for the District of Montana Michael W. Cotter. “Health care providers are required to bill federal health care programs truthfully for the work they perform.”

In addition, EGS has entered into CIA, effective February 11, 2014. Under the CIA, EGS is required to maintain its current compliance program and to undertake a series of additional compliance measures, including training and monitoring procedures and maintaining a disciplinary process for compliance obligations for at least 5 years.

Corporate Integrity Agreements- Successor Liability

Starting in 2014, OIG now includes the title “Successor Liability” in its section which used to be entitled simply Changes to Business Units or Locations. While the language is essentially the same as recent requirements, the new title stuck out as we examined the CIAs. We have noted a few differences below.

For example, when comparing EndoGastric to Johnson and Johnson’s 2013 CIA (emphasis added):

IV. CHANGES TO BUSINESS UNITS OR LOCATIONS

Sale of Unit or Location

In the event that, after the Effective Date, J&J or a J&J Pharmaceutical Affiliate proposes to sell any or all of its business units or locations that are subject to this CIA, J&J and/or the J&J Pharmaceutical Affiliates shall notify OIG of the proposed sale no later than five days after the sale is publicly disclosed by J&J or the J&J Pharmaceutical Affiliate. This notification shall include a description of the business unit or location to be sold, a brief description of the terms of the sale, and the name and contact information of the prospective purchaser. This CIA shall be binding on the purchaser of such business unit or location, unless otherwise determined and agreed to in writing by the OIG.

EndoGastric’s CIA had noticeable differences (available on p. 16 of 32, differences in bold):

IV. SUCCESSOR LIABILITY; CHANGES TO BUSINESS UNITS OR LOCATIONS

A. Sale of Company, Business Unit or Location.

In the event that, after the Effective Date, EGS proposes to sell any or all of its company, business units, or locations (whether through a sale of assets, sale of stock, or other type of transaction) that are subject to this CIA, EGS shall notify OIG of the proposed sale at least 30 days prior to the sale of its company, business unit, or location. This notification shall include a description of the company, business unit, or location to be sold, a brief description of the terms of the sale, and the name and contact information of the prospective purchaser. This CIA shall be binding on the purchaser of the business, business unit, or location, unless otherwise determined and agreed to in writing by the OIG.

OIG may be stressing to companies that no legal entity maneuvering will shield them from the rigors of CIAs. Many CIAs have a transparency requirement for companies to upload payments and grants to a public website. Now that the Sunshine Act makes that a requirement for all pharmaceutical and device manufacturers, we will follow potential OIG changes to its agreements to align with the Sunshine Act.