enforcement issues for pharmaceutical and medical device manufacturers: recent developments and...

Enforcement Issues for Pharmaceutical and Medical Device Manufacturers:

Recent Developments and Emerging Issues

January 28, 2010

Pharma/Device Enforcement Issues| 2 Skadden, Arps, Slate, Meagher & Flom LLP

Cautionary Notes

• Company-specific citations in slides and accompanying discussion based on public sources – no privileged or confidential information

• With respect to discussion of indictments and/or civil FCA allegations, these involve allegations of wrongful conduct – and are not themselves proof

• In each of the civil settlements, the companies have denied wrongdoing and the settlements do not include admissions of liability

• The purpose of today’s discussion is to describe and analyze theories of liability/risks (and potential defenses and mitigation strategies) – not to judge or criticize the conduct of any particular company


What we Will Cover

• Overview of Select Recent Enforcement Actions

• Analysis of Enforcement Trends

• Update on Healthcare Reform

• Broader Trends for the Healthcare Industry


Pharma/Device Settlements: One-Year Look Back

Company Date Amount Alleged Conduct

Settlements

BSC (Guidant) Dec 2009 $22 million Kickbacks

Omnicare Nov 2009 $98 million Kickbacks

Pfizer Sept 2009 $2.3 billion OL Promotion, Kickbacks

Biovail Sept 2009 $22 million Kickbacks

Quest April 2009 $302 million Misbranded/AdulteratedProducts

Lilly Jan 2009 $1.4 billion OL Promotion, Kickbacks

Pending (reserve announced)

Forest April 2009 $170 million Misleading Promotion, Kickbacks

GSK Jan 2009 $400 million Sales/Promotional Issues


Representative Cases for Discussion

• Federal Criminal Cases– Pfizer Settlement

– U.S. v. Synthes

– U.S. v. Reuben

– U.S. v. Harkonen

• Federal Civil Enforcement Actions– Forest

– Scios

– J&J/Omnicare


Pfizer Settlement -- Summary

• $2.3 billion criminal fines and civil penalties– $1.3 billion in criminal penalties

• $1.195 billion criminal fine (largest US criminal fine ever)

• $105 million criminal forfeiture

– $1 billion in civil FCA penalties

• $668 million for federal programs

• $331 million for states

• Pharmacia & Upjohn: Felony plea to FDCA violation involving Bextra• Products referenced in civil settlement

– Promotional allegations: Bextra, Zyvox, Geodon, and Lyrica

– Inducements: Nine (9) other products (involving conduct 2001-04)

• Six whistleblowers will share $102 million • Previous Pfizer-related matters

– Lipitor 2002

– Neurontin 2004

– Pharmacia 2007


Pfizer Settlement - Civil


Pfizer Settlement - Civil (cont’d)


Pfizer Settlement – Additional Perspectives

Mike Loucks – Remarks at Press Conference

Pfizer General Counsel:The agreement resolves all "material pending matters" with the Justice Department, said Pfizer general counsel Amy W. Schulman in a statement. "This gives us a very important opportunity to put final closure on the universe of material open items involving our U.S.-based operations," she said.


U.S. v. Reuben


U.S. v. Reuben

• Brought by the USAO in Boston; • Likely an outgrowth of the Bextra investigation;• Reuben allegedly:

– sought and obtained grant funding from various pharmaceutical companies, including Pfizer, to conduct placebo-controlled studies and publish the results;

– did not actually enroll patients into the studies;

– submitted articles for publication that included study data that “were wholly made up by Reuben.”

• Pleaded guilty to health care fraud for knowingly and willfully executing a scheme and artifice to defraud Pfizer.


U.S. v. Norian, Synthes & Individuals


Synthes (cont’d)


U.S. v. Harkonen

• October 2006: InterMune settled criminal and civil charges for off-label promotion; paid $37 million in fines/penalties and entered into DPA

• March 2008 : Former CEO Scott Harkonen indicted on wire fraud and felony FDCA charges in connection with the promotion of Actimmune® (interferon gamma-1b)

• Pre-Trial Rulings:– No First Amendment restriction on prosecution for false,

misleading statements– Press release was "labeling" under the FDCA

• Verdict (September 29, 2009):– Misbranding: Not guilty– Wire fraud: Guilty


Civil Enforcement Actions

»Forest

»Scios

»J&J/Omnicare


FCA Complaint – Forest Laboratories


Forest Laboratories (cont’d)



• Activities/evidence regarding off-label and/or inducements promotion

– Marketing plans and forecasts

– Sales force call plans

– Promotional speakers

– Advisory boards

– Clinical study with alleged purpose to switch patients

– Preceptorships

– Ghostwriting

– Gifts and entertainment

– ROI analysis

• Complaint also makes reference to prior “compliance” statements by management


FCA Complaint-Scios

• Filed June 11, 2009

• Focuses on Natrecor® (approved IV treatment for acute decompensated CHF)

• Alleges promotion for serial, scheduled out-patient infusions

• Qui tam complaint filed in 2005 by former Area Manager


Scios Complaint – Overview

• Activities/evidence regarding off-label promotion– Internal marketing materials discussing the outpatient market,

opportunity

– Sales force calls on outpatient infusion clinics

– Payments to HCPs for promotional speeches, training on outpatient use, publications on use in outpatient setting

– “Ghostwriting”

– Use of CME to promote off-label use

– Registry study conducted as a marketing tool

– Coverage and reimbursement support

• DOJ refers to company-sponsored studies indicating Natrecor was not effective for serial, out-patient infusions (¶¶ 48-54)

• Discussion of Scios/J&J relationship


Scios Complaint – Points to Consider

• No allegation of false or misleading statements

• Substantial discussion of coverage and reimbursement activities (¶¶ 91-97)


U.S. v. Johnson & Johnson

• Filed January 15, 2010

• Focuses primarily on J&J’s antipsychotic drug Risperdal

• Alleges J&J paid kickbacks to Omnicare to induce purchasing and referrals of J&J drugs

• Qui tam complaints filed by former Omnicare pharmacist and former Omnicare financial analyst


U.S. v. Johnson & Johnson

• Complaint, filed by the USAO in Boston, covers conduct that allegedly occurred between 1999-2004;

• Likely an outgrowth of Omnicare’s 2009 FCA settlement alleging that it received kickbacks from multiple pharmaceutical companies in exchange for providing formulary preference for certain drugs;

• Complaint alleges that J&J paid kickbacks in exchange for Omnicare recommending certain drugs;

• Alleged kickbacks included:– market share rebate payments,

– data purchases, and

– grants


Key Take-Aways


Insights and Analysis

• Despite controversy over prosecution of truthful, non-misleading off-label promotional activities by manufacturers, DOJ actions generally have focused on allegations of false and misleading statements made with intent to defraud or mislead. The Scios complaint is a notable exception, though DOJ may narrow its focus as the case proceeds

• There is increasing scrutiny of how companies compile and disclose clinical study results. While often characterized as false or misleading, many do not involve outright falsehoods; rather, they are premised on communications that are misleading by omission of contrary or negative study data

• Prosecutors are scrutinizing “non-traditional" sales and marketing practices, including "ghostwriting," reimbursement support activities and interactions with compendia, formulary sponsors, and payor organizations


Insights and Analysis (cont’d)

• Several recent enforcement actions appear to be motivated, in part, by false statements to FDA – including statements that reassured the FDA regarding future compliance. Such "flouting" of regulators can be a critical factor in charging decisions by prosecutors

• Prosecutors are increasingly investigating the activities of individuals, particularly executives and management personnel, and are willing to bring both strict liability misdemeanor charges under the FDCA and felony charges for fraud

• DOJ has become increasingly active in litigating FCA actions against pharmaceutical companies

• As companies raise compliance-type defenses, prosecutors are focusing intensively on how programs worked in practice – particularly how companies received, investigated and remedied improper conduct

– Compliance efforts even more important today in light of prosecution of individuals under Park doctrine


Update on Healthcare Reform


Legislation aside, what are we seeing . . .

• Transparency initiatives resulting in increased scrutiny of cost, relationships, and quality;

• Increasing enforcement and oversight, with particular emphasis on accountability at the senior executive and boards of directors level;

• Increasing focus on pay-for-performance and cost-effectiveness strategies; and

• States playing a more prominent enforcement role.


Speaker Biographies

John Bentivoglio represents pharmaceutical, medical device and biotechnology manufacturers in FDA and health care regulatory issues, compliance programs, and civil and criminal investigations by federal and state law enforcement agencies. He has extensive experience developing, implementing and assessing corporate compliance programs under federal and state laws. He also has assisted manufacturers in investigations by various U.S. Attorney’s Offices, the Criminal and Civil Divisions of Main Justice, and state attorney generals; and negotiated several CIAs. [email protected]; 202.371.7560

Jennifer Bragg counsels clients on FDA enforcement issues. Her work frequently involves developing strategies and conducting risk assessments to help companies to resolve their regulatory issues while minimizing litigation risks. She has represented numerous global pharmaceutical and medical device companies in government investigations laws, including cases arising under the False Claims Act and the Federal Food, Drug and Cosmetic Act. In addition. From 1998 to 2003, Ms. Bragg served in the FDA’s Office of Chief Counsel as associate chief counsel for enforcement, where she provided advice to the FDA’s Office of Criminal Investigations. [email protected]; 202.371.7980.

enforcement issues for pharmaceutical and medical device manufacturers: recent developments and...

Documents

meagher flom llpwhat

emerging issues

civil penalties

civil settlements

civil fca penalties

criminal penalties

criminal forfeiture

criminal fines