Health Care Compliance Assoc.

2000 Compliance InstituteValli Baldassano

Pharmacia Corporation

On the Agenda

• History• Dose of Reality• The Arsenal• Take Aways

History

• 1991 OIG Study: “Promotion of Prescription Drugs Through Payments and Gifts”– Approved product studies are schemes to pay

doctors

• 1993 & 1994 State enforcement against “Switching Programs”– Miles pays $805,000 and Upjohn pays $675,000

• cognitive services programs to pharmacists

• 1992 J&J Settles with States– Rebate coupons to customers

• August 1994 OIG Fraud Alert: “Prescription Drug Marketing Schemes”– Cash to pharmacists for “product conversions”– Free airline miles to docs for prescribing– Research payments to docs for de minimis record

keeping tasks

• 1993 Ayerst Labs $830,000 – Patient profiling program corrupts doctors

• 1994 Rugby $200,000– Pharmacists get vacation packages for

buying product

• 1994 Hoffman La Roche $450,000– Small grants to doctors for sham research on

FDA approved products

• 1995 Merck-Medco– Consent decree: full disclosure of relationship

with Merck and switching programs

• 1995 Caremark International $161,000,000 – Kickback claims that took several forms:

research grants, consulting agreements and paying for office expenses

Recent Activity• March 1999 Novartis (Ciba-Geigy) $8,000,000

– Overcharged VA by failing to provide accurate pricing information during negotiations

• May, 1999 Genetech $50,000,000 – Off-label promotion of Protropin, allegedly

facilitated through educational grants and sham research payments

• May, 1999 NMC $16,500,000 – Kickbacks for diagnotic tests– NMC president & vice president indicted

• January, 2000 Fresenius Medical Care $486,000,000 (including $101,000,000 criminal fines) – False claims/ giving educational grants and

other payments as kickbacks for business

• California allergist indicted (winter 2000)– Study for RPR faked

• Bindley Western 4/2000 $25,800,000 – (criminal) rogue employees of wholesaler

diverting drugs through gray market

• Bayer and others (reported 5/2000)– Deceptive Pricing Practices

• AWP• Medicaid Best Price

– repackaging

– Federal and State Enforcement– Congressional Inquiry

• Warner Lambert (reported 5/2000)– Whistleblower suit involving promotion of

WL’s epilepsy drug

• PBM Investigation (reported March 2000)– Switching Programs– Upstream and Downstream Rebates– Formulary Access

Government Aresenal

• Anti-kickback Statute 42 U.S.C. § 1320a-7b(b)– Illegal remuneration to influence purchase,

prescription or recommendation of any item reimburseable by Medicare or Medicaid

– “One Purpose” Test• liability if only one purpose of payment is

to influence. U.S. v. Greber, 760 F.2d 68, 69 (3d Cir. 1985)

Kickbacks can be . . .• wining and dining• consulting services• advisory boards• clinical studies• free goods• business assistance• charitable/public service expenditures• discounts and rebates• bundling arrangements

No Easy Escape Through Safe Harbors

• Discount• Bona fide Employees• Group Purchasing Organizations• Personal Services• Shared Risk

False Claims Act

• Civil liability for person who knowingly presents or causes to be presented a false or fraudulent claim for payment. 31 U.S.C. § 3729– Home of the whistleblower– Industry practice under attack: AWP and

Medicaid Best Price

How Can AWP Reporting be a False Claim?!

• Claim is Facially False– AWP not defined by regulation and widely

published– Would have to prove knowledge of or willful

blindness to doctor’s failure to report discounts• questionable whether doctors are

required to report discounts

• “Fraudulent Implied Certification” Theory– Claimant implicitly certifies compliance with the law

when submitting claim. • U.S. ex rel. Pogue v. Healthcorp, Inc., 914 F.Supp.

1507 (M.D. Tenn. 1996) – Liability attaches only if compliance with regulations

at issue is a prerequisite for obtaining the benefit and the defendant affirmatively certified such compliance• Harrison v. Westinghouse Savannah River Co., 176

F.3d 776, 778 (4th Cir. 1999)• Thompson v. Columbia/HCA Healthcare Corp., 125

F.3d 899, 902 (5th Cir. 1997)

• “Fraudulent Course of Conduct” Theory– Fraudulent course of conduct caused government to

pay claim for money• U.S. v. Incorp Village of Island Park, 888 F. Supp.

419, 439 (E.D.N.Y. 1995)– FCA “reaches beyond ‘claims’ which might be legally

enforced, to all fraudulent attempts to cause the government to pay out sums of money.” • U.S. v. McLeod, 721 F.2d 282, 284 (9th Cir. 1983)• U.S. Neifert-White Co., 390 U.S. 228, 233 (1968)

A Note on PBMs . . .

• FCA potentially applies to allegations:– skimming discounts to pharmacies– “playing the float”– billing for services not provided– brand/generic switch & bill– switch programs

• Kickbacks in procurement: 41 U.S.C. § 51 or Robinson Patman § 2(c) – formulary inclusion

Take Aways

• Pharma Initiatives Are Here– Medicare Drug Benefit– Congressional hearings– Public proclamations

• The Rules are Being Redefined• Difficult to Advise Clients• Compliance Programs Make Sense