Life Science Compliance Update November 2016

Life Science Compliance Update

Contact: www.lifescicompliance.com

U.S. EDITIONVolume 2.11 | November 2016

Thomas Sullivan . . . . . . . . . . . . . . . . . . . . . . . . Publisher

Seth Whitelaw, JD, LLM, SJD . . . . . . . . . . . . . . . .Editor

Cheryl Landis, LANDIS DESIGN STUDIO . . . . . . . . . . Graphic Design

Value Based Contracts and Government

Pricing A Cross Functional View

By Chris Cobourn, Managing Director and Clay Willis, Director Huron Life Sciences1

Abstract: Value Based Contracts are becoming increasingly important and commonplace. VBCs also have important implications for Government Pricing programs. Therefore, life sciences companies need to take a coordinated and collaborative approach towards compliance that involves multiple stakeholders to evaluate the agreements and the potential impact on Government Pricing.

Value Based Contracts (“VBCs”) are the talk of the town these days. But for all of the talk there is little substantive information or guidance to help the pharmaceutical manufacturer understand the landscape of VBCs. This includes the potential impact and risks related to Government Program (“GP”) reporting requirements.

It is one thing to evaluate the value to patients, as well as the potential business value of these arrangements; it is another to understand the implications on GP, especially on a price sensitive value such as Medicaid Best Price (“BP”). Given the importance of GP Compliance, and the dramatic impact that these arrangements could have on government pricing, it is critical that manufacturers develop an appropriate process across the organization to thoroughly vet these

INSIDE

1 The authors of this article are consultants with Huron Life Sciences, which serves the continuum of life sciences organizations to deliver unique solutions that bridge the process of scientific discovery and sustainable business model creation with strategies that reduce the risks associated with regulatory and government scrutiny. Views expressed in this article are that of the authors and not necessarily those of Huron Consulting Group, or its clients, and should not be interpreted as legal advice. If you have questions about sValue Based Contracts or any other considerations, please feel free to contact Chris Coburn at 207-841-1353 or [email protected].

FEATURE

• Value Based Contracts and . . . . . . . . . . . .1 Government Pricing - A Cross Functional View

ENFORCEMENT

• SEC Provides Explicit Whistleblower. . . .6 Guidance – Hunting Season Is Now Open

• Examining the FY2015 Report . . . . . . . . . .8 on Medicaid Fraud Control Units

• GSK & China - The Latest FCPA . . . . . . . 11 Settlement Isn’t the End

• Tracking Towards a Banner Year. . . . . 14 for FCPA and FCA Enforcement

COMPLIANCE OPERATIONS

• Retaliation, Pre-taliation, and . . . . . . 17 Whistleblower Hotlines: How Compliance Officers Can Fight the Biggest Challenge They Face

• The Dilemma of Co-Pay Charities . . . 20 and Patient Access to Medication

FDA

• Are We Seeing the End of OPDP? . . . . . 23

BRIEFLY NOTEWORTHY . . . . . . . . . . 26

Feature Article

http://www.lifescicompliance.com

http://www.landisdesignstudio.com

http://www.landisdesignstudio.com

Life Science Compliance Update U.S. Edition

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arrangements and understand the net impact across commercial and government programs. It requires a coordinated and collaborative process across functions at the manufacturer, across compliance, GP, market access, legal, finance, and regulatory.

The focus in on this article is the potential impact on government pricing, and how VBCs can impact statutory pricing under Medicaid (with additional impacts on the 340B drug pricing as well as Medicare Part B Average Sales Price (“ASP”)). A few areas we will touch upon include:

1. What is a value based contract?

2. Why the momentum now, and where is it trending?

3. What is the potential gp impact?

4. How should a pharmaceutical manufacturer approach evaluating these arrangements?

5. What operational considerations should a pharmaceutical manufacturer evaluate?

The VBC Landscape: An Overview of VBC and Industry Trending

Value Based Contracts can generally be described as arrangements where the end price or reimbursement of pharmaceutical products is based upon some performance criteria or outcome.

However, despite that commonly accepted viewpoint, there is no single definition for VBC. For example, the Biotechnology Innovation Organization (“BIO”)—a trade association representing innovative biopharmaceutical developers, goes a step further, describing several minimum standards for Value Based Agreements, including that the arrangement must:

1. Be patient centered and support better outcomes for the patient,

2. Measure value using validated, meaningful metrics and data, and

3. Encourage the continued development of innovative new medicine and advancements in “beyond the pill” innovations that further improve patient care (e.g., Medicare adherence programs).2

Broadly speaking, the industry has been at the forefront of exploring the potential barriers to, and the promise of, VBC. For example, Eli Lilly & Company, a BIO member, announced a collaboration with Anthem, one the five largest U.S. insurers, earlier this year with a focus on promoting VBC arrangements.

The two Indiana-based companies noted that “[w]hile there has been substantial innovation in how health plans and the government reimburse for hospital and physician payments…payment for prescription drugs is often based on more traditional outcomes. Given the role that prescription drugs play in the treatment of and spending for many complex and chronic conditions, health plans and manufacturers seek greater opportunity to align payment with quality, accountability, and coordination. Ultimately, these arrangements can encourage access to high-value medicines and treatments and ensure that patients are getting the best value for their healthcare dollars.”3

Alongside industry and payer interest, the prominence of this issue in current national discussions on healthcare is driven by the reality that new and higher hurdles have evolved in the demonstration of the “value” of new products. Furthermore, Real World Evidence (“RWE”) has been cited as a major factor in recent decisions by retailers/PBMs related to reimbursement status and level and product utilization decisions. VBCs can be this direct mechanism linking reimbursement with impact to the patient.

In fact, industry trends suggest that that VBC’s are gaining critical momentum and are even approaching a tipping point. We, currently, are seeing this traction across both commercial and government payers.

For example, CMS has set an objective of 50% Medicare payments in value-based purchasing categories by the end of 2018. While CMS does not explicitly consider cost in coverage decisions, cost has been cited as a reason for Medicare to open a national coverage analysis.

2 Biotechnology Innovation Organization (BIO), 2016 (May ), Comments Re: Medicare Program; Part B Drug Payment Model [CMS-1670-P], available at: https://www.bio.org/letters-testimony-comments/bio-submits-comments-re-medicare-program-part-b-drug-payment-model-cms (last accessed October 13, 2016).

3 Lilly, Anthem, 2016 (January 29), Promoting Value-Based Contracting Arrangements, available at: https://lillypad.lilly.com/WP/wp-content/uploads/LillyAnthemWP2.pdf (last accessed October 13, 2016).

https://www.bio.org/letters-testimony-comments/bio-submits-comments-re-medicare-program-part-b-drug-payment-model-cms



https://lillypad.lilly.com/WP/wp-content/uploads/LillyAnthemWP2.pdf

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This industry momentum puts the manufacturer in an interesting position of trying to get ahead of the curve on VBCs to evaluate these evolving agreements in terms of impact on the business, compliance considerations, including the potential GP Impact.

The Potential GP Impact – Applying Current Guidance

Statutory pricing under government programs, such as Medicaid Average Manufacturer Price (“AMP”) and BP are based upon commercial relationships.4 Manufacturers are required to evaluate contracting and commercial activity and from it calculate the various price points that set the government price or reimbursement under that particular program. CMS provides guidance to help manufacturers develop methodologies for performing the calculations, such as inclusion or exclusion of various customer types (Class of Trade), transaction types, or types of payments (price incentives or excluded Bona Fide Service Fees).

Current guidance does not provide much direction on how to evaluate complex VBCs relative to Medicaid AMP and BP. So, although public policy seems to be pushing value based evaluations, CMS has not provided guidance on how to treat these agreements in the calculations.

• On March 8, 2016, the Centers for Medicare & Medicaid Services (CMS) released the proposed Part B Drug Payment Model rule which plans to test a new

Medicare Part B payment model for reimbursement of ASP products.

– The objective of the proposed rule is to test whether an alternative payment structure and/or use of value-based purchasing tools can reduce Medicare spend and improve quality of care to Medicare beneficiaries.

• On July 14, 2016, CMS issued Manufacturer Release #99 (State Release # 176) which provided minimal guidance on value based purchasing (VBP) arrangements.

– The release indicated that manufacturers should refer and adhere to existing regulations when determining which transactions are eligible for BP, which is not new guidance.

– T h e g u i d a n c e d i d , h o w e v e r , e n c o u r a g e manufacturers to consider VBP arrangements with state Medicaid agencies.

– Encouraged any manufacturer that has these arrangements to submit any issues or questions to the CMS Division of Pharmacy at [email protected].

So where does this leave us?

Current guidance directs us to apply current guidance. This means taking established guidance related to areas such as Bundling, Stacking Lagged Pricing Concessions, and Free Goods, and applying them to these complex arrangements.

Is it a like a Bundle? And where does that get us?

In the 2007 AMP Final Rule, CMS established a definition and approach around “bundles.”5 Bundles can generally be understood as where there are some criteria that

Pharmaceu)calpriceshavebeenthefocusofintensepublicscru)nyinthepast18months,andthepublicwantsmanufacturerstoprovethevalueoftheirinnova)onsandjus)fythecorrespondingprices

Since2012,threeprominentproviderorganiza)onsputforthrecommenda)ons&toolstoaddressthehighcostofoncologydrugs:theMayoClinic,theAmericanSocietyofClinicalOncology,andMemorialSloanKeHeringCancerCenter.

Inmarketcondi)onswhereaccessisanincreasinglyimportantbasisofcompe))on,innova)vepayercontrac)ngapproachesarecri)calpointsofdifferen)a)on.

Policymakerscon)nuetoadvocateforvalue-basedpricingmechanisms(ACAenablement:CMMI,BPCI,MSSP,VBPM;CMSproposedPartBpaymentmodel;CMSCommissionercomments

4 See C. Cobourn, What You Don’t Know About AMP Can Hurt You - Part 1 - In the Beginning, 2.7 Life Science Compliance Update 14 (Jul. 2016).

5 See Medicaid Program; Covered Outpatient Drugs, 81 Fed. Reg. 5169 (Feb 1, 2016) at https://www.federalregister.gov/d/2016-01274/p-249.

https://www.federalregister.gov/d/2016-01274/p-249


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impacts net pricing of a drug, such as a price on one drug being dependent upon pricing and or market or volume criteria on another drug, such as volume, market share, or performance over time.

Applying current guidance to VBCs generally can mean that some of these arrangements may have to be treated as a bundle. We call a bundle that has performance criteria over some elapsed time period to be a “temporal bundle.” This means that there can be an initial price, but some price adjustment based upon criteria over time, such as volume or market share. This requires a complex approach to developing an allocation of the net pricing over time, and allocating price adjustments across the time period of the performance criteria.

VBCs, with some performance criteria over time, can be viewed as a temporal bundle. This guidance directs manufacturers as to how to evaluate them and implement pricing methodologies.

So what does this mean to Medicaid Statutory Pricing?

Manufacturers calculate and report AMP on a monthly and quarterly basis, and BP on a quarterly basis. Pricing is due 30 days after the end of a given period. If VBCs are considered a Temporal Bundle, it will require adjustment of historically reported pricing data. This will potentially impact the Medicaid rebate paid to the states, as well as the Public Health Service (“PHS”) price. This presents both compliance and operational challenges to ensure that the manufacturer is properly evaluating the bundle and incorporating it in to their methodologies, as well as performing ongoing true-ups and adjustments.

BP is based upon what is “earned” in each quarter. Since the net pricing is not normally known by 30 days after the end of a period, manufactures have to have some method of estimating the BP, and then “truing it up” at some point once all payments and adjustments are realized, often up to 3 years after a quarter.

BP is a key component in the calculation of the Unit Rebate Amount (“URA”), or the amount per paid to the state on a quarterly basis for Medicaid Utilization. Adjustments to BP after the fact can change the Medicaid

URA calculation, requiring prior period adjustments to the states for historical rebates paid. The URA also directly impacts the 340B price,6 so an historical adjustment can also require credits back to Covered Entities based upon an adjusted price.

So, if a VBC is considered a bundle, manufacturers have to develop methodologies and operational procedures to perform initial reporting, as well as BP True-Ups, including

1. Determine an approach to the initial BP estimate, due 30 days after a particular quarter

2. Determine a time frame for a reasonable BP true up (i.e. 1 year)

3. Determine a BP True-Up allocation methodology (which would occur each quarter for a previous quarter)

4. Determine reasonable assumptions by VBC agreement for situations that fall outside current BP guidance (i.e. outside the 3 year CMS window to restate BP, non-unit based prices and/or discounts, etc.)

5. After each True-Up

a. Report and adjusted BP based upon the results of the VBC agreement

b. Evaluate the impact on the Medicaid URA for the historical period, and if there is an additional Medicaid liability due to the states

c. Evaluate the impact on the historical PHS price, and whether refunds are due to 340B Covered Entities based upon the updated pricing

d. Evaluate reasonable assumptions and document any necessary updates based upon the result of the VBC agreement

6 The Veterans Health Care Act of 1992 enacted section 340B of the Public Health Service Act (“PHS Act”), which created the “Limitation of Prices of Drugs Purchased by Covered Entities.” Section 340B provides that a manufacturer who sells covered outpatient drugs to certain eligible entities agrees to charge a price for covered outpatient drugs that will not exceed that determined under a statutory formula (also referred to as the ceiling price, and calculated at Medicaid AMP minus the Medicaid URA). 340B covered entities are Disproportionate Share Hospitals, Federal Grantee Clinics, and other safety net entities.


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Below is an example of typical BP process and how it could be impacted by VBAs as a Temporal Bundle:

our monthly and quarterly GP calculations? VBCs have a different feel than normal agreements. This could stem from the fact that they are new, so many unknowns, or overall concerns. From a GP calculation perspective, we need to be prepared so we can operationalize these arrangements and determine how to manage these moving forward. This includes what this will mean for manufacturers systems, data, and processes. We recommend:

• Engaging with IT to assess what technology platforms or partnerships are needed to support VBC from a data collection and analytics standpoint.

• If your current IT infrastructure is insufficient, the time is now to consider platform investments or novel partnerships.

• Assess available data to actually determine utilization, efficacy, and outcomes and will the data be auditable and reliable.

• Begin dialogue with relevant GP system vendors to assess capabilities for VBC agreements.

• Assess impact this will have on current monthly and quarterly processes for GP calculations across all government programs.

• Assess what document assumption document will need to be created or updated to address a VBC agreement.

Where Does This Leave Us?

Although there are compliance, legal, operational, and GP hurdles to overcome before VBC agreements become commonplace, current trends indication this is the direction the industry is headed. Whether a manufacturer

Evaluating Value Based Contracts Across the Organization

Given the potential complex compliance, legal, and GP risks, these agreements should be vetted through a process across the business value, the compliances risks, and the potential impact on Government Pricing and government programs. Participation in these programs cannot just be evaluated based upon perceived business value, as the compliance and GP risks can be far reaching, and hard to understand without the appropriate analysis.

We recommend a cross functional approach, where appropriate functions are involved up front in the evaluation, to conduct the appropriate analysis and price modeling, so that an appropriate decision can be made upon a known ROI and analysis of value and risks prior to arrangement become effective. Functions involved can include compliance, GP, market access, legal, finance, and regulatory.

A proposed approach to the evaluation of these agreements is outlined to the right.

Operational Impact ConsiderationsFrom the GP perspective, can we hear about VBCs and quickly direct our attention to the operational impact, how would we incorporate them in to


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has already signed a VBC agreement, there have been a few, or has only just begun to consider them, there are numerous action steps or consideration that can be pursued today:

• Understand how likely your company is to engage in these types of arrangements (may not be within your control… you need to be prepared).

• Don’t wait for regulatory policy to catch up; partner with your contracting, market access, legal, finance, and GP colleagues, understand current contractual arrangements and VBC ambitions, and define the critical regulatory scenarios and sign posts needed to make VBC a reality.

• Define regulatory sign post events needed to pave the way for VBC at your organization, and build relationships with the appropriate stakeholders.

• Ensure that your company’s GP team is involved at the beginning of the process, and that they have the information they need to model the potential agreement and educate the organization of the potential impacts.

• Monitor government program regulations to see if VBC arrangements are addressed.

• Ensure informed decisions are made to maximize access and revenue and avoid unanticipated impacts on government program.

SEC Provides Explicit Whistleblower Guidance

– Hunting Season Is Now Open

By Robert N. Wilkey, Esq., Staff Writer for Life Science Compliance Update

Abstract: The SEC’s Office of the Whistleblower recently announced that its whistleblower awards have now exceeded over $100 million including the approximately $500 million regarding financial remedies in the form of SEC fines, forfeiture, and other penalties. The Program established by Congress to incentivize whistleblowers with specific, timely and credible information about federal securities laws violations to report to the SEC, continues to be a very integral part of the SEC’s overall enforcement and compliance plan.

Compliance officers have long talked about the “threat” whistleblowers pose to companies, especially as whistleblowers started coming forward in the hopes of big payouts. However, in August, the Securities and Exchange Commission (“SEC”) revealed just how lucrative it has been for whistleblowers.7 Since 2011, with the help of whistleblowers, the SEC has awarded over $100 million to recover more than $500 million.8

As part of its August announcement, the SEC’s Office of Whistleblower reaffirmed the agency’s regulatory position that any “assistance and information from a whistleblower who knows of possible securities law violations can be among the most powerful weapons in the law enforcement arsenal of the SEC.”9 The SEC continues to realize the integral role that whistleblowers play in identifying possible fraud, SEC violations, and providing other information which allows the SEC to “minimize the harm to investors, better preserve the integrity of the United States’ capital markets, and more swiftly hold accountable those responsible for unlawful conduct.”10

Background of the SEC’s Whistleblower Enforcement Program

Congress mandated that the SEC establish a Whistleblower Enforcement Program (“The Program”) in 2011. The Program had the explicit policy goal of incentivizing whistleblowers with specific, timely and credible information about federal securities laws violations to report to the SEC.11 Andrew Ceresney, Director of the SEC Division of Enforcement, has described that the “ultimate goal of our whistleblower program is to deter securities violations.”12 It also significantly expands the SEC’s ability to gather information about potential infractions.

7 See U.S. Securities and Exchange Commission, Office of the Whistleblower, Press Release, Whistleblower Awards Top $100 Million, (Aug 30 2016) available at https://www.sec.gov/news/pressrelease/2016-173.html

8 Id.9 See U.S. Securities and Exchange Commission, Office of the

Whistleblower, Welcome to the Office of the Whistleblower, October 2016, available at https://www.sec.gov/whistleblower/

10 Id. 11 See U.S. Securities and Exchange Commission, Office of the

Whistleblower, Press Release, Whistleblower Awards Top $100 Million, (Aug 30 2016) available at https://www.sec.gov/news/pressrelease/2016-173.html

12 Id.

https://www.sec.gov/news/pressrelease/2016-173.html


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The SEC paid its first award in 2012, just over a year after its Office of the Whistleblower was established. Since then, the Office has received more than 14,000 whistleblower tips from individuals in all 50 states and the District of Columbia and 95 foreign countries.13 Some states, however, rank more highly regarding tips. For example, states with a high proportion of tips include California (2,046), Texas (740), Florida (892), and New York (950).14

As tips from whistleblowers have increased by 30% from 2012 to present, so too have the awards. In 2016, the Agency, so far, has received nearly 4,000 tips resulting in six of the SEC’s top-ten awards.15 Despite the size of the awards to whistleblowers, overall whistleblowers take only 20 cents of every dollar recovered, making it a very efficient tool.

How Does the SEC Whistleblower Enforcement Program Work?

According to the SEC, whistleblowers may be eligible for an award when they voluntarily provide the SEC with unique and useful information that leads to a successful enforcement action. Also, the monetary sanctions imposed need to exceed $1 million. If both conditions are satisfied the whistleblower awards can range from 10 percent to 30 percent of the money collected.16

The SEC is openly, actively and transparently marketing its Program to prospective whistleblowers, and it openly discloses the claims, review, and investigation process as part of this marketing campaign.17 The SEC summary of its Whistleblower Enforcement Program is depicted in the figure.

The Whistleblower Enforcement Program typically commences with the voluntary submission of tips and information to the SEC by a qualified whistleblower.18

Under the Securities and Exchange Act, a qualified whistleblower is “a person who voluntarily provides us with original information about a possible violation of the federal securities laws that has occurred, is ongoing, or is about to occur.”19 The SEC clearly states that one or more people are allowed to act as a whistleblower, but companies or organizations cannot qualify. Whistleblowers also do not need to be employees of the company to submit information about that company.20

As with False Claims Act whistleblowers, the SEC defines “original information” as information derived from an individual’s knowledge of facts known by that individual and not information derived from a publicly available source.21 In other words, the original information is likely to be an independent analysis (i.e. evaluation of information that may be publicly available but which reveals information that is not generally known) that is unknown to the SEC.22 In short, whistleblowers cannot “piggyback” off of the work of others.

To be viable, the information provided by a whistleblower must be provided “voluntarily,” which includes information provided to the SEC directly from the whistleblower, another regulatory agency, or law enforcement authority.23 Finally, as noted previously, to qualify for a whistleblower award, it “must lead to a successful SEC action resulting in an order of monetary sanctions exceeding $1 million.”24

13 Id. 14 Id. 15 Id. 16 Id. 17 See U.S. Securities and Exchange Commission, Office of the

Whistleblower, Frequently Asked Questions (FAQ), available at https://www.sec.gov/about/offices/owb/owb-faq.shtml

18 Id. 19 Id. 20 Id. 21 Id. 22 Id.23 See Section 21F of the Securities Exchange Act of 1934 (“Exchange Act”)

(15 U.S.C. § 78u-6) (“Rule 21F-4(a)”). 24 See U.S. Securities and Exchange Commission, Office of the


https://www.sec.gov/about/offices/owb/owb-faq.shtml

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The SEC requires that the whistleblower initiates the process by submitting information either through the SEC’s online Tips, Complaints and Referrals Questionnaire or by completing the SEC’s hardcopy Form-TCR (“Form TCR”) and mailing or faxing it to the SEC Office of the Whistleblower.25 The SEC notes that such tips or information can be submitted anonymously, where an attorney has been retained and submitted such forms on behalf of the whistleblower.26 Once a tip or information is submitted, the SEC conducts a rigorous claims analysis and investigation.27 If the SEC determines the claim to be viable, the Commission will proceed to seek an order of penalties.28 If the SEC determines that there is justification to issue fines, penalties, and sanctions exceeding $1 Million, it will publicly announce the situation by way of a Notice of Covered Action,29 which “will allow anyone who believes they may be eligible will have an opportunity to apply for a whistleblower award.”30

The SEC highlights that there are a number of factors in determining the amount of an award based on the unique facts and circumstances of each case and that the SEC has the discretion to increase the award percentage based on the existence of these factors:

• The significance of the information provided to the success of any proceeding brought against wrongdoers.

• The extent of the assistance provided in the SEC investigation and any successful proceeding.

• The law enforcement interest in deterring violations of the securities laws by making awards to whistleblowers providing information that leads to the successful enforcement of these laws.

• The extent to which, the whistleblower participated in the company’s internal compliance systems, legal or compliance procedures before, or at the same time, reported to the SEC.31

Additionally, the SEC notes they have the discretion to reduce an amount of an award based on some factors including if the whistleblower was a participant or culpable in the securities laws being reported as violated or the whistleblower interfered with a company’s internal compliance and reporting systems.32 In other words, “bad actors” cannot reap the rewards of being a whistleblower.

25 Id. 26 Id. 27 Id; see also SEC: What happens to whistleblower tips? FCPA Blog,

available at http://www.fcpablog.com/blog/2016/6/22/sec-what-happens-to-whistleblower-tips.html


Whistleblower, Claim an Award, https://www.sec.gov/about/offices/owb/owb-awards.shtml



32 See Section 21F of the Securities Exchange Act of 1934 (“Exchange Act”) (15 U.S.C. § 78u-6) (“Rule 21F-6”).

What’s the Takeaway?

Whistleblowing has become a lucrative endeavor thanks in large measure to the SEC’s ongoing marketing efforts. From the SEC’s point of view, the fact that awards have topped the $100 million mark highlights that the role of whistleblowers remains a very integral part of the Commission’s overall compliance and enforcement strategy. From the manufacturer’s viewpoint, while whistleblowers remain a “threat,” the SEC’s transparency about its whistleblower processes and procedures is helpful in understanding how and why these cases are brought. It also is an example of excellent compliance marketing.

Examining the FY2015 Report on Medicaid Fraud Control Units

By Kaitlin Fallon Wildoner, Esq., Senior Staff Writer, Life Science Compliance Update

Abstract: Medicaid Fraud Control Units play an important, if often overlooked, role in the Government’s continuing effort to control program, fraud and abuse. The recently released FY 2015 report sheds light on the work of the Units as well as confirms trends seen by other enforcement agencies.

Life science compliance officers are accustomed to reviewing the OIG’s annual work plans and statistics for insights on how to improve company compliance programs. However, the work of the state Medicaid Fraud Control Units (“MFCU”) has mostly gone unnoticed. With


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the recent trend to more local regulatory intervention, we thought it was important to take a look at the MFCUs’ activities.

BackgroundThe Social Security Act (“SSA”) requires each state to operate an MFCU to investigate and prosecute Medicaid provider fraud, as well as patient abuse or neglect in health care facilities and board and care facilities. States are not required to operate a MFCU if the Secretary of Health and Human Services (“HHS”) determines that (1) operation of a unit would not be viable because minimal Medicaid fraud exists in a particular State and (2) the State has other adequate safeguards to protect Medicaid beneficiaries from abuse or neglect. Forty-nine states and the District of Columbia have MFCUs.33

Each Unit is required to employ an interdisciplinary staff that consists of at least an investigator, an auditor, and an attorney.34 The unit staff works to review referrals of potential fraud and patient abuse or neglect to determine the potential for criminal prosecution and civil action. Referral sources can include the public, the State Medicaid Agency, and other Federal and State Agencies. Once the MFCU has the referral, they do an intake, investigate, and determine whether to take any further action.35 Outcomes of a MFCU referral can include: convictions, criminal recoveries, civil settlements, civil recoveries, exclusions, program recommendations, and overpayment recoveries.36

MFCU FundingEach MFCU is funded jointly by State and Federal governments. Federal funding is provided as part of the Federal Medicaid appropriation, but is administered by the Office of Inspector General (“OIG”). Each Unit receives Federal financial assistance equivalent to 75% of its total expenditures, while State funds contribute the remaining 25% of expenditures. In Fiscal Year (“FY”) 2015, 2015 expenditures for the Units totaled approximately $251 million.37

Administration and Oversight The United States HHS OIG is the federal agency designated with responsibility for overseeing State MFCUs. To receive federal reimbursement from the OIG, each Unit is required to submit an initial application to

OIG for approval and be recertified each year after that. During the recertification process, OIG evaluates MFCU compliance with Federal requirements (found in the SSA, regulations, and policy guidance) and adherence to performance standards (published by OIG, and address topics such as staffing, maintaining adequate referrals, and cooperation with Federal authorities).38

OIG can also perform onsite reviews of the Units, evaluating compliance with laws, regulations, and policies, as well as adherence to performance standards. OIG makes observations about best practices, provides recommendations to the Units, and monitors the implementation of the recommendations.39

OIG also provides oversight on the collection and dissemination of performance data, training, and technical assistance. The OIG website has pertinent information for each MFCU, including an interactive map with statistical data.40

The FY2015 Annual Report In September 2016, the HHS OIG released its annual report on MFCUs.41 The report compiles data on investigations and prosecutions by the 50 MFCUs across the United States. The HHS OIG based the information on its analysis of data from three sources: (1) annual statistical reports submitted for FY 2015; (2) quarterly statistical reports for FYs 2011 through 2014; and (3) onsite review reports published in FYs 2011 through 2015.42

MFCUs recovered a total of $744 million in criminal and civil fines in FY 2015, which was down significantly from the $1.5 billion to $2.6 billion range over the previous four years. The OIG attributes this decrease

33 See HHS OIG, Medicaid Fraud Control Units Fiscal Year 2015 Annual Report, at https://oig.hhs.gov/oei/reports/oei-07-16-00050.pdf

34 Id.35 Id.36 Id.37 Id.38 See HHS OIG, Medicaid Fraud Control Units Fiscal Year 2015 Annual

Report, at https://oig.hhs.gov/oei/reports/oei-07-16-00050.pdf39 Id.40 See HHS OIG, Medicaid Fraud Control Units – MFCUs, available at

https://oig.hhs.gov/fraud/medicaid-fraud-control-units-mfcu/41 See HHS OIG, Medicaid Fraud Control Units Fiscal Year 2015 Annual

Report, at https://oig.hhs.gov/oei/reports/oei-07-16-00050.pdf42 See HHS OIG, Medicaid Fraud Control Units Fiscal Year 2015 Annual

Report: Summary, at https://oig.hhs.gov/oei/reports/oei-07-16-00050.asp


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to “a national trend of declining civil health care fraud complaint settlements, especially those involving large pharmaceutical companies.”

ConvictionsAs noted above, in FY 2015, MFCU reported 1,553 convictions, nearly thirty-three percent of which involved personal care services attendants or other home health care aides. Another eleven percent (166 convictions) were of licensed nurses, physician assistants, or nurse practitioners. These convictions involved abuse or neglect, provision of services without a license, and services not rendered, among other charges. The number of convictions has increased over the past five years, from 1,235 in FY 2011 to FY 2015’s 1,553. During that same period, civil settlements and judgments decreased from 908 in FY 2011 to 731 in FY 2015.

MFCU reported the highest number of convictions in the last five years, and OIG exclusions resulting from Unit conviction referrals have grown since 2011. Civil settlements and judgments have decreased modestly over the previous five years, and civil recovery amounts have decreased significantly. Many Units also made operational improvements in response to OIG recommendations.

Fraud cases accounted for almost three-fourths (71%) of all convictions. There were also 731 civil settlements and judgments in FY 2015, including 297 involving pharmaceutical manufacturers and fifty-four involving pharmacies.

Pharmaceutical ManufacturersOf the 731 civil settlements and judgments reported, thirty-eight percent (279) involved pharmaceutical manufacturers, making it the provider type that accounted for the greatest percentage of settlements and judgments. Most of the settlements for pharmaceutical manufacturers were related to the marketing of drugs, while an additional fifty-four settlements and judgments involved retail and wholesale pharmacies. For example, in one such settlement, a pharmacy automatically refilled prescriptions that were not requested by the patients or caregivers, requiring a payment to the State of more than $1.5 million in restitution for the overpayments.

Individual State RecoveriesOut of the $744 million in recoveries reported, the Texas Unit reported over a quarter of the total recoveries ($210 million), while expending only seven percent of the total expenditures. More specifically, Texas accounted for twenty-eight percent of total Unit recoveries and fifty-nine percent of all Unit criminal recoveries. While


Contents 11

Not long after GlaxoSmithKline plc (“GSK”) settled with the U.S. Department of Justice (“DOJ”) for three billion dollars, the Company found itself in serious trouble in China.43 The allegations were that GSK had developed schemes spanning a period of years involving the transfer of money, gifts, and other items of value to health care professionals.44 According to the SEC, as well as the Chinese authorities, this led to GSK receiving millions of dollars in increased product sales to China’s state health institutions.45

Now in the latest chapter, GSK and the United States Securities and Exchange Commission (“SEC”) have come to a $20 million agreement to settle charges that GSK violated the Foreign Corrupt Practices Act (“FCPA”) when its China-based subsidiaries engaged in a pay-to-prescribe scheme to increase sales.46

an impressive number, the Texas Unit had several large, multiple defendant cases that all came to fruition during FY 2015, resulting in an unusually large number of enormous restitution amounts being reported.

New York, Tennessee, California, Florida, and Wisconsin accounted for fifty percent of the civil recoveries, combined, reporting $196 million of the $394 million in civil recoveries.

OIG RecommendationsThe OIG makes recommendations to individual units for improvements – between FY 2011 and FY 2015, the OIG published 32 onsite review reports. In those reports, the most common recommendations were in response to a lack of case file documentation of supervisory reviews and approvals, late or no required report of convictions to OIG and the National Practitioner Data Bank (NPDB), deficiencies in Units’ MOU with State Medicaid program integrity units, and Unit policies and procedures.

Each of the thirty-two Units reviewed received at least one recommendation related to those areas, for a total of sixty-five recommendations, sixty-two of which were implemented by MFCUs.

Despite the OIG recommendations, the MFCUs have proven to be a valuable tool in the Government’s efforts to reduce fraud and abuse. At the same time, the decreasing trend in convictions and settlements mirrors statistics from the other major enforcement agencies. However, as the MFCU report illustrates, this is not the time for complacency.

GSK & China - The Latest FCPA

Settlement Isn’t the End

By Kaitlin Fallon Wildoner, Esq. Senior Staff Writer, Life Science Compliance Update

Abstract: GlaxoSmithKline(“GSK”) reached a settlement with the Chinese government in 2014 related to bribes and improper actions taken by company officials. Recently, GSK reached an agreement with the United States Securities and Exchange Commission for allegations that GSK violated the FCPA. While the SEC settlement is nowhere near the value of the 2014 Chinese settlement, they are both worth taking a look at.

43 See, e.g., Eric Palmer, GSK China scandal resolved with $500M fine and suspended jail sentence, FIERCEPHARMA (September 19, 2014) available at http://www.fiercepharma.com/pharma/gsk-china-scandal-resolved-500m-fine-and-suspended-jail-sentence

44 See SEC, GlaxoSmithKline Pays $20 Million Penalty to Settle FCPA Violations, (File No. 3-17606) at https://www.sec.gov/litigation/admin/2016/34-79005-s.pdf

45 Id. 46 Id.47 Id.

2012:$3billion

se/lementwiththeDOJ

2014:$489millionfinefromChina

2016:$20million

se/lementwithSEC

GSK Settlements Through the Years

The participants included individual complicit sales and marketing managers within GSK’s China-based subsidiaries. According to the SEC, “GSK failed to devise and maintain a sufficient system of internal accounting controls and lacked an effective anti-corruption compliance program to detect and prevent these schemes.”47 The costs were recorded in official books and records as legitimate expenses, such as medical association sponsorship, employee expenses, conferences, speaker fees, and marketing costs. As such, the improper payments were not accurately reflected in GSK’s books and records.


Contents 12

The SEC’s Order finds that GSK violated the FCPA’s internal controls and books-and-records provisions. Not surprisingly, GSK consented to the order without admitting or denying the findings and agreed to pay a $20 million civil penalty. GSK also agreed to provide status reports to the SEC for the next two years on its remediation and implementation of enhanced anti-corruption compliance measures.48

The GSK case is just the latest in China’s efforts to crack down on the fraud and corruption that is rampant throughout the country. For example, in August 2013, a closed door meeting was held between several United States multinational companies and an official from the PRC’s National Development and Reform Commission.49

According to sources who attended the meeting, an NDRC official allegedly pressured foreign companies’ in-house lawyers to confess to violations and warned them against retaining counsel to defend against government investigations. Since that meeting, at least sixty pharmaceutical companies have been targeted by the NDRC as part of an ongoing probe into pricing and cost-calculation issues in the industry.50

2014 China Settlement

This settlement follows on a 2014 court decision in Changsha, China fining GSK $489 million for bribery. The Chinese authorities accused GSK of paying $488 million in bribes to health officials and doctors to boost sales.51

China’s Ministry of Public Security claimed in 2013 that GSK had funneled up to 3 billion yuan to travel agencies to facilitate bribes to doctors and officials, using 700 travel agents to deliver the illegal payments since 2007. According to documents reviewed by the Wall Street Journal, GSK employees often treated physicians and others to trips, with all expenses paid.52 GSK was also accused of bribing government officials, hospitals, and doctors to sell more drugs, at higher prices.53

GSK’s former head of China operations, who supposedly endorsed the program, Mark Reilly, was given a three-year prison sentence. That sentence was suspended, and Reilly deported. Other China nationals working as GSK executives were sentenced to between two and four years in jail; light sentences in PRC terms.54

After the sentencing, GSK apologized and said it remained committed to China. “GSK plc fully accepts the facts and evidence of the investigation and the verdict of the Chinese judicial authorities. Furthermore, GSK plc sincerely apologizes to the Chinese patients, doctors, and hospitals, and to the Chinese Government and the Chinese people.”55

2016 SEC SettlementAccording to the SEC, the improper practices were pervasive among GSK China sales and marketing representatives and condoned by both regional and district managers. Between 2010 and mid-2013, GSK China spent nearly $225 million on planning and travel services.

Roughly forty-four percent of sampled invoices were inflated, and about twelve percent of sampled invoices were for events that didn’t occur. Of the estimated $17 million in speaker fees spent by GSK China in 2012, $2 million was paid to people whose health care qualifications could not be verified.

According to GSK, the SEC settlement took into account changes GSK has made over the past few years to its commercial practices.56 The changes include the way GSK’s sales representatives are compensated, stopping “payments to healthcare practitioners to speak to other prescribers about the company’s products,” and further disclosure of payments to healthcare practitioners for providing services or participating in clinical research.

48 Id. 49 See John Tan and Christine Lu, China Life Sciences Regulatory

Crackdown: September 10 Update, ReedSmith (September 2013) at https://m.reedsmith.com/files/Publication/307ce2a7-6c70-4377-ab82-66ed8f268319/Presentation/PublicationAttachment/df2edc56-59f7-4e0c-862e-b12249802b1a/alert13244.pdf

50 Id.51 See Eric Palmer, GSK China scandal resolved with $500M fine and

suspended jail sentence, FIERCEPHARMA (September 19, 2014) available at http://www.fiercepharma.com/pharma/gsk-china-scandal-resolved-500m-fine-and-suspended-jail-sentence

52 See Hester Plumridge and Laurie Burkitt, GlaxoSmithKline Found Guilty of Bribery in China (September 19, 2014) available at http://www.wsj.com/articles/glaxosmithkline-found-guilty-of-bribery-in-china-1411114817

53 Id.54 See Eric Palmer, GSK China scandal resolved with $500M fine and

suspended jail sentence, FIERCEPHARMA (September 19, 2014) available at http://www.fiercepharma.com/pharma/gsk-china-scandal-resolved-500m-fine-and-suspended-jail-sentence

55 Id.56 See Richard L. Cassin, GSK pays SEC $20 million to settle China FCPA

violations, FCPA BLOG (September 30, 2016) available at http://www.fcpablog.com/blog/2016/9/30/gsk-pays-sec-20-million-to-settle-china-fcpa-violations.html

https://m.reedsmith.com/files/Publication/307ce2a7-6c70-4377-ab82-66ed8f268319/Presentation/PublicationAttachment/df2edc56-59f7-4e0c-862e-b12249802b1a/alert13244.pdf



http://www.fiercepharma.com/pharma/gsk-china-scandal-resolved-500m-fine-and-suspended-jail-sentence


http://www.wsj.com/articles/glaxosmithkline-found-guilty-of-bribery-in-china-1411114817





http://www.fcpablog.com/blog/2016/9/30/gsk-pays-sec-20-million-to-settle-china-fcpa-violations.html




Contents 13

Many of these changes were implemented first in the U.S, and it is not clear if they are worldwide practices.

The settlement documents have been released and look eerily similar to what one might expect from the Corporate Integrity Agreement (“CIA”), which GSK currently is subject to. The Order includes remedial efforts and undertakings that GSK has agreed to, including: reporting to the Commission staff periodically the status of its remediation and implementation of compliance measures; certifying compliance with undertakings of periodic reviews and reports, including proprietary, financial, confidential, and competitive business information; and completing at least two follow-up reviews, incorporating any comments provided by the Commission staff in the previous report.57

GSK notes that it “remains strongly committed to these changes and to operating its commercial activities in a responsible, ethical, and professional manner consistent with the company’s values.”58

International Climate Differences

It is interesting to note that the $20 million United States SEC settlement is paltry compared to the $489 billion settlement from two years prior in China. However, it is consistent with other recent SEC FCPA settlements involving life sciences companies (see table).

While much notice surrounded the Chinese decision, the U.S. settlement was announced with little fanfare.

However, the SEC settlement does not completely resolve the China situation for GSK. The United Kingdom’s Serious Fraud Office (“SFO”), which is responsible for enforcing the U.K.’s anti-bribery provisions, is still conducting their “criminal investigation into the commercial practices of GlaxoSmithKline PLC and its subsidiaries.”60 The investigation was opened in May 2014 and, like many other investigations and eventual settlements, relies heavily on whistleblowers. Given that GSK is a U.K.-based company, it is a very real possibility that its home country may be the harshest punisher yet.

Also, China tends to do much of its work behind closed doors, and it has been predicted that the crackdowns will continue as part of a way to help Chinese companies better compete, and for the government to extract price cuts from foreign companies. According to two antitrust lawyers who spoke with the New York Times, cases against companies have been hurried by the courts, giving companies little time to prepare.61 Therefore, should additional evidence be uncovered by the SFO, China conceivably could seek to reopen the case.

Conclusion

The 2014 settlement underlines, and this most recent case confirms, the dangers for multinationals as they do business in a country where corruption has been widespread and where the legal and regulatory system has shown a greater willingness to prosecute foreign companies. Takeaways from the recent settlement should once again include having staff understand the local culture, understand the local laws, and have a compliance program in effect that takes those local factors into account and combines them with the “home state” approach.

57 See Order Instituting Cease-and-Desist Proceedings, available at https://www.sec.gov/litigation/admin/2016/34-79005.pdf

58 Id.59 See SEC, SEC Enforcement Actions: FCPA Cases, available at https://

www.sec.gov/spotlight/fcpa/fcpa-cases.shtml60 See UK SFO, GlaxoSmithKline, PLC, at https://www.sfo.gov.uk/cases/

glaxosmithkline-plc/61 See Keith Bradsher and Chris Buckley, China Fines GlaxoSmithKline

Nearly $500 Million in Bribery Case, NEW YORK TIMES, (September 19, 2014) at http://www.nytimes.com/2014/09/20/business/international/gsk-china-fines.html

Company Settlement Amount

GlaxoSmithKline $20 million

Anheuser-Busch InBev $6 million

AstraZeneca $5 million

LAN Airlines $22 million

Novartis AG $25 million

Bristol-Myers Squibb $14 million

Alcoa$384 million

(included parallel criminal case)

Recent SEC FCPA Settlements59

https://www.sec.gov/litigation/admin/2016/34-79005.pdf

https://www.sec.gov/spotlight/fcpa/fcpa-cases.shtml

https://www.sec.gov/spotlight/fcpa/fcpa-cases.shtml

https://www.sfo.gov.uk/cases/glaxosmithkline-plc/

https://www.sfo.gov.uk/cases/glaxosmithkline-plc/

http://www.nytimes.com/2014/09/20/business/international/gsk-china-fines.html

http://www.nytimes.com/2014/09/20/business/international/gsk-china-fines.html


Contents 14

62 See Michael Volkov (2016). Headlines from Mid-Year FCPA Enforcement Review, JD Supra Business Advisor, available at http://www.jdsupra.com/legalnews/headlinesfrommidyearfcpa23415/

63 Id. 64 See Michael Volkov (2016). Headlines from Mid-Year FCPA Enforcement

Review, JD Supra Business Advisor, available at http://www.jdsupra.com/legalnews/headlinesfrommidyearfcpa23415/

65 See U.S. Securities and Exchange Commission (“SEC”), FCPA Cases, list of the SEC’s FCPA enforcement actions listed by calendar year, available at https://www.sec.gov/spotlight/fcpa/fcpa-cases.shtml


67 See U.S. Securities and Exchange Commission, Press Release, VimpelCom to Pay $795 Million in Global Settlement for FCPA Violations, available at http://www.sec.gov/news/pressrelease/2016-34.html

68 Id.69 Id.

actions will exceed all prior years through 2011 (except 2010, which had a total of 72 enforcement actions).”64

The corporate life sciences defendants in 2016 represent a cross-section of the industry and include, among others:

• GlaxoSmithKline,

• Nu Skin Enterprises,

• AstraZeneca,

• Novartis-AG,

• Nordion, Inc., and

• SciClone Pharmaceuticals.65

The most notable FCPA case is 2016 does not involve life sciences, but telecommunications. In a case involving the Dutch firm, VimpelCom, where the DOJ obtained the largest criminal fine in FCPA history.66

The VimpelCom Case

On February 18, 2016, the SEC, along with the DOJ and Dutch regulators, announced a global settlement that required telecommunications provider VimpelCom Ltd. to pay more than $795 million.67 The company agreed to the settlement to resolve violations of the FCPA stemming from its efforts to win business in Uzbekistan.68

Additionally, VimpelCom entered into a deferred prosecution agreement with the DOJ in connection with a criminal information charging the company with conspiracy to violate the FCPA’s anti-bribery and books and records provisions, and a separate count of violating the FCPA’s internal controls provisions.69 Finally, the

Tracking Towards a Banner Year for FCPA and FCA Enforcement

By Robert N. Wilkey, Esq., Staff Writer for Life Science Compliance Update

Abstract: There are some strong indicators to suggest that 2016 is on track to be a real banner year regarding Foreign Corrupt Practices Act (“FCPA”) enforcement and qui tam actions. One of the most notable indicators is that FCPA enforcement for 2016 is on track to exceed actions for 2015. Additionally, newly unsealed qui tam cases show the FCPA focus on health care and hi-tech companies and the enforcement actions involving other countries, in particular, China is growing. This year is also an introduction to the DOJ’s pilot program for self-disclosure, corporate transparency, and continued support for whistleblower rewards.

Although all the data is not in yet, based on what we can see so far, in comparison to FY 2015, FY 2016 is on track to exceed the previous year’s Foreign Corrupt Practices Act (“FCPA”) and False Claims (FAC) enforcement levels. This is particularly true when qui tam cases and whistleblower awards are factored in.

FCPA Enforcement

So far in 2016, the U.S. Securities and Exchange Commission (“SEC”) has brought actions involving a total of 16 separate FCPA enforcement actions (13 corporations and three individuals).62 During the same period, the U.S. Department of Justice (“DOJ”) in 2016 has brought a total of 10 enforcement actions with six involving corporations and four involving individuals.63

According to Michael Volkov, “if the pace of enforcement continues, the total number of [overall] enforcement

Target of Action SEC DOJ

Corporations 13 6

Individuals 3 4

FY 2016 FCPA Enforcement Actions


Contents 15

settlement requires VimpelCom to pay $167.5 million to the SEC, $230.1 million to the DOJ and $397.5 million to Dutch regulators, as a well as a requirement that company must retain an independent corporate monitor for at least three years.70

The SEC alleged that “VimpelCom offered and paid bribes to an Uzbek government official related to the President of Uzbekistan as the company entered the Uzbek telecommunications market and sought government-issued licenses, frequencies, channels, and number blocks.”71 The SEC describes that at least $114 million in illegal payments that were funneled through an entity affiliated with the Uzbek official, and approximately a half-million dollars in bribes were disguised as charitable donations made to charities directly affiliated with the Uzbek official.72

While this case does not involve a life science company, nevertheless, it is instructive for three reasons. First, it is a strong illustration of how the SEC, DOJ, and foreign governments are working together to address international bribery. Second, it shows how extensive liability can be under the FCPA. Finally, given how the bribery allegedly transpired, it serves as a reminder to compliance officers to pay close attention both to charitable donations as well as entities connected to healthcare practitioners such as independent research foundations.

Going Global

One of the most significant FCPA trends in 2016, has been the growing number of foreign countries, in particular, China involved in such actions.73 This trend has highlighted the “International cooperation among regulators” and “extraordinary efforts of the SEC, Department of Justice, and law enforcement partners around the globe to jointly pursue those who break the law to win business.”74 This was especially true in the VimpelCom case discussed above.

The number of FCPA enforcement actions in China “is increasing as an overall percentage of countries involved in FCPA enforcement. Before this year, almost one-third of FCPA enforcement actions involved China, and this year the number is closing in on 50 percent.”75 Some speculate that this is because China “poses unique and significant risks for healthcare and hi-tech companies

70 Id. 71 Id. 72 Id. 73 See Michael Volkov (2016). Headlines from Mid-Year FCPA Enforcement

Review, JD Supra Business Advisor, available at http://www.jdsupra.com/legalnews/headlinesfrommidyearfcpa23415/

74 See U.S. Securities and Exchange Commission, Press Release, VimpelCom to Pay $795 Million in Global Settlement for FCPA Violations, available at http://www.sec.gov/news/pressrelease/2016-34.html

75 Id. 76 Id. 77 See U.S. Securities and Exchange Commission, Office of the

Whistleblower, Press Release, Whistleblower Awards Top $100 Million, August 30, 2016, available at https://www.sec.gov/news/pressrelease/2016-173.html

78 See Robert N. Wilkey, Esq. “SEC Provides Explicit Whistleblower Guidance – Hunting Season is Now Open” Life Science Compliance Update, November 2016.


80 See Mintz Levin (2016). Mintz Levin Health Care Qui Tam Update -Recently Unsealed Whistleblower Cases, August 2016, available at http://www.jdsupra.com/legalnews/mintzlevinhealthcarequitamupdate12245/

in particular [where] both industries depend on local distributors who are often involved in bribery schemes using gifts, hospitality, and travel to confer benefits on critical foreign officials.” 76

On August 30, 2016, the SEC’s Office of Whistleblower in publicly announced that its Whistleblower Enforcement Program (“Program”) had exceeded over $100 million in awards.77 As outlined in our companion article in this issue, the announcement by the SEC highlights the agencies continued support of its whistleblower program as a means to further its FCPA enforcement goals.78 Additionally, unlike prior years, the DOJ has implemented its pilot program seeking to further self-disclosure, corporate transparency, and continued support for whistleblower rewards.79

FCA Enforcement – Examining the Qui Tam Health Care Cases

In evaluating some now unsealed qui tam cases whistle-blower cases, some significant trends are evident. First, of the 31 newly unsealed qui tam cases, 28 were filed before 2015.

Of those 28, three unsealed complaints date back to 2010, and of the remaining complaints, four were filed in 2012, eight in 2013, 12 in 2014 and three in 2015.80 The statis-tics corroborate what we have seen in other contexts; that after an enforcement spike around 2014, enforce-

http://www.jdsupra.com/legalnews/headlinesfrommidyearfcpa23415/


http://www.sec.gov/news/pressrelease/2016-34.html

http://www.sec.gov/news/pressrelease/2016-34.html





http://www.jdsupra.com/legalnews/mintzlevinhealthcarequitamupdate12245/

http://www.jdsupra.com/legalnews/mintzlevinhealthcarequitamupdate12245/


Contents 16

ment actions in the healthcare space are declining for reasons that are unclear.81

Second, the cases iden-tified were filed in federal district courts in 18 states, including multiple cases in California (3), New York (4), Florida (4), Kentucky (2), Massachusetts (2), O h i o ( 2 ) , a n d Pennsylvania (3), which may evidence

geographic locations where there is a prevalence of both technology, pharmaceutical, and health care based industries.82

Third, the Federal authorities intervene in very few cases. According to these statistics, the authorities decline approximately three cases for every one accepted (23 vs. eight where n=31).83

Finally, these 31 cases provide a glimpse into the nature and characteristics of the types of cases being pursued by whistleblowers in the healthcare arena. For example, 15 of the recently unsealed cases involve both state and federal claims. While nine cases alleged unlawful kickbacks, five involve allegations of Stark Law violations indicating that the anti-self-referral provisions continued in Stark continue are a continuing problem. Finally, while nearly two-thirds of the unsealed cases (20 of 31) involved current or former employees of the defendant, six cases (approximately 20%) included claims for relief under state or federal anti-whistleblower retaliation provisions.84

Also, some of the unsealed cases reveal additional insights on the breadth FCA claims can take. For example, United States ex rel. Florida Society of Anesthesiologists v. Choudhry et al., No.8:13-cv-02603 (M.D. Fla. Oct. 9, 2013) (unsealed on March 24, 2016) involving alleged federal and state FCA provisions, represents the first time that a medical society has filed a qui tam action against

physicians and their related entities, showing “that qui tam relators can come from any part of the health care landscape.”85

United States of America ex rel. Henson v. Midwest Family Practice, PLC, and Dr. Hussein Awada, C.A. No. 2:13-cv-14579 (E.D. Mich.) (unsealed on March 18, 2016), involved alleged false claims because certain services were not provided at all or that physician services and diagnostic tests, as well as prescriptions for controlled substances were not medically necessary is significant “because the FCA allegations rely on the alleged lack of medical necessity for certain prescriptions, services, and tests [consistent with the] ongoing stream of cases based on the purported lack of medical necessity.86

Finally, United States of America ex rel. Duncan v. Nexus Lab, Inc., Nexus Lab, LLC, PremierTox 2.0, Inc. et al., Case No. 1:14-cv-00089 (W.D. Kent.) (unsealed March 9, 2016), a combine FCA and anti-kickback statute case, is significant because the relator alleged a “worthless service” theory given the inconsistency and unreliability of the oral specimen results. Many circuits, including the Sixth Circuit, accept and have addressed the worthless services theory.87

Conclusion

In terms of overall FCPA and FCA enforcement impact, 2016 is poised to be a historical year by all regulatory accounts, not only in the sheer number of FCPA enforcement actions that are now projected to exceed 2015, but where there is strong evidence to strongly suggest that FCA enforcement continues at a substantial, although less rapid, pace. However, the significance of the newly unsealed qui tam actions illustrates the breadth that FCA claims have taken on.

81 While the cause for the enforcement decline is unclear, one theory is that recent Government losses in off-label cases have put a dampening effect on whether to pursue potentially marginal off-label cases.

82 See Mintz Levin infra. 83 Id. 84 Id. 85 Id. 86 Id. 87 See e.g. Chesbrough v. VPA, P.C., 655 F.3d 461, 468 (6th Cir. 2011)

(holding that “a test known to be of no medical value would constitute a claim for ‘worthless services,’ because the test is so deficient that for all practical purposes it is the equivalent of no performance at all”).

4

8 12

3

Qui Tam Complaints

2012 2013 2014 2015


Contents 17

Retaliation, Pre-taliation, and Whistleblower

Hotlines: How Compliance Officers Can Fight the

Biggest Challenge They Face

By Matt Kelly, Editor & CEO at Radical Compliance88

Abstract: Handling whistleblowers is one of the biggest challenges facing most compliance officers. Furthermore, recent actions taken by the SEC are de facto policy pronouncements expanding the range of whistleblower risks compliance officers face. This article will review the three primary concerns that compliance officers have about whistleblowers: how to stop retaliation; how to avoid pre-taliation; and how to design whistleblower hotlines.

If any single concept has risen to the front of regulatory enforcement lately, it’s this: protect the freedom of whistleblowers to raise the alarm about misconduct.

Certainly, we’ve seen that in the United States, where the Securities and Exchange Commission (“SEC”) has given one example after another of how much it wants to protect and reward whistleblowers. Since the SEC established its Office of the Whistleblower in 2011, the agency has awarded more than $100 million to whistleblowers whose tips led to successful enforcement actions.89 Two of the largest awards (for $22 million and $17 million) were doled out this summer alone.

For compliance officers, however, the real news is in the enforcement actions the SEC has taken about whistleblowers—actions that are de facto policy pronouncements, that every company should take seriously.

For example, we’ve seen the SEC move against so-called “pre-taliation clauses,” where companies try to prohibit employees from disclosing confidential information to regulators. We’ve seen large fines imposed for retaliation against whistleblowers. We’ve seen rewards go to whistleblowers because they can no longer find jobs in their industry after speaking out—which means, in a practical sense, that companies are being fined for retaliatory activity whistleblowers might receive from other businesses.

And all that activity is in the United States alone. Other countries are stepping up their whistleblower protections as well, even if those protections aren’t as extensive as what we see in the U.S. France is about to adopt a new anti-corruption law that requires whistleblower protections. Canada and the United Kingdom have already done so. The ISO 37001 standard for anti-corruption compliance programs requires whistleblower protections.90

This article will review the three primary concerns that compliance officers have about whistleblowers: how to stop retaliation; how to avoid pre-taliation; and how to design whistleblower hotlines—one of the most important tools in the chief compliance officer’s toolbox—so they give you the best, most useful information possible.

RetaliationPolicing against whistleblower retaliation is probably the most frustrating challenge compliance officers have. The SEC and other government agencies (the Labor Department chief among them) talk about the need to protect whistleblowers all the time. Anti-retaliation themes are all over the compliance training materials that corporations use.

And yet, complaints about retaliation happen all the time.

Yes, some of those complaints are fabricated, so an unhappy employee has more bargaining power with the company; and some are misunderstandings of legitimate actions an employee perceives as retaliation. But plenty of complaints are legitimate.91 For better or worse, compliance officers must build a program that entertains them all.

88 Matt Kelly is the founder of Radical Compliance, which provides consulting and commentary on corporate compliance, audit, governance, and risk management. Radical Compliance also serves at the personal blog for Mr. Kelly, the long-time (and now former) editor of Compliance Week.

89 See U.S. Securities and Exchange Commission, Office of the Whistleblower, Press Release, Whistleblower Awards Top $100 Million, (Aug 30, 2016) available at https://www.sec.gov/news/pressrelease/2016-173.html.

90 See ISO 37001, Anti-bribery management systems -- Requirements with guidance for use (2016) available at http://www.iso.org/iso/catalogue_detail?csnumber=65034.

91 NAVEX Global 2016 Ethics & Compliance Benchmark Report at http://www.navexglobal.com/en-us/resources/benchmarking-reports/navex-globals-2016-ethics-compliance-hotline-benchmark-report Substantiation rates for calls to companies’ whistleblower hotlines rose from 30 percent in 2010 to 41 percent in 2015, an all-time high.


Contents 18

We should start by remembering a simple fact: ultimately retaliation is an action, which one person takes against another. Somebody within the company must decide to retaliate against the complaining employee and then actually do so. To design an effective anti-retaliation program, compliance officers need to take that basic truth and ask a basic question: what preventive and detective controls can we put in place for this problem?

Compliance officers will face a blizzard of advice trying to answer that question. Much of it will be good—and much of it also won’t apply to your specific business. An early-stage biotech firm has different anti-retaliation needs than a major pharmaceutical company; a healthcare provider fields different complaints than a healthcare payer. The compliance program that works best for your business is something you will need to find yourself. We can, however, identify a few basic processes that all compliance programs must execute well if they want an anti-retaliation effort that’s effective.

First, remember that an investigations process must be clear and communicative, more than it needs to be fast.

Above all, employees raising retaliation complaints want to feel that they’ve been heard. They want a sense of justice from an organization that’s larger and more powerful than they are as individuals. People define justice in many ways, but they do not define it as arbitrary. Justice implies that a framework for adjudicating disputes, and that implies that people who are asking for justice already have a sense of what outcomes might happen.

All that translates into some specific investigation protocols you should have. For example, do all retaliation complaints get an immediate response, even if the response is simply, “We heard you and will follow up soon”? Do you have pre-existing policies to see whether any immediate steps are necessary, such as re-assigning a co-worker or supervisor away from a complainant? Do you have a schedule of follow-up responses to the complainant, so the person knows the case has not been shelved? Do you have a case management system that will allow people to raise concerns about additional retaliation, and those new concerns are tied back to the original complaint?

That systematic outreach back to whistleblowers is all the more important because today’s complaints take, on

average, more time to resolve.92 Whistleblowers also have more temptation to go directly to regulatory agencies that might offer rewards, because more agencies now do offer rewards. Whistleblowers need to feel that they have been heard and that the compliance program handling their complaint is taking them seriously.

Beyond investigation protocols, senior leaders have a duty as well, to fight any corporate culture (or sub-culture) that lets employees believe retaliation is possible. To borrow a term from COSO and its framework for internal controls, you need to ensure that your control environment addresses a retaliation culture successfully. Three of COSO’s principles for an effective control environment are especially relevant to retaliation:

• Demonstrate commitment to integrity and ethical values;

• Demonstrate commitment to a competent workforce;

• Hold people accountable.

As you consider anti-retaliation training, and communi-cations from senior leadership about how retaliation will be handled, keep these principles in mind. How can dis-cipline against retaliators be discussed, to demonstrate your company’s commitment to ethics? How can you tie compensation to ethical conduct, in some way that encourages mid-level managers to stamp out retaliation?

Ultimately, retaliation complaints suggest flaws in your corporate culture. That means you will need to strengthen your culture to fight it. Some of that will be “soft tools,” such as the tone from senior leaders. Some will be “hard tools,” such as clear investigation protocols and policies. And brace yourself—fighting this battle will never be easy.

Pre-taliation

Pre-taliation is a fundamentally different problem. Where retaliation is an action that one person takes against another, pre-taliation is a condition that a company creates.

92 See NAVEX Global 2016 Ethics & Compliance Benchmark Report at http://www.navexglobal.com/en-us/resources/benchmarking-reports/navex-globals-2016-ethics-compliance-hotline-benchmark-report. Median case closure time has increased from 32 days in 2011 to 46 days in 2015.

http://www.navexglobal.com/en-us/resources/benchmarking-reports/navex-globals-2016-ethics-compliance-hotline-benchmark-report

http://www.navexglobal.com/en-us/resources/benchmarking-reports/navex-globals-2016-ethics-compliance-hotline-benchmark-report


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Thankfully, that difference also means that your concern about pre-taliation—and given SEC and Justice Department enforcement actions lately, that concern is well-founded—all boils down to a simple question.

Do your employment contracts impede people from reporting misconduct?

That’s it. If the answer is “yes” then you have a problem that needs to be fixed. And as we’ve seen in several recent cases, if you don’t fix the problem, regulators will fix it for you.

One example is BlueLinx Corp., a distributor of building products based in Atlanta with about 1,700 employees. The SEC fined BlueLinx $265,000 in August for language in its employee severance contracts that violated the spirit of Section 21F of the Exchange Act.93 That rule that says nobody can impede someone from communicating with the SEC about possible violations of federal securities law.94

What contract language landed BlueLinx in such hot water? According to the SEC complaint, the separation clauses said: “Employee has not and in the future will not use or disclose to any third party confidential information, unless compelled by law and after notice to BlueLinx.”

“Compelled” is the crucial word. An employee could not approach the SEC (or any other regulator) on his or her initiative to raise alarms about possible misconduct. You could only speak after a court order allowed you to do so, which by definition means that someone else had to disclose the misconduct first and bring it to the court’s attention.

By 2013, BlueLinx tried to circumvent Section 21F by amending its contract language to confirm that, yes, an employee could volunteer confidential information to regulators “if applicable law requires that employees be permitted to do so”—but any employee who takes that route waives the right to collect any whistleblower reward the employee might get for offering the tip.

Tying severance pay to silence clauses can impede someone’s ability to report misconduct. Asking someone to waive whistleblower rewards can impede that person’s

ability to report misconduct. People need money to survive. If a company threatens to withhold money because an employee wants to tell regulators of possible misconduct, that’s an impediment. If a company offers extra money so an employee will not speak to regulators—that’s the same outcome, constructed in a different way. It’s an impediment.

We have a related example from AB InBev, which paid $6 million in fines in September to settle Foreign Corrupt Practices Act charges.95 In that case, part of AB InBev’s misconduct was to forge a separation agreement with an employee in its India subsidiary who had already begun raising concerns to the SEC. The agreement called for the employee not to disclose confidential information, under threat of a $250,000 penalty he would need to pay.

Again, the company sought to impede a whistleblower’s ability to disclose misconduct. That is the very definition of pre-taliation.

In these instances, compliance officers need to take a more nuts-and-bolts approach, reviewing company policies and agreements to see whether they contain pre-taliation clauses. It isn’t a matter of corporate culture; it’s a matter of contract management. That means the compliance officer needs clear authority to work with the HR and legal department to review contracts, and ideally, the enterprise should have a standard process for employment contracts so individual managers can’t introduce their own pre-taliation clauses.

HotlinesWhistleblower hotlines are the indispensable tool for compliance officers looking to root out misconduct, and specifically retaliation. The question is how to put real insight into “calls to the hotline” so that metric is actually useful, rather than just something easy to quantify and present to the board. Veteran compliance

93 See U.S. Securities and Exchange Commission, Press Release, Company Paying Penalty for Violating Key Whistleblower Protection Rule (Aug 10, 2016) at https://www.sec.gov/news/pressrelease/2016-157.html.

94 See Section 21F of the Securities Exchange Act of 1934 (“Exchange Act”) (15 U.S.C. § 78u-6) (“Rule 21F-6”).

95 See U.S. Securities and Exchange Commission, Press Release, SEC Charges Anheuser-Busch InBev With Violating FCPA and Whistleblower Protection Laws (Sep 28 2016) at https://www.sec.gov/news/pressrelease/2016-196.html.






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officers know the conundrum: plenty of calls to your whistleblower hotline is not necessarily a bad thing; it can indicate a strong speak-up culture, which is what you want. Conversely, no calls to your hotline might suggest the (really bad) possibility that employees are terrified to report misconduct.

To get to useful indicators of effectiveness, you need information about the reports themselves. Foremost, track hotline complaints that are specifically about retaliation: the number of retaliation complaints you get in absolute terms, the percentage relative to total complaints, the year over year change, the number of managers against whom retaliation complaints are filed, and so forth.

Metrics about retaliation get you closer to answering the question, “How is our culture? Does it respect ethics & compliance?” That is a question worth chief compliance officers’ time—because if your firm ever does run into regulatory trouble, questions about its corporate culture will be in the regulators’ agenda.

On a practical level, the challenge is to ensure that your compliance program can actually track metrics like the ones mentioned above. Maybe your hotline doesn’t collect data at that granular a level, and it can’t be reported to you. Maybe your hotline does, but your HR department does not. Maybe both do, but you lack a control to be sure the same bad manager isn’t counted twice because an employee complained via two channels.

So even when you do have a solid grasp of the hotline metrics you want, you still have lots of homework on policies and procedures to ensure you collect that data smartly.

Conclusion

Whistleblower and anti-retaliation risks are a multi-headed challenge to compliance officers. They require a mix of clear controls and policies, and cultural messaging. No single solution will work for any organization. That said, the SEC is clear in what it wants from compliance programs regarding whistleblowers: clear, unimpeded ability for those persons to raise concerns about misconduct. That goal won’t be easy to achieve—but at least it’s simple and clear.

The Dilemma of Co-Pay Charities and Patient Access to Medication

By Lenna M. Babigian, M.H.S., Paralegal, LCSU Staff Writer

Abstract: Increasingly creative methods are being used by big pharma to increase sales. Drug manufacturers are donating billions of dollars to not-for-profit organizations that fund co-pay assistance programs for patients. Pharmaceutical company profits are through the roof, and these not-for-profit organizations are growing at incredible rates. Even though patients are receiving much-needed financial help, there is an abundance of legal and ethical concerns.

Google the topic of “Co-Pay Charities” and the search engine returns information that could not be farther apart. The first result is a revealing article about the real reasons behind the assistance that big pharma is providing to patients, Medicare patients in particular.96The second result is a guide for Medicare patients that provides information on how to access that same support and financial assistance for prescription medications. This is an apt snapshot of the breadth of issues and questions that surround the increasing presence of co-pay charities that provide financial assistance to particular groups of health care consumers, and pharmaceutical companies.

The cost of big pharma name brand medication is rising at unprecedented rates.97 At the same time, pharmaceutical companies are donating large sums of money to not-for-profit organizations that support those who have the illnesses that the drugs treat. While this is certainly an admirable, altruistic gesture, Joel Hay, a professor at the University of Southern California and founding chairperson of the University’s Department of Pharmaceutical Economics and Policy, contends “[d]rug companies aren’t contributing hundreds of millions of dollars for altruistic reasons.”98

96 Benjamin Elgin, Robert Langreth. How Big Pharma Uses Charity Programs to Cover for Drug Price Hikes, BLOOMBERG (May 19, 2016) at http://bloomberg.com/news/articles/2016-05-19/the-real-reason-big-pharma-wants-to-help-pay-for-your-prescription,.

97 Id.98 Id.

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As the cost of pharmaceuticals continues to rise so too does the amount of money those companies are donating to various not-for-profit organizations. With the Government’s increasing emphasis on anti-kickback violations, these donations raise the concern that the charities are being used as inappropriate proxies.

A Bit of Back StoryThe challenge to afford the escalating prices of prescription medications is not a new one. In April of 2009, a brief article was published on POZ, a website for anyone living with or affected by AIDS and HIV.99 Under the heading of “Treatment News,” POZ published an article on whether big pharma is stifling AIDS research.100 The authors reported that doctors and advocates, the very people who they felt “should” have been standing up for HIV patient rights, were becoming dependent on pharmaceutical funding. Therefore, those who were once innovators and watchdogs were thought no longer to be objective. The dependence provided an inherent inhibition for physicians and others who presumably had patients’ best interests at heart to advocate for better treatments due to the influence of the pharmaceutical companies.101 It is a contention that is at the center of the Physician Payments Sunshine Act or Open Payments.

Likewise, prescription-assistance coupon programs have been in existence for many years now, giving discounted or free medicine to patients. Chris Lillis, MD, an internal medicine physician practicing in Fredericksburg, Virginia, highlighted this in 2011 noting drug manufacturers send their sales representatives out to offer coupons for their new medications to physicians for distribution to patients.102 According to Dr. Lillis, free samples of an expensive new medication along with coupons that cover a patient’s co-pay can override the need to prescribe the generic alternative preferred by the insurance company.103

The coupons do have a downside (at least for the pharmaceutical companies), public insurance, Medicare Part D and Medical Assistance (Medicaid), do not accept coupons, thus creating a gap in the drug market. Also as we have seen recently, the OIG is extremely skeptical about coupons and co-pay reimbursements.104

The Next Generation of AssistanceCharitable organizations seem to be the next generation of assistance. Pharmaceutical companies have begun

donating millions of dollars to patient-assistance charitable organizations, or co-pay charities. These organizations provide support to government-funded Medicare drug programs. Patients who meet the income guidelines qualify for aid with their out-of-pocket drug costs.105 There are 7 top non-profit patient assistance charities. Each of these has more than doubled in size between 2010 and 2014.106

99 Treatment News, Is Big Pharma Stifling AIDS Research?, POZ.COM (Apr. 14, 2009) at https://www.poz.com/article/hiv-activism-barr-16457-3989.

100 Id101 Id102 Chris Lillis, MD, The Tragic Irony of Pharmaceutical Coupons,

KEVINMD.COM (Jun. 24, 2011) at www.kevinmd.com/blog/2011/06/tragic-irony-pharmaceutical-coupons.html.

103 Ibid.104 See R. Wilkey and S. Whitelaw, Helping the Patient - Co-Pay

Reimbursement Can Be Okay in Certain Circumstances, 2.10 Life Science Compliance Update 21 (Oct. 2016).

105 See Benjamin Elgin, Robert Langreth. How Big Pharma Uses Charity Programs to Cover for Drug Price Hikes, Bloomberg (May 19, 2016) available at http://bloomberg.com/news/articles/2016-05-19/the-real-reason-big-pharma-wants-to-help-pay-for-your-prescription.

106 See Ben Elgin, Robert Langreth. “Celgene Accused of Using Charities ‘Scheme’ to Gain Billions.” Bloomberg (Aug. 1, 2016) at http://www.bloomberg.com/news/articles/2016-08-01/celgene-accused-of-using-charities-in-scheme-to-gain-billions.

https://www.poz.com/article/hiv-activism-barr-16457-3989

https://www.poz.com/article/hiv-activism-barr-16457-3989

http://www.kevinmd.com/blog/2011/06/tragic-irony-pharmaceutical-coupons.html

http://www.kevinmd.com/blog/2011/06/tragic-irony-pharmaceutical-coupons.html



http://www.bloomberg.com/news/articles/2016-08-01/celgene-accused-of-using-charities-in-scheme-to-gain-billions




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Most drugs under Medicare Part D have a large initial prescription co-pay followed by smaller ongoing costs. Many Medicare patients are on fixed incomes, and co-pay charities make a personal difference. For example, Steve Ashbrook, a retired optician from Cincinnati was featured in recent a Bloomberg article.107 In 2009, Mr. Ashbrook was diagnosed with chronic myeloid leukemia. His doctor prescribed Gleevec, which is manufactured by Novartis. The dose prescribed cost $6,000 per month. Mr. Ashbrook’s initial outlay for the medication under his Medicare Part D plan was over $2,000 followed by ongoing payments of $300 per month.

However, Mr. Ashbrook lives on a fixed income of $1,600 per month. As the authors reported, Novartis gave Ashbrook free medicine at first. Mr. Ashbrook’s doctor referred him to Patient Services, Inc. (PSI), a co-pay charity, where he qualified for help. PSI covered his out-of-pocket costs, and Medicare paid the rest.108 For Mr. Ashbrook and others like him, it does not matter where the PSI got the money to help him afford his life-saving medication: “I’d be dead without PSI.”109

Not Without Risk

The recent developments suggest that supporting co-pay charities is not without legal compliance risk. In fact, it is the subject of a $40B False Claims Act case in U.S., ex rel., Brown v. Celgene Corp.110

At issue in Brown, is thalidomide. Thalidomide was used to treat morning sickness in pregnant women in the 1950s and 1960s. The drug caused severe birth defects, and only 50% of the infants survived.111 In the 1990s Celgene received FDA approval to use thalidomide to treat a skin disease called erythema nodosum leprosum (ENL). Beverly Brown, a former sales representative for Celgene, contends that Celgene received and dismissed numerous warnings from the FDA regarding the reclassification of thalidomide.112

Brown also contends that as part of its efforts to market thalidomide off-label, Celgene set up co-pay funds for people with specific diseases; specific conditions for which Celgene Corp. happens to manufacturer medications.113 She claims, among other things, that Celgene coordinated with the charities to ensure that their donations went to patients who used the company’s medications.114

107 Id.108 Id.109 Id.110 See U.S., ex rel., Brown v. Celgene Corp., Case No. 10-cv-03165 GHK

(C.D. Cal 2016).111 Whistle Blower News Review, Thalidomide, Really? Again?!

Whistleblower Documents Unsealed – Celgene Corp in Hotseat, (Aug 30, 2016) at http://www.whistleblowergov.org/healthcare-and-pharma.php?article=Celgene-Thalidomide-Whistleblower-Documents-Unsealed_82.

112 See U.S., ex rel., Brown v. Celgene Corp., Case No. 10-cv-03165 GHK (C.D. Cal 2016).

113 Id.114 Id.115 See OIG Advisory Opinion No. 16-67, U.S. Department of Health

and Human Services, Office of Inspector General, June 27, 2016, available at https://oig.hhs.gov/fraud/docs/advisoryopinions/2016/ AdvOpn16-07.pdf; see also R. Wilkey and S. Whitelaw, Helping the Patient - Co-Pay Reimbursement Can Be Okay in Certain Circumstances, 2.10 Life Science Compliance Update 21 (Oct. 2016).

The Horizon Is UnclearPatient-assistance charities are growing. Patients win, charities win, and big pharma wins. The outstanding question is whether the American taxpayer wins.

One argument would be that more expensive drugs are being covered thanks to the co-pay programs for patients with Medicare Part D and Medical Assistance, ultimately inflating the taxpayers’ bill. On the other hand, patients need help paying for medications that can and, in many cases, will save their lives.

Medicare and Medicaid are taxpayer-funded, highly regulated government programs. Every renewal year insurance companies “tweak” their plans. Today we have multiple tiers of deductibles and continuously changing formularies. What was covered last year may not be this year. Monthly premiums will likely increase with next year’s plan. Since the massive shift in the United States to health care for all, health insurance plans have changed each year and so have the price tags.

All of this gives rise to the question of whether manufacturer support for co-pay charities creates anti-kickback or false claim liability. For that, the recent OIG advisory opinion on coupons may be instructive.115 Provided that a manufacturer can show that the risk of abuse is minimal, it seems likely that the OIG will allow it. Of course, much of this is dependent on how the Brown case turns out.

For now, compliance officers should monitor this space carefully and begin examining company marketing pro-

http://www.whistleblowergov.org/healthcare-and-pharma.php?article=Celgene-Thalidomide-Whistleblower-Documents-Unsealed_82



https://oig.hhs.gov/fraud/docs/advisoryopinions/2016/ AdvOpn16-07.pdf

https://oig.hhs.gov/fraud/docs/advisoryopinions/2016/ AdvOpn16-07.pdf


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grams that involve support for co-pay charities. Similar to patient advocacy groups, this review should include an examination of how much of the foundation’s support is derived from the company.

The tides are turning, and the awareness that changes must be made is increasing. What is clear is that for now, co-pay charities are here to stay. As with other pricing matters, this is an opportunity for compliance officers to be proactive.

Are We Seeing the End of OPDP?

By Kaitlin Fallon Wildoner, Esq., Senior Staff Writer, Life Science Compliance Update

Abstract: The FDA OPDP issued enforcement letters have been on a steep decline since 2010. This article examines the numbers of OPDP letters issued, they were issued for, and what it may mean for the compliance industry.

Tom Abrams, FDA’s Director of the Office of Prescription Drug Promotion (“OPDP”), has long been a featured speaker at major industry compliance conferences and meetings. Every year he outlines the efforts of OPDP to keep the pharmaceutical industry compliant with FDA’s

advertising and promotion rules. However, in conjunction with recent setbacks with off-label promotion and commercial free speech litigation, Agency watchers have noticed a precipitous decline in enforcement letters issued by OPDP. In fact, for 2016, OPDP has issued only 4 letters, of which 1 is a Warning Letter.116 This is down from 9 letters in 2015 and an all-time high of 52 in 2010.

While the reason for this decline is not clear, we believe it could involve the confluence of three factors:

1. A shift of focus by OPDP from enforcement to developing guidance (e.g., social media and off-label),

2. Recent off-label litigation setbacks making off-label enforcement a lesser litigation priority for DOJ attorneys,117 and

3. Fewer egregious cases.

Others have suggested that the volume submissions and complexity of the issues could be to blame. OPDP receives approximately 90,000 pre-launch promotional pieces for review each year, with a goal of reviewing companies’ core launch materials within forty-five days of receipt. According to Thomas Abrams, director of OPDP, “We had been meeting that goal,” but recent submissions to the agency “have presented more complex issues requiring a deeper level of review and more consultation with our colleagues in different offices.”118

0 10 20 30 40 50 60

2009

2010

2011

2012

2013

2014

2015

2016

OPDPEnforcementLe7ers

EnforcementLe7ersPerYear

116 OPDP issues warning letters and untitled letters to companies for drug marketing that does not meet the truthful, balanced, and non-misleading promotional standard. An untitled letter cites violations that do not meet the threshold of regulatory significance for a Warning Letter, according to the Agency’s Regulatory Procedures Manual. Such letters are often used for drug promotion violations.

117 See Kelly N. Reeves and Gillian M. Russell, A Historic Low for Drug Promotion Warning Letters, LAW 360 (March 17, 2016) at http://www.law360.com/articles/770500/a-historic-low-for-drug-promotion-warning-letters (“Given the current landscape, it would not be surprising if the FDA were more careful and deliberate in determining which letters to issue, as well as requiring multiple layers of review for each enforcement letter.”).

118 See Dana Elfin, FDA Acknowledges Decrease in Rx Promotion Violation Letters, BLOOMBERG BNA (September 29, 2016) at http://www.bna.com/fda-acknowledges-decrease-n57982077770/


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In any event, despite the reduced number of enforcement letters and the fact that the letters involved lesser known companies, we can see that OPDP’s focus remains fairly consistent year-on-year. For example, in 2015, omission and/or minimization of risk information was the most commonly cited violation.119

119 See Michael Mezher, FDA Promotional Enforcement Actions Hit Record Low in 2015, REGULATORY AFFAIRS PROFESSIONALS SOCIETY (January 19, 2016) at http://www.raps.org/Regulatory-Focus/News/2016/01/19/23927/FDA-Promotional-Enforcement-Actions-Hit-Record-Low-in-2015/

120 See Letter from OPDP to Hospira, (January 14, 2016) at http://www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/EnforcementActivitiesbyFDA/WarningLettersandNoticeofViolationLetterstoPharmaceuticalCompanies/UCM482464.pdf

121 See Beth Snyder Bulik, FDA slaps Pfizer’s Hospira unit for ‘misleading’ YouTube ad, FIERCEPHARMA (January 21, 2016) at http://www.fiercepharma.com/pharma/fda-slaps-pfizer-s-hospira-unit-for-misleading-youtube-ad.

122 Id.

Violation Number of Letters

Minimization/Omission of Risk Information

4

Omission of Material Fact 3

Unsubstantiated Claim/Superiority 3

Lack of Adequate Directions for Use 2

Misleading Claims 2

Promotion of an Investigational New Drug

1

Inadequate Communication of Indication

1

2015 Violations Cited in OPDP Enforcement Letters

Although few, the trends continue with the 2016 letters. Since they are so few, we will examine the 2016 letters in detail.

2016 Enforcement LettersHospira

OPDP sent an untitled letter dated January 14, 2016, to Hospira, now owned by Pfizer, alleging that a YouTube video published by the company “omits risks and material facts” about its sedative drug, Precedex.120 OPDP also chastised the company for publishing the promotional video without first submitting it to OPDP for review.121

OPDP requested Hospira “cease violating the FD&C Act, as described” and respond to the untitled letter with a plan for “discontinuing use of such violative materials.”122 According to a Pfizer spokeswoman, while the YouTube video was taken down in September 2015, it was not directly accessible before that, as “the Precedex video was not intended to be viewed outside the Precedex website,

The FDA’s regulations require applicants submit labeling or advertising pieces to the FDA before the date of first commercial use:

(3) Other reporting—(i) Advertisements and promotional labeling . The applicant shall submit specimens of mailing pieces and any other labeling or advertising devised for promotion of the drug product at the time of initial dissemination of the labeling and at the time of initial publication of the advertisement for a prescription drug product . Mailing pieces and labeling that are designed to contain samples of a drug product are required to be complete, except the sample of the drug product may be omitted . Each submission is required to be accompanied by a completed transmittal Form FDA–2253 (Transmittal of Advertisements and Promotional Labeling for Drugs for Human Use) and is required to include a copy of the product’s current professional labeling . Form FDA–2253 is available on the Internet at http:// www.fda.gov/opacom/morechoices/ fdaforms/cder.html . See 21 C .F .R . § 314 .81(b)(3)(i) (2015) .

PRIOR SUBMISSION OF LABELING & ADVERTISING

TO OPDP IS REQUIRED


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which contained the important safety information.”123 In essence, Pfizer’s response was that no violations occurred despite OPDP’s contention to the contrary.

Shionogi, Inc.

On March 29, 2016, OPDP sent its only Warning Letter to Shionogi, Inc., about its co-pay assistance program. According to OPDP, the drug maker had omitted risk information about Ulesfia, a head lice treatment.124 Shionogi was allegedly marketing a co-pay assistance voucher that claimed the drug is the number-one prescribed branded treatment for head lice. However, Shionogi failed to provide any risk information about the formulation of the drug, nor did it provide information on the products’ limitations or the fact that it was approved only for certain class of patients.125

In its response, Shionogi countered that it provides links to sites that published full prescribing information, including the omitted information raised by OPDP, focused on. However, OPDP was not persuaded concluding that “by omitting the risks associated with Ulesfia, the voucher fails to provide material information about the consequences that may result from the use of the drug and creates a misleading impression about the drug’s safety.”126

Celator Pharmaceuticals, Inc.

On August 25, 2015, OPDP sent an untitled letter to Celator Pharmaceuticals, Inc., taking issue with a conference panel for an unapproved cancer treatment.127According to OPDP, the panel, displayed at the June 2016 American Society for Clinical Oncology (ASCO) annual meeting for Celator’s investigational product CPX-351 Liposome Injection, “suggests, in a promotional context,” that the investigational drug is “safe and effective for the purposes for which it is being investigated or otherwise promotes the drug.”128 Therefore, Celator’s investigational new drug, designed to treat acute myeloid leukemia, was misbranded because drug sponsors are not permitted to make promotional claims or assert the safety and efficacy of the investigational drug. OPDP also cited Celator for using the proprietary name of the investigational drug, VYXEOS, without clearly identifying its investigational drug status.129

Reviewing the recent OPDP letter to Celator, Coalition for Healthcare Communication Executive Director John Kamp noted, “[t]his letter is a clear warning that FDA intends to vigorously defend its marketing limits while a drug approval is pending. The letter is not a surprise to those who have followed this area closely, and should be considered a clear warning to all companies with new drugs pending approval at FDA.”130 It also is a reminder that the limits of when a company’s discussions about an investigational drug become unapproved promotion are often in the eye of the beholder, or in this case OPDP.

DURECT Corp. and Pain Therapeutics Inc.

Finally, rounding out the four 2016 letters, on September 8, 2016, OPDP sent a letter to both DURECT Corporation and Pain Therapeutics, Inc., regarding Remoxy ER, which is an investigational opioid drug. According to the letter, the activity at issue was the fact that the two companies published website presentations suggesting the drug, “is safe and effective for the purposes for which it is being investigated.”131 OPDP, however, pointed out “conclusory statements regarding safety and effectiveness of a drug, made while an application for the product is under review, suggest an effort to shape public impressions of the drug in the lead-up to its launch, before FDA’s evaluation of the product is complete and reflected in approved drug labeling.”132 OPDP went on to note that statements about Remoxy ER on the DURECT homepage, such as “long-lasting” and “tamper-resistant,” are

123 Id.124 See Letter from OPDP to Shionogi, Inc. (March 29, 2016) at

http://www.fda.gov/downloads/Drugs/GuidanceCompliance RegulatoryInformation/EnforcementActivitiesbyFDA/WarningLetters andNoticeofViolationLetterstoPharmaceuticalCompanies/UCM493790.pdf

125 Id.126 Id. 127 See Letter from OPDP to Celator Pharmaceuticals, Inc. (August 25,

2016) at http://www.cohealthcom.org/wp-content/uploads/2016/09/CPX-351-Letter.pdf

128 Id.129 Id.130 See Coalition for Healthcare Communication, OPDP Sends

Enforcement Letter for Promotion of Investigational Drug (September 8, 2016) at http://www.cohealthcom.org/2016/09/08/opdp-sends-enforcement-letter-for-promotion-of-investigational-drug/

131 See Letter from OPDP to DURECT Corp. and Pain Therapeutics, Inc. (September 8, 2016) at http://www.cohealthcom.org/wp-content/uploads/2016/09/Remoxy-Untitled-Letter.pdf

132 Id.

http://www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/EnforcementActivitiesbyFDA/WarningLettersandNoticeofViolationLetterstoPharmaceuticalCompanies/UCM493790.pdf




http://www.cohealthcom.org/wp-content/uploads/2016/09/CPX-351-Letter.pdf

http://www.cohealthcom.org/wp-content/uploads/2016/09/CPX-351-Letter.pdf

http://www.cohealthcom.org/2016/09/08/opdp-sends-enforcement-letter-for-promotion-of-investigational-drug/

http://www.cohealthcom.org/2016/09/08/opdp-sends-enforcement-letter-for-promotion-of-investigational-drug/

http://www.cohealthcom.org/wp-content/uploads/2016/09/Remoxy-Untitled-Letter.pdf

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Briefly Noteworthy

133 Id. 134 See Dana Elfin, FDA Issuing Fewer Rx Promotion Violation Letters,

BLOOMBERG BNA (October 3, 2016) at http://www.bna.com/fda-issuing-fewer-b57982077877/

135 Id136 Id.137 See Dana Elfin, FDA Acknowledges Decrease in Rx Promotion

Violation Letters, BLOOMBERG BNA (September 29, 2016) at http://www.bna.com/fda-acknowledges-decrease-n57982077770/

138 Id. 139 See Daniel Ghinn, What doctors say about EpiPen pricing,

pharmaphorum (Oct 6, 2016) at http://pharmaphorum.com/views-and-analysis/doctors-say-epipen-pricing

140 Id.

“phrased as established facts,” which suggest that the product is “safe and effective with the characteristics described or otherwise promote the drug.”133 Apparently, similar language was found on the Pain Therapeutics, Inc. website. Therefore, the companies were attempting to promote the drug pre-approval.

Does the Slowdown Signal the End of OPDP?

The short answer is no. As Abrams has repeatedly stated, Warning Letters and untitled letters are “just one component of our multifaceted approach to achieve the objective of having non-misleading, truthful and balanced promotion.”134 For OPDP, the other components of the “multifaceted approach” include developing guidance documents, reviewing draft product labeling, and reviewing core launch materials.135

Abrams continues to note that OPDP will “work on issuing guidances on promotional issues,” with the goal of achieving voluntary compliance, thereby continuing to lower the amount of enforcement letters sent out.136

The challenge for OPDP is that it takes a long time to issuance guidance, and some observers are skeptical that OPDP can ever publish enough timely guidance to meet Abrams’ goal.

Abrams also routinely advises that companies should stay in close communication with OPDP about their submissions, “talk to us about time frames” and “let your reviewer know that launch materials are coming.”137

He also noted that companies should identify the most important materials in the submission to the reviewer so that the agency can work on those first. Finally, it is imperative that companies ensure their submissions are complete, as Abrams stated, “what we have seen sometimes are incomplete submissions including product claims without references or references that aren’t annotated.”138 Such unsupported claims clearly hinder the review process.

Therefore, while OPDP’s enforcement efforts have clearly diminished over time, there remains a need for companies and compliance officers to remain vigilant about advertising and promotional details, or they just might find themselves on the receiving end of an increasingly rare OPDP enforcement letter.

Briefly Noteworthy

What HCPs Really Think

It is not often in the compliance world that we truly get an idea of what healthcare professionals think. However, in a recent pharmaphorum article, Daniel Ghinn, the CEO of Creation, examined almost 14,000 social media posts by healthcare professionals mentioning EpiPen from August to September 2016.139 The results are depicted here in this word cloud graphic.

Drilling deeper, Ghinn observed that several themes emerged. These included:

1. Fury over perceived price gouging,

2. Concern over the impact to patients,

3. Frustration that Mylan executives did not seem to appreciate the outrage, and

4. A call for tougher laws and penalties to prevent companies from raising prices so precipitously.

In the end, Ghinn notes that all this activity “points to a crisis of confidence among healthcare professionals about the pharmaceutical industry’s motives.”140

http://pharmaphorum.com/views-and-analysis/doctors-say-epipen-pricing/?utm_campaign=pharmaphorum+newsletter+9&utm_source=emailCampaign&utm_medium=email&utm_content=

http://pharmaphorum.com/views-and-analysis/doctors-say-epipen-pricing/?utm_campaign=pharmaphorum+newsletter+9&utm_source=emailCampaign&utm_medium=email&utm_content=


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141 See William Alderman, No Longer a Mirage: FCPA Compliance and Cooperation Has Its Benefits, JD SUPRA BUSINESS ADVISOR (Sep. 29, 2016) at http://www.jdsupra.com/legalnews/no-longer-a-mirage-fcpa-compliance-and-96022/; see also Richard Deutsch, et. al, DOJ and SEC Find Advance Due Diligence and Robust Compliance Program Shield Purchasing Company in FCPA-Stained Transaction, THE NATIONAL LAW REVIEW (Oct. 3, 2016) at http://www.natlawreview.com/article/doj-and-sec-find-advance-due-diligence-and-robust-compliance-program-shield.

142 See Nate Raymond, Ex-Insys sales manager arrested in U.S. fentanyl-kickback case, REUTERS (September 29, 2016) at http://www.reuters.com/article/us-insys-court-idUSKCN11Z2I4

143 Id.144 Id.145 See Nick Paul Taylor, Ex-Puma exec charged with insider trading,

hit with criminal charges, FIERCEBIOTECH (September 30, 2016) at http://www.fiercebiotech.com/biotech/ex-puma-exec-charged-insider-trading-hit-criminal-charges

146 Id.

Oh Look, Compliance Programs Are ValuableFor years, compliance professionals struggled to show the ROI of having an effective compliance program. Now in the recent case of Harris Corporation comes evidence that compliance programs are indeed a valuable asset.

During the acquisition of Hunan CareFx Information Technology (CareFx) by Harris, Harris uncovered significant FCPA violations including the fact that CareFx’s chairman and CEO, Jun Ping Zhang had authorized and facilitated a practice of giving gifts (between $200,000 and $1 million) to officials at state-owned hospitals in China that resulted in awarding $9.6 million in contracts to CareFx.141 The gifts were provided through the use of fake expense reports that were booked as legitimate expenses. Although Harris faced potentially significant penalties for the bribes and failing to keep proper books and records, both the DOJ and SEC refused to prosecute Harris.

Harris’s robust due diligence program during the acquisition of CareFx, as well as it is ongoing efforts to root out corruption apparently carried the day. Added to the picture was the fact that once discovered, Harris self-reported the matter and cooperated fully with the authorities. So it seems at long last, we can show senior management that good compliance pays dividends.

Yates Individual Accountability UpdateThe Yates Memo and the DOJ have made explicitly clear that in an attempt to reduce the amount of kickbacks and fraud in the healthcare industry, individuals will be held accountable. We have seen this at work in the cases of Warner Chilcott and W. Carl Reichel (though he was found to be not guilty) and continue to see the DOJ and SEC attempting to work together and prosecute individuals responsible for AKS and fraud violations. Below are two recent examples of this continued focus on personal responsibility.

Insys Therapeutics Inc.The fallout from the Insys case continues. Most recently, Jeffrey Pearlman, a former Insys Therapeutics Inc. district sales manager, was arrested on September 29, 2016, on charges that he participated in a scheme to pay kickbacks to doctors to prescribe a drug containing fentanyl, Subsys.142 Pearlman is the third former staffer to be charged in the alleged kickback scheme, which involves

paying physicians, nurses, and physicians’ assistants to speak at hundreds of sham educational events in the hopes they would prescribe Insys drugs. According to prosecutors, speaker fees ranged from one thousand dollars to several thousand dollars, with one Connecticut health care provider earning $83,000 in kickbacks to prescribe Subsys.143 Pearlman has pled not guilty in a Connecticut federal court.144

Puma BiotechnologyFederal prosecutors have arrested a former California biotech executive, and financial regulators have charged him with insider trading in September 2016. Robert Gadimian, former senior director of regulatory affairs at Puma Biotechnology, allegedly profited roughly $1.1 million by making a series of trades informed by non-public knowledge on the status of trials of Puma’s breast cancer candidate, neratinib.145

According to the SEC, Gadimian bought $261,530 worth of Puma stock in August and September 2013 (during a blackout period, without permission) after he learned neratinib was performing well in the I-SPY 2 trial. Gadimian sold his stock the following day, netting $95,000 in profits. In 2014, Gadimian was in for an even bigger payday: he bought $215,880 of Puma stock and placed a $34,500 bet that the company’s share price would rise shortly. When Gadimian sold, he realized profits of $1.1 million.146

Disclosing Compassionate Use PoliciesIt seems that the topic of expanded access and compassionate use is once again making headlines. Recently Endpoints News did a series of articles on

http://www.jdsupra.com/legalnews/no-longer-a-mirage-fcpa-compliance-and-96022/

http://www.jdsupra.com/legalnews/no-longer-a-mirage-fcpa-compliance-and-96022/

http://www.natlawreview.com/article/doj-and-sec-find-advance-due-diligence-and-robust-compliance-program-shield



http://www.fiercebiotech.com/biotech/ex-puma-exec-charged-insider-trading-hit-criminal-charges

http://www.fiercebiotech.com/biotech/ex-puma-exec-charged-insider-trading-hit-criminal-charges


Contents

CONTACT

Visit www.lifescicompliance.com28

Editorial BoardTerry Chang, MD, JDAssociate General Counsel and Director Legal & Medical AffairsAdvaMed

Ian ClarkDirector Corporate TrainingBioMarin

David Davidovic President Path ForwardFormer VP and Global Head Commercial Services Roche and Genentech

Marc EignerSenior Partner Polaris

Nicodemo (Nico) Fiorentino, JDSenior Advisor, Research & ComplianceG&M Health, LLC

Abraham Gitterman, JDFDA/Healthcare AssociateArnold and Porter

Toby Ann HoletzCompliance Officer Biogen

Maureen J. LloydDirector, Life Sciences Governance, Risk Management, and CompliancePwC

John Kamp, JD, PhDExecutive DirectorCoalition for Healthcare Communications

Meryl Katz, JDACA AuditorIndependence Blue Cross

Kari K. Loeser, JD Senior Director & Senior Compliance Counsel Jazz Pharmaceuticals

Chad A. MorinDirector ComplianceARIAD Pharmaceuticals

John A. Murphy, JD Assistant General CounselPhRMA

John Patrick Oroho, JDPartner Porzio

Kristin Rand, JD, MAVice President and Compliance OfficerSeattle Genetics, Inc.

Marc J. Scheineson, Esq. Partner, Life SciencesAlston & Bird LLP

Paul Silver Managing Director & Practice LeaderHuron Life Sciences

David Vulcano, LCSW, MBA, CIP, RAC AVP & Responsible Executive for Clinical ResearchHospital Corporation of America

Bert Weinstein, JDVice President, Ethics & Compliance, Purdue Pharma LP

Thank You for subscribing to Life Science Compliance Update, a monthly compliance resource for pharmaceutical, biotechnology, and medical device companies. Each issue offers attorneys and compliance professionals a one stop shop for up-to-date, accurate compliance news and analysis. With input from industry experts and featured articles from leaders across the healthcare sphere, Life Science Compliance Update is a must-read for those operating in the increasingly important and ever-evolving compliance field.

Life Science Compliance Update is accepting submissions for future issues of the monthly publication. To submit an article or for question about the submission process, please visit: http://www.lifescicompliance.com/submissions

SponsorAll materials in Life Science Compliance Update are for general information purposes and are not intended to be and should not be taken as legal advice. A person’s inclusion on the Editorial Board for Life Science Compliance does not necessarily indicate their endorsement of articles herein. Similarly, quotes included and opinions expressed by attorneys in the articles do not necessarily reflect the views of their firms or their clients or their employers, and should not be taken as legal advice. No attorney-client relationship shall be created through the purchase of Life Science Compli-ance Update or the use of policymed.com. If you have particular questions about a legal or compliance issue, you should seek professional legal advice.

147 See John Carroll, Say what? Compassionate use program? What compassionate use program?, ENDPOINTS NEWS (Oct 12, 2016) at http://endpts.com/say-what-compassionate-use-program-what-compassionate-use-program

148 See Brenda Huneycutt, Nina Mermelstein, and Gillian Woollett, Current State of Transparency of Manufacturer’s Compassionate Use Policies, Avalere Health (Oct. 2016) at http://go.avalere.com/acton/attachment

149 Id.150 See John Carroll, The compassionate use poll: A lopsided vote favors posting policies, with plenty

of fretting, ENDPOINTS NEWS (Oct 13, 2016) at http://endpts.com/the-compassionate-use-poll-a-lopsided-vote-favors-posting-policies-with-plenty-of-fretting/.

the topic.147 Citing a recent Avalere Heal th report , Endpoints noted that in large measure disclosure of compassionate use policies depended on the size of the company (see Figure 2).148 However overall, the number of companies disclosing compassionate use policies was relatively small (19 out of 100).149

Endpoints followed this thread and in a snap poll asked its readers whether they thought posting compassionate use policies on the company website was good idea. Not surprisingly, 70% of those polled (n=149) believed it was a good idea.150 However, Endpoints noted there continues to be concern, and rightful so, that expanding compassionate use programs too quickly could undermine patient recruitment for trials needed to secure market authorizations. This is a long standing industry concern and only time will tell if it is well-founded. But for, now the transparency wave has yet to fully crest.

Figure 2: Percent of Companies That Post Compassionate Use Policies on Their Websites

http://www.lifescicompliance.com

http://endpts.com/say-what-compassionate-use-program-what-compassionate-use-program/?utm_medium=email&utm_campaign=Wednesday%20%20October%2012%202016&utm_content=Wednesday%20%20October%2012%202016+CID_918b6e29c98f37915e35d5b5f53b1fee&utm_source=ENDPOINTS%20emails&utm_term=Its%20no%20secret%20that%20the%20average%20biotech%20company%20is%20no%20great%20fan%20of%20compassionate%20use%20requests%20for%20their%20experimental%20drugs

http://endpts.com/say-what-compassionate-use-program-what-compassionate-use-program/?utm_medium=email&utm_campaign=Wednesday%20%20October%2012%202016&utm_content=Wednesday%20%20October%2012%202016+CID_918b6e29c98f37915e35d5b5f53b1fee&utm_source=ENDPOINTS%20emails&utm_term=Its%20no%20secret%20that%20the%20average%20biotech%20company%20is%20no%20great%20fan%20of%20compassionate%20use%20requests%20for%20their%20experimental%20drugs

http://go.avalere.com/acton/attachment/12909/f-0354/1/-/-/-/-/20161010 Transparency of Compassionate Use Policies.pdf

http://go.avalere.com/acton/attachment/12909/f-0354/1/-/-/-/-/20161010 Transparency of Compassionate Use Policies.pdf