Life Science Fraud and Abuse

HHS and DOJ produced their annual report for 2022 for penalties from for fraud and abuse. It hits all types of healthcare fraud issues, but I focused on life science issues. Here are some key takeaways:

1. Rigorous Enforcement and Investigations: The Department of Justice (DOJ) opened over 809 new criminal health care fraud investigations, leading to the filing of criminal charges in over 419 cases involving at least 680 defendants. Over 477 defendants were convicted of health care fraud-related crimes. The Health and Human Services Office of Inspector General (HHS-OIG) conducted 661 criminal actions against individuals or entities involved in Medicare and Medicaid-related crimes, resulting in 726 civil actions, including false claims and civil monetary penalty settlements.
2. Financial Impact: The Federal Government recovered more than $1.7 billion, with over $1.2 billion transferred to the Medicare Trust Funds and approximately $126.1 million in Federal Medicaid money transferred to the Centers for Medicare & Medicaid Services.
3. Strike Force Effectiveness: The Health Care Fraud Strike Force Teams used data analytics and resources from multiple law enforcement agencies to prosecute complex health care fraud and opioid distribution/diversion schemes. These efforts led to 266 indictments, 395 guilty pleas, and over 53 months of average imprisonment for 323 defendants.

Impact on Life Science Companies

For life science companies, these insights underscore the importance of stringent compliance with healthcare laws and regulations. Proactive measures to prevent and detect fraud, meticulous adherence to legal and ethical standards, and a thorough understanding of enforcement trends are essential strategies for 2024 and beyond.

The following drug companies were targeted:

1. Kaleo paid $12.7 Million in settlement
2. Mallinckrodt ARD LLC (Previously Questcor Pharmaceuticals) paid $260 Million for paying kickbacks, underpaying rebates
3. Akorn falsely submitted 3 drugs for reimbursement but they were credited for disclosure, cooperation and remediation

The following Device Companies were targeted:

1. Arthex, Inc. agreed to pay $16.0 million and entered into a 5 year CIA to resolve civil FCA allegations that it paid kickbacks in the form of royalty payments purportedly for the surgeon’s contributions to Arthex’s SutureBridge and SpeedBridge products when the remuneration was in fact intended to induce the surgeon’s use and recommendation of Arthex’s products .
2. Eargo Inc. sells and dispenses hearing aid devices to customers nationwide. They agreed to pay $34.4 million to resolve allegations that submitted or caused to be submitted claims containing unsupported diagnosis codes for federal reimbursement of its hearing aid devices.
3. Biotronik, Inc. (Biotronik) agreed to pay $13.0 million to resolve civil FCA allegations relating to paying kickbacks to physicians to induce and reward their use of Biotronik’s implantable cardiac devices. In particular, the United States alleged that Biotronik abused a new employee training program by paying physicians for an excessive number of trainings and, in some cases, for training events that either never occurred or were of little or no value to trainees. Allegedly Biotronik made these payments despite concerns raised by its own compliance department, which warned that salespeople had too much influence in selecting physicians to conduct new employee training and that the training payments were being over-utilized. The settlement also resolved allegations that Biotronik violated the AKS when it paid for physicians’ holiday parties, winery tours, lavish meals with no legitimate business purpose, and international business class airfare and honoraria in exchange for making brief appearances at international conferences.
4. Essilor Laboratories of America Inc., and Essilor Instruments USA (collectively, Essilor), agreed to pay $22.0 million to resolve allegations that the company violated the AKS. Allegedly Essilor knowingly and willfully offered or paid remuneration to eye care providers, such as optometrists and ophthalmologists, to induce those providers to order and purchase Essilor products for their patients, including Medicare and Medicaid beneficiaries, in violation of the AKS.

What Should Companies Do?

The DOJ released several guidances in 2023 relating to the evaluation of corporate compliance programs, creating a pilot program involving the use of employment agreements with clawback provisions and incentivizing voluntary self disclosures in M&A transactions. HHS also announced its own updated compliance program. Companies would be well advised to reconcile the requirements across all programs and develop their own comprehensive compliance program that is consistent with DOJ, OIG and FDA requirements.

#compliance #pharma #medicaldevice #regulatorycompliance