As regulations and requirements for transparent interactions between pharmaceutical, medical device and biotechnology companies (collectively “life sciences organizations” or LSOs), and healthcare professionals (HCPs) continue to evolve, certain patterns are emerging. Iis becoming increasingly important to protect prescribers and companies by ensuring that transactions are commercially reasonable and FMV (fair market value) compliant.   

Interactions between HCPs and LSOs

Considering that certain types of interactions between HCPs and LSOs are fundamental to the advancement of science and the provision of high-quality care, there is a proven need to preserve these relationships.  Current regulatory scrutiny focuses on various types of service arrangements to determine whether they may be linked to prescribing practices or to usage patterns involving the LSOs products.  Of particular significance is whether the fees paid to HCPs are based on the services rendered (i.e., speaking, consulting, training, conducting research, etc.), or are paid as an inducement to prescribe the LSO’s products and/or services.  As a result, U.S. and global transparency laws seek to expose all payments made to HCPs by LSOs, or their third-party intermediaries in an effort to identify those which may directly or indirectly relate to payment for referrals. Notwithstanding, there is also increased recognition that opportunities continue to exist for illegal activity. 

Governmental tools to hold companies accountable

Within the U.S., the government has very effective tools to hold both companies and prescribers accountable for illegal referrals of products and/or services through the dynamic pairing of the Anti-Kickback Statute (“AKS”) and the False Claims Act (“FCA”).  

  • The AKS makes it illegal to knowingly or willfully offer, pay, solicit, or receive “remuneration,” directly or indirectly, in exchange for referring a patient or furnishing or arranging for a healthcare good or service, for which payment may be made under Government insurance programs, such as Medicare or Medicaid. The AKS is a criminal statute and requires intent. 
  • The FCA basically is focused on the submission of false claims for payment to the government as well as on those who avoid paying required money to the government (Section 3729(a)(1)(G), known as the reverse false claims section). The FCA is a civil statute and requires that there be knowledge of the falsity of the submitted claim(s). 

Recent government cases

These regulations often focus on various types of service arrangements to determine whether they may be linked to prescribing practices or to usage patterns involving the LSO’s products or services.  Of particular significance is whether the fees paid to prescribers are commercially reasonable and/or appear to be in excess of fair market value.  Some recent government cases illustrate the issues: 

9/26/19

  • The DOJ announced that Avanir Pharmaceuticals (Avanir), based in Aliso Viejo, California, was charged for paying kickbacks to physician to induce prescriptions of its drug Nuedexta.  Additionally: 
  • The Northern District of Georgia announced a deferred prosecution agreement resolving the charge, under which Avanir admits that it paid a doctor to induce him to not only maintain but increase his prescription volume.  Under the agreement’s terms, Avanir will pay a monetary penalty in the amount of $7,800,000, and a forfeiture in the amount of $5,074,895; 

11/26/19

  • The DOJ announced that a resident of Monroeville, Pennsylvania who owned two labs, Personalized Genetics, LLC, d/b/a Personalized Genomics (PGL) and Med Health Services Management, LP (MHS) based in Pittsburgh, Pennsylvania, was charged for paying kickbacks in connection with almost $130 million in Medicare claims for genetic testing.  Additionally:  

 

 

11/20/1818 through 11/26/19

In a series of twelve recent cases OK Compounding, LLC and its network of paid ‘medical directors’ have been the focus of government investigation.  In these cases, OK Compounding paid prescribers, through sham medical director fees, to prescribe compounded pain creams to their patients.  These “kickbacks” were in violation of the False Claims Act because some patients were insured by federal health insurance programs. 

12/5/19

A Manhattan doctor was convicted in federal court of accepting bribes and kickbacks from a pharmaceutical company in exchange for prescribing a fentanyl-based drug. As reflected in the Indictment and other documents, the physician participated in a scheme to receive bribes and kickbacks in the form of fees for sham educational programs (“Speaker Programs”) from Insys Therapeutics, Inc. (“Insys”) in exchange for prescribing millions of dollars’ worth of Subsys, a potent fentanyl-based spray manufactured by InsysAccording to the DOJ, the physician, who was also an Associate Clinical Professor at a large hospital in Manhattan, received approximately $308,600 in Speaker Program fees from Insys in exchange for prescribing large volumes of Subsys. According to the New York Times, five physicians in total were indicted and several Insys executives and employees face charges. Insys filed for bankruptcy in June shortly after reaching a $225 million settlement with the DOJ.

It is also important for HCPs and LSOs to recognize that many of the government’s FCA actions have been the direct result of whistle blowers, who receive a percentage of the recovered damages … an amount that can be quite sizable. In addition, as a result of expanding transparency laws and requirements, there is an exponential increase in the amount of available data related to payments by LSOs to HCPs in the U.S. and throughout the world.  Therefore, it is relatively easy for government regulators to identify outliers for further investigation 

To learn more about how to protect yourself and your company, contact Ann Brandt directly at ann.brandt@LBMC.com or 615-309-2706 or contact Katie Tarr at ktarr@LBMC.com or 615-690-1944. 

 

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