1. Health Care Compliance Assoc. 2000 Compliance Institute Valli Baldassano Pharmacia Corporation

2. On the Agenda History Dose of Reality The Arsenal Take Aways

3. History 1991 OIG Study: “Promotion of Prescription Drugs Through Payments and Gifts” –Approved product studies are schemes to pay doctors 1993 & 1994 State enforcement against “Switching Programs” –Miles pays $805,000 and Upjohn pays $675,000 cognitive services programs to pharmacists

4. 1992 J&J Settles with States –Rebate coupons to customers August 1994 OIG Fraud Alert: “Prescription Drug Marketing Schemes” –Cash to pharmacists for “product conversions” –Free airline miles to docs for prescribing –Research payments to docs for de minimis record keeping tasks 1993 Ayerst Labs $830,000 –Patient profiling program corrupts doctors

5. 1994 Rugby $200,000 –Pharmacists get vacation packages for buying product 1994 Hoffman La Roche $450,000 –Small grants to doctors for sham research on FDA approved products 1995 Merck-Medco –Consent decree: full disclosure of relationship with Merck and switching programs

6. 1995 Caremark International $161,000,000 –Kickback claims that took several forms: research grants, consulting agreements and paying for office expenses

7. Recent Activity March 1999 Novartis (Ciba-Geigy) $8,000,000 –Overcharged VA by failing to provide accurate pricing information during negotiations May, 1999 Genetech $50,000,000 –Off-label promotion of Protropin, allegedly facilitated through educational grants and sham research payments May, 1999 NMC $16,500,000 –Kickbacks for diagnotic tests –NMC president & vice president indicted

8. January, 2000 Fresenius Medical Care $486,000,000 (including $101,000,000 criminal fines) –False claims/ giving educational grants and other payments as kickbacks for business California allergist indicted (winter 2000) –Study for RPR faked Bindley Western 4/2000 $25,800,000 –(criminal) rogue employees of wholesaler diverting drugs through gray market

9. Bayer and others (reported 5/2000) –Deceptive Pricing Practices AWP Medicaid Best Price –repackaging –Federal and State Enforcement –Congressional Inquiry

10. Warner Lambert (reported 5/2000) –Whistleblower suit involving promotion of WL’s epilepsy drug PBM Investigation (reported March 2000) –Switching Programs –Upstream and Downstream Rebates –Formulary Access

11. Government Aresenal Anti-kickback Statute 42 U.S.C. § 1320a- 7b(b) –Illegal remuneration to influence purchase, prescription or recommendation of any item reimburseable by Medicare or Medicaid –“One Purpose” Test liability if only one purpose of payment is to influence. U.S. v. Greber, 760 F.2d 68, 69 (3d Cir. 1985)

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

13. No Easy Escape Through Safe Harbors Discount Bona fide Employees Group Purchasing Organizations Personal Services Shared Risk

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

15. How Can AWP Reporting be a False Claim?! Claim is Facially False –AWP not defined by regulation and widely published –Would have to prove knowledge of or willful blindness to doctor’s failure to report discounts questionable whether doctors are required to report discounts

16. “ Fraudulent Implied Certification” Theory –Claimant implicitly certifies compliance with the law when submitting claim. U.S. ex rel. Pogue v. Healthcorp, Inc., 914 F.Supp. 1507 (M.D. Tenn. 1996) –Liability attaches only if compliance with regulations at issue is a prerequisite for obtaining the benefit and the defendant affirmatively certified such compliance Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 778 (4th Cir. 1999) Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 902 (5th Cir. 1997)

17. “ Fraudulent Course of Conduct” Theory –Fraudulent course of conduct caused government to pay claim for money U.S. v. Incorp Village of Island Park, 888 F. Supp. 419, 439 (E.D.N.Y. 1995) –FCA “reaches beyond ‘claims’ which might be legally enforced, to all fraudulent attempts to cause the government to pay out sums of money.” U.S. v. McLeod, 721 F.2d 282, 284 (9th Cir. 1983) U.S. Neifert-White Co., 390 U.S. 228, 233 (1968)

18. A Note on PBMs... FCA potentially applies to allegations: –skimming discounts to pharmacies –“playing the float” –billing for services not provided –brand/generic switch & bill –switch programs Kickbacks in procurement: 41 U.S.C. § 51 or Robinson Patman § 2(c) –formulary inclusion

19. Take Aways Pharma Initiatives Are Here –Medicare Drug Benefit –Congressional hearings –Public proclamations The Rules are Being Redefined Difficult to Advise Clients Compliance Programs Make Sense