compliance and the pharmaceutical industry hcca regional

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Compliance and the Pharmaceutical IndustryHCCA Regional Annual ConferenceChristie Bloomquist, Partner

May 3, 2013

www.hoganlovells.com

Overview

• Legal Framework

• Hot Topics– Discounts and Rebates

– Product Support Services• Reimbursement Assistance

• Coupons and Vouchers

– Federal Physician Payment Sunshine Act Compliance

– Government Pricing Program Compliance

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Legal Framework


Kinds of Fraud and Abuse Laws• Anti-Kickback Statute prohibits “remuneration” in return for referrals, purchases,

orders, or recommendations

• False Claims Act prohibits submission (or causing the submission) of false or fraudulent claims to governmental payors

• Health care fraud laws prohibit a scheme or artifice to defraud any health care benefit program (e.g., HIPAA fraud)

• State laws supplement federal laws and sometimes apply with regard to all payors(e.g., Massachusetts All-Payor Anti-Kickback Statute)

• Administrative remedies: civil monetary penalties and exclusion from Federal Health Care Programs (e.g., CMP for failure to provide and certify timely or accurate pricing information)

• In addition federal and state laws may restrict or require disclosure of expenditures related to marketing (e.g., federal Physician Payment Sunshine Act)

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High Level of Scrutiny

The list of pharmaceutical companies currently subject to Corporate Integrity Agreements is long and grows longer every year. It includes:

Abbott (5/2012), Allergan (2/2010), Amgen (12/2012),AstraZeneca (4/2010), Bayer (11/2008), Biovail (9/2009), Boehringer Ingelheim (10/2012), Cephalon (9/2008), Eli Lilly (1/2009), Forest (9/2010), GlaxoSmith Kline (6/2012), Ivax Pharmaceuticals (10/2009), Merck (11/2011), Novartis (9/2010), Novo Nordisk (5/2011), Ortho-McNeil-Janssen (4/2010), Otsuka (3/2008), Par Pharmaceutical (3/2013), Pfizer (8/2009)

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Anti-Kickback Statute (AKS)

• Applies to any person (individuals and corporations)engaging in a:– Knowing and willful– Offer or payment/solicitation or receipt– Of any “remuneration” – To induce someone to refer a patient or to purchase, order,

lease (or arrange for or recommend)– Any item or service which may be paid for by a Federal Health

Care Program (e.g., Medicare or Medicaid)

• Simply stated, you can’t give something of value to generate a prescription

• In addition to health care providers, may implicate problematic arrangements with patients

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Anti-Kickback Statute Compliance Considerations

• Statutory Exceptions / Regulatory Safe Harbors protect arrangements that would otherwise violate the statute

• Fitting within a safe harbor means you are safe from prosecution

• To be protected, must meet all elements of the safe harbor

• Not required to fit within a safe harbor for an arrangement to be legal, but always preferable when possible

• When an arrangement does not fit within a safe harbor it is subject to a case by case analysis

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Anti-Kickback Statute Safe Harbor Compliance

Key Safe Harbors• Personal service agreements (consultants, speakers)

• Payments to employees

• Referral Services

• Discounts

• Group Purchasing Organization fees

No Safe Harbors• Product Support Services

• Gifts to patients and customers

• Patient assistance programs

• Educational and research grants

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False Claims Act (FCA)

• Federal law prohibiting:– Knowingly presenting or causing to be presented false or

fraudulent claims for payment– Knowingly making, using or causing to be made or used a false

record or statement material to a false or fraudulent claim for payment

– Knowingly concealing or knowingly and improperly avoiding or decreasing an obligation to pay or transmit money or property to the government

– Conspiring to commit a violation of the FCA• Relevant to kickbacks and to advice on coverage,

payment and coding• “Knowingly” defined broadly to include• No proof of specific intent to defraud required

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Discounts and Rebates

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• Statutory Exception and Regulatory Safe Harbor

• Discounts and rebates should be structured to meet the requirements of the discounts safe harbor

– Seller/offeror must advise buyer of buyer’s reporting obligations; provide information needed to report; not impede buyer reporting

– Discount is reflected on the invoice – the reduced price must be shown

– Rebate is a discount not given at the time of sale

– Rebates permitted if 1) described in writing before sales, 2) invoice reflects existence of rebate program, and 3) seller provides end-of-period statement showing calculation and goods to which rebate applies

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• Risk Areas: – Bundling: Supplying one good or service without charge

or at a reduced charge to induce the purchase of a different good or service, unless reimbursed under the same methodology and full disclosure/accurately reflected

– “Prebates” – Up-front discounts/payments/signing bonuses

– Discounts that are more than price reductions (i.e., conditioned on meeting other requirements such as actively promoting a product)

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• Historically, enforcement cases have involved situations in which companies did not want to discount because of price reporting implications, so allegation was that the Company disguised the discount by entering into data purchase agreements, or providing grants instead (e.g., Schering-Plough 2004)

• United States v. Johnson & Johnson: Complaint takes a different tack

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• US: J&J unlawfully induced Omnicare to promote J&J’s branded drugs over less costly alternatives in violation of AKS, FCA and state consumer protection laws by means of market share rebates, data and sponsorship fees and grants– Omnicare earned rebate only if

• Purchases met market share thresholds at expense of competitors• Omnicare succeeded with “Active Intervention” and “Appropriate

Use” programs

• J&J: Rebates met statutory safe harbor for discounts and other price reductions and were properly disclosed and reflected

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• J&J’s agreement was not with a Health Plan which openly engages in formulary management where beneficiaries agree to be subject to formulary choices

• Pharmacy drug switching activities were not transparent to the plans or their beneficiaries and may have undermined formulary decisions plans made on behalf of beneficiaries

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• Case stayed – included in pending global J&J settlement

• Open question: Is government signaling that it will now examine more critically the basis on which discounts are earned such as conditions of eligibility if other than pure volume, even when form complies with the safe harbor?

• Discount features that may draw scrutiny– Providers vs. plans– Providers with significant influence over product choice vs.

others– Identical product vs. different formulation or therapeutically

similar products

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Product Support Services

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Product Support Services

• Potential risks: Anti-Kickback Statute violation if the service:– Substitutes for activities that are part of the customer’s

cost of doing business– Becomes free consulting services for which customers

would otherwise have to pay– Is provided in tandem with another service or benefit that

confers a benefit on a referring provider

• Potential FCA risk if the service involves activities that could influence or result in submission of a false claim– Inaccurate coding or billing advice

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Coupons and Vouchers

• Co-pay assistance programs increasingly common and accepted in pharmaceutical industry

• Main legal concerns for manufacturer programs– Federal

• AKS

• HIPAA Fraud

• RICO

• Robinson-Patman

• Medicaid Rebate/ASP Price Reporting

– State Laws• All Payor State Anti-kickback Statute

• State Statutes on Waiver of Co-pays

• Health Insurance Fraud

• Tortious Interference

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Coupons and Vouchers: Private Class Actions

• Filed in March 2012 by four health and welfare funds in four different federal courts against nine drug manufacturers– S.D.N.Y., N.D. Ill., E.D. Pa., D.N.J.– Abbott, Amgen, AstraZeneca, BMS, GSK, Merck,

Novartis, Otsuka America and Pfizer

• Legal Claims– Racketeer Influenced and Corrupt Organizations Act

(RICO), 18 U.S.C. § 1961 et seq.– Robinson-Patman Act, 15 U.S.C. § 13(c)

• Cases in early stages: motions to dismiss and discovery

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Coupons and Vouchers: Exclusion of FHCP Beneficiaries

• OIG has made clear that manufacturer co-pay assistance to FHCP beneficiaries who use the manufacturer’s product is impermissible under the AKS

• FHCP definition (42 U.S.C. § 1320a-7b(f))• Recent study released by National Coalition on Health

Care “Senior Awareness and Use of Prescription Co-pay Coupons in Medicare”

• Coupon lawsuits allege that Part D beneficiaries and Medicaid beneficiaries who receive their prescription drugs through program run through private health insurers mistakenly report themselves eligible, and manufacturers don’t enforce limitation


Coupons and Vouchers: Suggested Restrictions

• Put the insurer directly on notice of the co-payment program– manufacturer notice to insurer

– pharmacy/physician notice on claims submittal

• Pharmacies and physicians allowed to participate in the coupon program only where they have provided a representation and warranty that their participating in the program is consistent with their contracts with the relevant insurance companies and that they will report receipt of the coupon to the insurer if required to do so

• For physician-administered drugs, require physician certification that use of coupon not inconsistent with any contract or arrangement with third party payor and requiring disclosure of acceptance of coupon to applicable payors

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Coupons and Vouchers: Suggested Restrictions

• Adopt a process so that the individual utilizing the coupon certifies that acceptance of co-payment support from the manufacturer is consistent with its subscriber certification and the patient will make any required reports to the insurer

• Coupon is made generally available (e.g. website, advertisements, physicians) and not targeted to a specific insurer

• Coupon availability for a physician is not provided as a reward for prescribing; no advertising of coupons

• Coupons should not be designed, and should not be discussed with physicians, as a way of overcoming formulary placement

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Federal Physician Payment Sunshine Act

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Federal Sunshine Act: Overview

• Enacted in 2010 as part of Affordable Care Act

• Final regulations released February 1

• Tracking begins August 1, 2013– Exception for companies with no covered products: grace

period of 180 days after first product becomes covered

• First report due March 31, 2014

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Federal Sunshine Act: The Basics

• Applicable manufacturers must report payments and other transfers of value that they make to covered recipients, subject to certain exceptions

• Payments tracked throughout the year and reports due three months after the end of the calendar year

• Manufacturers and covered recipients have 45 days to review reports before public release

• CMS will publish report on public, searchable website

• Separate provision covers physician ownership interests, which must be reported by manufacturers and group purchasing organizations

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Federal Sunshine Act: Some Issues for Consideration

• What entities are “applicable manufacturers,” particularly with regard to foreign affiliates

• Tracking of “indirect payments”

• Tracking and reporting of payments to a third party

• Exclusions from tracking and reporting

• Special reporting rules for research

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Federal Government Price Reporting

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Federal Government Price Reporting: AMP and Best Price

• AMP: average unit price paid to the manufacturer for the drug in the US by wholesalers for drugs distributed to the retail pharmacy class of trade– Post-2010, AMP for inhalation, infusion, instilled, implanted and

injectable (5i) drugs is defined as the price to a broader commercial market

• Best Price: The lowest price to any commercial entity in the US in any pricing structure (including capitated payments)

• DOJ, as well as private whistleblowers, have actively pursued pricing and marketing arrangements and practices alleged to have resulted in false AMP and Best Price calculations and reports, thereby causing underpayment of Medicaid rebates– Giving something of value instead of a price reduction can draw

enforcement interest

• OIG is pursuing AMP audits of some manufacturers

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Federal Government Price Reporting: Recent AMP and Best Price Enforcement

• Merck (2008)– $399M FCA settlement to resolve allegations that Merck paid

kickbacks to physicians and that company underpaid Medicaid rebates by excluding from Best Price drug sold to hospitals at nominal prices (less than 10% of AMP) that were contingent on hospital purchasing large quantity or giving exclusive or preferred status

• GSK (2012) - $3B criminal and civil settlement included $300M FCA settlement alleging underpayment of Medicaid rebates by– Entering into contracts with hospitals, GPOs, managed care

organizations, etc. for product sold at nominal price that were contingent on purchase of other GSK products, placement of other products on formulary (or placement on exclusive or preferred formulary status), achieving or maintaining market share for other GSK products, etc.

– Failing to allocate the discount among all of the drugs in these bundled sales

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Federal Government Price Reporting: Current Landscape

• US ex rel. Kieff v. Wyeth: government and over a dozen states intervened in whistleblower litigation alleging company miscalculated and misreported best price for Protonix by not accounting for bundled pricing arrangements

• US ex rel. Streck v. Allergan: whistleblower case alleging false AMP calculation and reporting by improperly treating service fees paid to wholesalers as discounts

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