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

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