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  1. Compliance Best Practices in a Post Orthopedic Environment David Matyas Epstein Becker & Green, PC Washington, DC

  2. Even though few manufacturers are subject to a DPA, all manufacturers can benefit from what these companies have been required to do and adopt best practices: • Understand the underlying legal issues • Develop policies for determining the needs in contracting with physicians/consultants • Develop procedures for approving and renewing such arrangements • Adopt process for determining fair market value • Maintain a database of all financial relationships • Have the mindset “Would we be comfortable if all our financial relationships were listed in the New York Times?” • Be prepared to terminate an arrangements if services are not being rendered or are no longer necessary

  3. Best Practice 1: Understand the underlying legal issues • The Federal Health Care Program Anti-Kickback Statuteprovides criminal and civil penalties for individuals and entities that knowingly and willfully offer, pay, solicit or receive remuneration in order to induce business for which payment may be made under a federal health care program. • The type of remuneration covered by the Anti-Kickback Statute includes, but is not limited to, kickbacks, bribes, and rebates. • applies to any such remuneration whether made directly or indirectly, overtly or covertly, in cash or in kind. • Moreover, prohibited conduct includes not only remuneration intended to induce referrals, but also remuneration intended to induce the purchasing, leasing, ordering, or arranging for any good, facility, service, or item paid for by a federal health care program. Social Security Act § 1128b(b), 42 U.S.C. § 1320a-7b(b)

  4. Best Practice 2: Develop policies for determining the needs for physicians/consultants • Recognition that the device industry is unique and is very dependent upon physicians for the advancement and development of products • Does not have to be as rigid a process as the “needs assessment” required under the DPAs, but should be a proactive (instead of reactive) process

  5. Key Terms in Deferred Prosecution Agreements to Keep in Mind “Consultant” is defined as any United States-based [orthopedic] surgeon, PhD, health care professional, non-physician practitioner, medical fellow, resident or student, or any employee or agent of any educational or health care organization the Company retains for any personal or professional services or compensates or remunerates in any way, directly or indirectly, for or in anticipation of personal or professional services relating to [hip and knee reconstruction and replacement]. The term Consultant shall not include accountants, auditors, attorneys, fair market value specialists, CME providers, reimbursement specialists, any nonphysician engineering or marketing consultants, or any other types of non-physician professionals or entities excluded from this definition by the Monitor upon recommendation by the Company.

  6. “Consulting Agreement” includes all contracts with Consultants for services to be performed on behalf of the Company. This includes, but is not limited to, agreements for compensation, payments, remuneration, honoraria, fellowships, professional meetings, speaking engagements, teaching, publications, clinical studies, fee-for-service consulting, product development and license agreements, research, and professional services agreements. The term “Consulting Agreement” also includes agreements to provide grants, donations, sponsorships and other forms of payment to medical educational organizations, medical societies and training institutions.

  7. “Payment” shall include any and all compensation or remuneration paid to or for the benefit of Consultants, including but not limited to payments and reimbursements for personal or professional services, any type of securities, registered or unregistered, meals, entertainment, travel, gifts, grants, honoraria, charitable contributions, donations, sponsorships, research grants, clinical studies, professional meetings, product training, medical education, research funding, product development services, in-kind services (e.g., use of aircraft), advertising, promotion, and marketing expenses or support, and royalties or other payments for transfer of documented intellectual property. Unless otherwise approved by the Monitor, the Company shall only compensate or remunerate Consultants through direct Payments made pursuant to a Consulting Agreement. The Company shall not knowingly make any Payments to Consultants indirectly, such as through distributors.

  8. Best Practice 3: Procedures for approving (and renewing) all arrangements • All arrangements need to be in writing • Form contracts • Process for entering into arrangements needs to be independent of marketing and sales departments

  9. Best Practice 4: Adopt process for determining fair market value • How does one determine the fair market value for these types of services? • Should all physicians be paid equally? Is it appropriate for different specialties to receive different amounts? • What is an appropriate payment methodology? Per hour, if so, should there be a maximum number of hours per week/month? An aggregate amount per month irrespective of hours worked?

  10. What about royalty arrangements and product development fees? • How should the entity and the physician document that services were actually rendered? How specific should time records be? Should time records be a prerequisite to payment? Who should review the time records? • If compensation under the agreement is a flat dollar amount per month with the “expectation” that the physician would be performing approximately 10 hours of work a month, what should be done if the time records only reflect 5 hours of work?

  11. Best Practice 5: Maintain a database of financial relationships • Use of electronic tools for contract management and risk assessments • Either developed by outside vendor or “home grown” database

  12. Best Practice 6: Have the Mindset “Would we be comfortable if all our financial relationships were listed in the New York Times?” • At present, there is no statutory requirement that device manufacturers disclose their financial relationships with physicians, but after the orthopedic settlements and introduction of the Physician Payments Sunshine Act (S 2029), there may be momentum for creating such a requirement • Therefore, be prepared to disclose the nature of all financial relationships with physicians in the future

  13. Best Practice 7: Be prepared to terminate an arrangements if services are not being rendered or are no longer necessary • Necessity for there to be a process for auditing financial relationships • Again, decision to terminate needs to be separate from sales and marketing departments