DOJ’s New “Probation Lite” Strategy
Corporate Integrity Agreements (CIAs) are the cornerstone of the Department of Justice’s (DOJ) attempts to keep device companies and pharmaceutical companies on the straight and narrow.
Problem is, companies continue to get into hot water with prosecutors and their effectiveness is hard to measure.
“Unfortunately there is insufficient objective data demonstrating that CIAs are actually reducing non-compliance, ” University of Minnesota law professor and counsel to Faegre Baker Daniel LLP (FBD), Ralph Hall told OTW on February 4, 2014.
“Fines are steadily increasing and even companies under CIAs continue to be the subject of enforcement actions. No one really knows which elements of a CIA are making a difference in either encouraging compliance or creating effective disincentives to non-compliance. Currently there is no agreed way to measure the level of compliance within a company and so we don’t know what works.”
The nation’s top healthcare crime prosecutor, U.S. Assistant Attorney General Stuart Delery, seems to agree with Professor Hall.
“Probation Lite”
In a keynote address to pharmaceutical compliance officers in Washington, D.C., on January 29, 2014, Delery, head of the DOJ’s Civil Division, said the department is “not interested in merely collecting a large fine and moving on to the next case. We strive to give companies the incentives—and the tools—to craft better compliance practices in the future.”
Tom Beimers, also of FBD and a former prosecutor in Delery’s division, told us that Delery appeared to signal a shift of emphasis in DOJ’s fraud prevention efforts. “Whereas DOJ’s focus in the past several years has centered on large dollar settlements in high-profile off-label marketing cases, Delery emphasized ‘renewed emphasis on identifying non-monetary measures that will help DOJ to prevent the recurrence of misconduct.’ This approach is in contrast to prior speeches, in which DOJ highlighted efforts to create disincentives through more enforcement activities, particularly with respect to individuals.”
He added, “Until the next major settlement, the precise meaning of Delery’s speech will remain speculative, but a shift from traditional CIAs to something along the lines of ‘probation lite’ may be DOJ’s next effort to curb what it views as a corporate recidivism problem.”
$20 billion in Settlements
Delery noted that since 2009, judgments and settlements under the False Claims Act (FCA) and Food, Drug and Cosmetic Act (FDCA) have totaled over $20 billion. “But monetary results tell only part of the story, ” said Delery.
“We have pursued doctors who perform unnecessary procedures to increase their bills, like a Florida dermatologist who performed thousands of unnecessary skin surgeries, participated in an illegal kickback scheme, and ultimately paid one of the largest FCA settlements ever by an individual—$26.1 million. We have gone after the manufacturers of defective medicines or medical devices, as in our criminal and civil cases against a Boston Scientific subsidiary for knowingly selling defective cardiac defibrillators.”
He said that when the focus is on financial recoveries, or on a specific investigation, it is easy to think of government and industry as adversaries. “But when the goal is ensuring that Americans can trust the drugs they take and the medical advice they receive, it is clear that we are on the same side.”
Expanding Corporate Integrity Agreements
Historically, when a drug or device company resolved FCA liability through a settlement, Beimers said the agreement was contingent upon entering into a CIA with the Office of Inspector General (OIG). Those agreements first appeared in the early 1990s and were originally limited to training and education requirements.
Over the years the scope of the agreements expanded, with additions including third-party auditing and monitoring provisions and the maintenance of databases reflecting payments to healthcare providers.
In recent years, Beimers says CIAs have introduced further enhancements. Management and board certifications required companies to certify compliance with a broad range of federal rules and laws, creating a cascade effect of additional compliance functions and necessitating the addition of compliance personnel.
Recent agreements, according to Beimers, have also mandated the retention of third party experts, the monitoring of various marketing activities (such as speaker programs), and transparency requirements, such as posting payments to physicians and disclosing the results of clinical trials. “Despite this expansion, the government frequently notes that the same companies are entering into a second or even third FCA settlement.”
New Post-Settlement Oversight and Monitoring Model
Against that backdrop, Beimers believes Delery’s speech may signal DOJ’s intention to take a more active role in crafting post-settlement oversight and monitoring arrangements. “There have been hints in this direction over the past two years.”
Delery pointed in particular to India-based Ranbaxy Laboratories Limited, which has experienced notorious manufacturing problems at many of its facilities. Those problems led to a major FCA settlement. Because Ranbaxy is subject to a strict consent decree with FDA, the agency has been able to act quickly when additional manufacturing issues were discovered.
Beimers says it is notable that Ranbaxy did not enter into a CIA with OIG as a condition of its settlement. “This may be a function of the relative lack of expertise within OIG when it comes to supervising manufacturing practices and quality systems issues.”
However, OIG does have a CIA with GlaxoSmithKline plc (GSK), based on violations of Good Manufacturing Practices regulations.
That CIA, which Beimers says tops out at over 100 pages, contains detailed provisions governing GSK’s manufacturing practices. “Some commentators have noted that the monitoring of these terms is rather far afield from the type of training and monitoring provisions that are typical of OIG agreements. That manufacturing practices oversight is more appropriate to FDA’s mandate may explain why DOJ is highlighting the Ranbaxy settlement structure as a model going forward.”
In a 2012 settlement with Abbott Laboratories for the off-label marketing of the atypical anti-psychotic Depakote, Beimers said DOJ supplemented the traditional CIA with probation. The probation terms require that Abbott submit some of the same information typically required by CIAs directly to DOJ.
“But the conditions of probation go well beyond the standard CIA requirements, and include a requirement that Abbott report any probable violation of the FDCA to the government, and put into place controls to ensure transparency around grant making and clinical trials, ” said Beimers.
Delery told the compliance officers that industry and government shared the same interests in assuring safe products and assuring competition on a level playing field. He outlined three ways the interests of the government align with corporate interests.
Ethical Culture, Not Programs
First, he said there is a common interest in promoting an ethical corporate culture instead of maintaining a compliance program in name only. “A common thread in many of our cases is that numerous individuals—ranging from executives to safety technicians—saw signs that misconduct was taking place and did not act.”
He said this demonstrates how a company can have the tools it needs to avoid violations of law, and yet have such violations happen anyway. “To be sure, Ranbaxy’s compliance operation could have done more than it did—its auditors, for instance, said that the company badly needed cGMP [current Good Manufacturing Practices] training; that training never happened. But policies alone are not enough.”
That is why the government has put a renewed emphasis on identifying non-monetary measures that will help to prevent the recurrence of misconduct, said Delery. “That happened with Ranbaxy, where an earlier civil consent decree called, among other things, for the company to establish an Office of Data Reliability that would work with its manufacturing, testing, approval, and compliance operations to ensure that all future drug applications are audited for accuracy before submission.”
Personal CEO Responsibility
In the $1.5 billion criminal and civil resolution in 2012 with Abbott Lab, Delery said DOJ crafted a resolution designed to ensure high-level accountability for the company’s compliance efforts. It imposes a term of probation for five years which requires Abbott to report any probable violations of the FDCA, and requires that its CEO personally certify compliance with this reporting requirement. In addition, Abbott’s board of directors is required to review the efficacy of the company’s compliance effort.
“And, ” added Delery, “it demands that Abbott institute policies to ensure that its scientific research and publications foster increased understanding of scientific, clinical, or healthcare issues.”
Knowing the Line
The second common interest is in having transparency about the conduct the government is investigating. “We must be clear about what misconduct gave rise to a criminal or civil resolution.”
Delery said the government will distinguish conduct that is lawful and even beneficial from conduct that is illegal and harmful. “For example, we recognize the value of giving doctors the freedom to decide, in consultation with their patients, what treatments to use. And we acknowledge the importance of an open dialogue in which companies and physicians share truthful information about a product’s likely effects.”
But where a company crosses the line and distributes its products intending them to be used in ways that are not approved as safe and effective by the FDA, the government will act aggressively.
Level Playing Field
Third, Delery says there is a common interest in ensuring that corporate compliance is a winning business strategy. The government will pursue companies that seek an unfair advantage by breaking the law. They want to ensure that companies that are committed to doing things right have the opportunity to compete on a level playing field.
“We want to make clear that the decision to come forward is the right one. When a company or individual acts responsibly by timely and voluntarily disclosing unlawful conduct, we will give serious consideration to that disclosure in deciding whether or how to charge or resolve the matter. Likewise, we will credit actions taken once the government has started to investigate.”
What to Expect
Delery says the government rejects the “pernicious idea” that a company can succeed by violating the law and treating healthcare fraud enforcement as a cost of doing business. “We continue to insist on resolutions that eliminate any economic incentive to engage in and attempt to conceal unlawful conduct. We continue to seek criminal penalties, against both companies and individuals, under appropriate circumstances. We continue to demand accountability by vigilantly enforcing federal laws against those who seek an unfair advantage at the expense of patients and taxpayers.”
Discussion
This is a fascinating development. In my practice we've seen similar outcomes with the revised protocol. The key differentiator seems to be patient selection criteria. Has anyone else noticed the correlation with BMI thresholds?
Great point. I'd push back slightly on the conclusion, the sample size in the cited study is too small to draw population-level inferences. That said, the directional signal is compelling and worth a larger RCT.
We implemented a similar approach last year. Early results are promising but we're still gathering 12-month follow-up data. Happy to share our protocol if anyone is interested.
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