Prosecutors Increasing Medical Device Industry Scrutiny

Three U.S. Attorneys recently told a group of compliance officers that they are placing an increased emphasis on medical device manufacturer misconduct.

Increased Emphasis and Coordination

The prosecutors from California, New Jersey and Tennessee, according to Tom Sullivan of Policy and Medicine, said the reasons for the uptick are that there are a number of areas of the country where prosecutors had not given such cases a high priority. Ben Wagner of the Eastern District of California said that his office is just getting through a lot of mortgage fraud cases from a few years ago. White collar prosecutors will be looking for new cases. He also noted that better coordination between the FBI, HHS (Department of Health and Human Services), and other agencies have allowed for more streamlined enforcement.

Whistleblowers Up Their Games

Elizabeth Tonkin of the Eastern District of Tennessee said that as qui tam whistleblower cases have been successfully settled, more whistleblower cases are coming to her office and she has an obligation to investigate them. She says a lot of qui tam relators have done their homework.

More Misconduct

Jacob Elberg of New Jersey told the compliance officers that based on the cases he and other prosecutors are seeing, they “continue to have the feeling that there is more misconduct that isn’t being addressed.” The medical device industry breeds a “whole range of misconduct, ” he noted, including improper payments, kickbacks, and off-label activity. Sullivan wrote that Elberg believes that prosecuting such behavior is important for the companies that are doing the right thing. “It’s only fair” to scrutinize smaller companies that might profit by not following the rules the larger companies have been bound to for quite some time. Sales reps, for example, shouldn’t have to lose out on business to other reps that rely on kickbacks to sell their devices. Elberg wants companies that follow the rules to know that Department of Justice (DOJ) is always interested in tips about such misconduct.

Docs Not Spared

When the prosecutors were asked why they only seem to go after the companies and not the surgeons, Sullivan said that Elberg “took issue with” that and said his office has convicted more than 60 doctors over the last few years, many related to kickbacks in the laboratory referral setting. Elberg told the audience that if a doctor is refusing to do business without a kickback payment side deal, companies should proactively bring it to the attention of the DOJ.

The prosecutors said they would love to know about physicians who are insisting on bribes. They agreed that such physicians, as well as those that reprocess single use-devices without following FDA protocol, or that import cheaper, non-FDA approved devices, are hurting med device companies.

They also pointed out, according to Sullivan, that it takes longer to prosecute physicians under a criminal statute. Arguing over what is “medically unnecessary” in front of a jury is a tough litigation challenge. But, said Tonkin, the government has the ability to assess penalties directly against physicians who are accused of kickbacks, without the physician being prosecuted separately.

The Open Payments and Medicare payments data streams are also new tools that allow prosecutors to track situations where doctors are implanting medical devices of a certain type where the area’s demographics don’t seem to support that level of use. They said they are getting better at tracking the needle in the haystack.

Device Company Compliance Expectations

When asked whether or not the government would also go after the device companies that sold the doctors the implants, the prosecutors said that companies should already be monitoring their customers for doctors who purchase and/or utilize a high number of devices—both from a business perspective and a risk-management perspective regarding off-label use. To avoid liability, Elberg said the government is going to expect the company to start asking questions about outlier implant use. To say the doctor was asking for a lot of product and we’re a for-profit company, isn’t going to fly with prosecutors.

The take-away message from the prosecutors to the compliance officers seemed to be that if your company is doing things right and you have competitors who are competing unfairly, go to the DOJ and sign them up as your new partner.