[Excerpts from Charlene L. McGinty et al.'s article, "Physicians Beware" - The Government Cometh: Vendor Relationships Under Fire," Health Lawyers News, Volume 11, No. 6, June 2007]
Enforcement in the healthcare industry continues unabated. In fiscal year 2006, the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services (DHHS) reported recoveries of nearly $38.2 billion, exclusions of 3,425 individuals and entities for fraud and abuse, and institution of 272 civil actions and 472 criminal actions against individuals and entities.1 The OIG is not the only player in this arena. With the passage of the Deficit Reduction Act of 2005, the states and their enforcement agencies will become more prominent players in enforcement initiatives, particularly in the Medicaid arena. In his State Medicaid Fraud Control Units (MFCUs) Annual Report for Fiscal Years 2004 and 2005 (MFCU Report), Inspector General Daniel Levinson reported: recoveries of $572 million in FY 2004 and $709 million in FY 2005; 1,160 convictions in FY 2004 and 1,123 convictions in FY 2005; and referrals of 1,267 providers to the OIG for exclusion.2 Not to be left out, the Federal Bureau of Investigation (FBI) also weighed in with its annual report that stated for the 12-month period ending September 30, 2006 the FBI investigated 2,423 cases of healthcare fraud that ended in 588 indictments and 534 convictions.3
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A number of federal and state laws and regulations can or will have an impact on physicians and their relationships with pharmaceutical manufacturers and/or vendors. For example, some of the federal laws that may be implicated in an arrangement include the Federal Anti-Kickback Statute5 (AKS), the Federal Food, Drug and Cosmetic Act6 (FDCA), the Prescription Drug Marketing Act7 (PDMA), and the Federal False Claims Act8 (False Claims Act).
The AKS prohibits the knowing and willful solicitation, offer, or receipt of any remuneration in return for (i) the referral of an individual to a person for the furnishing (or arranging for the furnishing) of an item or service which may be paid, either in whole or part, under a federal healthcare program or (ii) the purchasing, leasing, ordering, or arranging for the purchasing, leasing, ordering of any item or service which may be paid, either in whole or in part, under a federal healthcare program. 9 A violation of the AKS may in turn give rise to False Claims Act liability for the parties. Physicians and vendors should carefully review their arrangements and relationships to determine if the AKS is implicated.10
The FDCA and/or the PDMA regulate how drugs and pharmaceuticals are packaged, transported, labeled, and promoted, and how drug samples are handled. For example, the PDMA provides that “[n]o person may sell, purchase, or trade or offer to sell, purchase, or trade any drug sample.”11 The FDCA contains guidance regarding drug marketing and labeling provisions as well as outlines the regulatory powers and authority of the Food and Drug Administration (FDA). Therefore, any marketing initiatives and activities, unless carefully constructed to meet applicable regulatory requirements, could lead to liability for the parties to the arrangement, including the manufacturers as well as physicians.
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Generally, off-label use and improper marketing activities occur where a manufacturer’s sales force or consultants, including physicians, with either the tacit or implicit approval of the manufacturer, promote or market the use of a drug for uses that have not been approved by the FDA. Under FDA regulations, “no implied claims or suggestions of drug use may be made if there is inadequate evidence of safety or a lack of substantial evidence of effectiveness.”19 The FDA continues to be vigilant regarding enforcing the requirements of content and format of prescription drug labeling and marketing.
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End Notes:
1 U.S. Dept. of Health and Human Services, Office of Inspector General, Semiannual
Report, April 1, 2006-Sept. 30, 2006, available at oig.hhs.gov.
2 U.S. Dept. of Health and Human Services, Office of Inspector General, State Medicaid Fraud Control Units Annual Report, Fiscal Years 2004 and 2005, 2006, available at oig.hhs.gov (MFCU Report).
3 Federal Bureau of Investigation, Financial Crimes Report to the Public (Mar. 7, 2007),
available at www.fbi.gov/publications/financial/fcs_report2006/financial_crime_2006.htm.
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5 42 U.S.C. § 1320a-7b(b).
6 21 U.S.C. §§ 301 et seq.
7 21 U.S.C. §§ 353 et seq.
8 31 U.S.C. §§ 3729 et seq.
9 42 U.S.C. § 1320a-7b(b).
10 Depending on the facts and circumstances of the arrangement the Federal Physician
Self-Referral Law (Stark II), 42 U.S.C. § 1395nn, also may be implicated. However, with respect to Stark II, the government stated in the Preamble comments that pharmaceutical manufacturers are not generally subject to this law because they do not furnish “designated health services.” See 66 Fed. Reg. 855, 920 (Jan. 4, 2001). This reasoning may also hold true with respect to medical device manufacturers.
11 21 U.S.C. § 353(c).
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19 21 C.F.R. § 201.56(c).
[Additional enforcement actions against physicians can be found on the OIG's website:
oig.hhs.gov/fraud/enforcementactions.html]
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