Great Expectations: Enhanced Obligations in Recent HHS-OIG Corporate Integrity Agreements

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1 Thomas W. Beimers Special Counsel Faegre Baker Daniels LLP Minneapolis MN Great Expectations: Enhanced Obligations in Recent HHS-OIG Corporate Integrity Agreements The Department of Health & Human Services, Office of Inspector General ( OIG ) has now entered into over 1000 corporate integrity agreements ( CIAs ) since the practice was first formalized in the early 1990s. While early CIAs were relatively spare, and primarily concerned the types and extent of policies, procedures, training and education requirements, some CIAs particularly those with pharmaceutical manufacturers may now exceed 100 pages in length and govern virtually every aspect of a company s business, from manufacturing practices to compensation structure. CIAs with direct health care providers have also become far more expansive, and many provisions that were initially only included in agreements with drug and device companies are now routinely found in CIAs with providers such as hospitals and longterm care facilities. All companies operating in the health care and life sciences space should consider whether the enhanced provisions in recent CIAs may provide ideas for augmenting their compliance and risk management functions. Though CIAs are not technically guidance, they reflect current thinking within the OIG, and increasingly the Department of Justice ( DOJ ) and the Food & Drug Administration ( FDA ), concerning the types of controls that both manufacturers and providers should adopt as part of a state of the art compliance program. I. New Enhancements in Abbott Laboratories and GlaxoSmithKline LLC CIAs Two recent CIAs, entered into in conjunction with record-setting False Claims Act settlements, feature substantial enhancements, many of which are unique to these agreements. A. Claw Back: The GlaxoSmithKline LLC (GSK) CIA (July 2012) features several novel and noteworthy enhancements. The Executive Financial Recoupment Program, or claw back provision, has received significant attention. The term provides that GSK will seek to recoup incentive compensation, including bonuses and other performance pay, in the event of significant misconduct by the executives or employees under the executives supervision, where the misconduct is not isolated and is of a nature that the executive knew or should have known was occurring. Specifically, the CIA requires that: GSK shall establish and maintain throughout the term of this CIA a financial recoupment program that puts at risk of forfeiture and recoupment an amount equivalent to up to 3 years of annual 1

2 performance pay (i.e., annual bonus, plus long term incentives) for an executive who is discovered to have been involved in any significant misconduct (Executive Financial Recoupment Program). This financial recoupment program shall apply to both covered executives who are either current GSK employees or who are former GSK employees at the time of a Recoupment Determination. See GSK CIA, Section III.H. B. Incentive Compensation Program: A significant, and novel, provision in the GSK CIA is the incentive compensation program, which seeks to eliminate sales targets as an incentive for discretionary payments to sales representatives. Traditional sales-based compensation methodology is replaced with a competency matrix that includes a number of metrics that are intended to be objective and quantifiable. The goals of the new incentive program include delivery of better customer value, building employee engagement and trust, and permitting individual and team coaching and development. The program is described in the CIA as follows: Pursuant to its existing Patient First program, GSK agrees that it will not provide financial reward (through compensation, including incentive compensation or otherwise) or discipline (through tangible employment action) its prescribing-customer-facing field sales professionals (pharmaceutical sales representatives) or their direct managers based upon the volume of sales of GSK products within a given employee s own territory or the manager s district. The Patient First program includes evaluations for sales representatives based on business acumen, customer engagement, and scientific knowledge about GSK s products. GSK shall continue its Patient First Program, or a substantially equivalent program, during the term of this CIA. See GSK CIA, Section III.H. C. Dear Doctor Letter: The Dear Doctor Letter has been a feature of many CIAs entered into with pharmaceutical manufacturers. In effect, such provisions have required companies alleged to have engaged in off-label marketing to communicate the allegations stated in the covered conduct section of the False Claims Act Settlement Agreement to the physicians its representatives called on. For the first time, the letter was expanded in the GSK CIA to also notify government payors and other entities with which GSK has formulary access or rebate agreements. D. FDA Global Manufacturing and Supply Related Provisions: Appendix D of the GSK CIA is effectively a mini-cia that governs certain manufacturing and 2

3 supply chain activities. The Appendix has its own covered persons definition and its own governance, training and education, and policies and procedures sections. Notably, the Appendix provides that upon referral by FDA, OIG has the power to direct GSK to undertake certain Specified Actions, which include product recalls. II. Non-CIA Integrity Obligations in Abbott and GSK Settlement Agreements A. The GSK Plea Agreement contains an Addendum entitled Compliance Measures and Certifications. The Addendum requires GSK to submit regular reports to the Department of Justice both to the U.S. Attorney s Office for the District of Massachusetts and to the Consumer Protection Branch at Main Justice. Much of the information required to be submitted to DOJ overlaps with information that is typically required in a CIA. For example, the Addendum contains a Nonsolicitation Certification requirement: GSK sales representatives must obtain signatures from physicians who request off-label information (which requests are to be referred to Medical Affairs personnel) to document that the information request was unsolicited. That type of provision would typically be found in a CIA rather than a parallel contractual agreement with DOJ. The duplication of reporting and monitoring requirements will add an additional layer of review. This development warrants close attention, particularly with reference to the types of enforcement mechanisms DOJ may employ if a company fails to satisfy Compliance Measures. B. The Abbott Labs Plea Agreement includes a term of probation. The terms of probation require Abbott Labs to submit reports certifying that they have satisfied the compliance terms of Abbott s Plea Agreement and have effective policies to prevent off-label marketing. In addition, Abbott Labs must submit Reportable Events concerning off-label marketing to its Probation Officer. These submissions overlap with the reportable events submissions that are typically made under a CIA. Again, it will be important to observe whether DOJ handles the reportable events in a manner comparable to OIG s historic treatment of analogous provisions. Abbott Labs has a strong incentive to meet the terms of probation: failure to do so could result in additional liability of up to $300 million. III. Other Important Enhanced CIA Provisions Recent Trends A. Cooperation Requirement: This type of obligation has been included in several recent CIAs with device manufacturers, including Wright Medical (September 2010), DFINE, Inc. (September 2011), and Exactech, Inc. (December 2010). The Cooperation requirement, with slight variations, follows the language from the Wright Medical CIA: 3

4 Upon reasonable notice, Wright shall cooperate with all OIG investigations and understands that full cooperation includes: (1) prompt and truthful disclosure to OIG of all matters relating to any Federal or state health care law investigation, prosecution, or other enforcement action, related to the Covered Conduct, including other matters involving possible violations of Federal or state health care law by individuals or entities in the orthopedic medical device industry; and (2) truthful testimony in any administrative hearing and/or court proceeding. Wright, upon reasonable notice, will make reasonable efforts to facilitate access to, and encourage the cooperation of, its directors, officers, and employees for interviews and testimony, and will furnish to the OIG, upon reasonable request, all documents and records in its possession, custody, or control relating to the Covered Conduct. Section III.J shall not require the Company's waiver of attorney-client and work product protections. Nothing in Section III.J shall be construed as a waiver of any applicable attorney-client or work product privileges. See Wright Medical CIA, Section III.J. These provisions appear to be intended to help facilitate follow-on investigations in cases in which consulting agreements with physicians form an important component of the covered conduct in the FCA settlement agreement. B. Board Oversight 1. Lilly CIA (August 2008): In August 2008 Lilly entered into a $1.4 billion settlement agreement to resolve allegations related to off-label marketing of its antipsychotic drug Zyprexa. The CIA requires the Board of Directors to oversee the compliance program. The Board, or a committee of the Board, must meet at least quarterly to fulfill its oversight role. As part of each Annual Report required under the CIA, the Board must adopt a resolution that summarizes its oversight work for that period. 2. Pfizer CIA (August 2009): In August 2009 Pfizer entered into a $2.3 billion global settlement to resolve allegations related to a number of claims of misbranding, off-label marketing, and kickback-related conduct involving several different drugs. The CIA requires the Board to review the compliance program at least quarterly and requires each member of the Board s audit committee to sign a resolution summarizing the Board s oversight work. 3. Board oversight requirements similar to those contained in the Lilly and Pfizer CIAs appear in the CIAs between OIG and Cephalon (September 2008), Bayer (November 2008), AstraZeneca (April 2010) and Janssen Pharmaceuticals (April 2010). In each instance, the CIA contains an oversight 4

5 obligation requiring that the Board make a reasonable inquiry into the operations of the company s compliance program and to resolve that the company has implemented an effective compliance program to the best of the Board s knowledge. 4. Board certification requirements now routinely extend to non-pharma/device CIAs, including The Christ Hospital (June 2010); Odyssey Healthcare Services, Inc. (February 2012), LifeWatch Services Inc. (March 2012), BHC Sierra Vista Hospital (April 2012), and Pinnacle Medical Solutions, LLC (June 2012). C. Management Certifications 1. Bayer CIA (November 2008). The Bayer CIA includes an additional certification provision that applies to key senior management personnel. Individuals in key oversight positions are defined as Certifying Employees. In the Bayer agreement, the provision applies to all Bayer and Bayer Affiliate: presidents, chairpersons, chief executive officers; executive directors, vice presidents; and Chief Medical Officers, and directors of business units of Bayer or any Bayer Affiliate that perform pricing, sales, marketing, contracting, promotion, medical affairs, or medical information functions. 2. A number of other recent CIAs include oversight obligations that require key management personnel to certify that they have been trained on compliance and believe that their particular business units or divisions are in compliance with the CIA, federal health care program requirements, and FDA requirements. These include Cephalon (September 2008), Lilly (August 2008), Elan Pharmaceuticals (December 2010), Synthes (September 2010), WellCare Health Plans, Inc. (April 2011), and LifeWatch Services (March 2012). a. Who Is a Certifying Employee? In the WellCare CIA, the definition applies to a wide range of executives: The Certifying Employees include, at a minimum, the following: Chief Executive Officer; CFO; Chief Administrative Officer; Chief Medical Officer; General Counsel; President of National Health Plans; President of Florida/Hawaii Division; President of South Division; President of Northeast Division; Senior Vice President of Health Services; all Vice Presidents in Health Services Department; all Vice Presidents in Finance Department (Direct reports to CFO); Regional Chief Operating Officers or Market Directors; and Compliance Liaisons. See WellCare CIA, Section III.A.5. 5

6 The term Compliance Liaisons in the WellCare CIA applies to individuals designated to oversee compliance at individual business locations. See WellCare CIA, Section III.A.3. b. What Is the Required Certification? In the WellCare CIA, the certification must include at least the following: I have been trained on and understand the Federal health care program compliance requirements and obligations and responsibilities of the Corporate Integrity Agreement (CIA) as they relate to [department or functional area], an area under my supervision. I have had the opportunity to obtain supplemental guidance on those requirements and responsibilities from the Compliance and Legal Departments and my management when necessary. My job responsibilities include ensuring compliance of the [department or functional area] with all applicable Federal health care program requirements, obligations of the CIA, and WellCare policies, and I have undertaken to do so. In the event that I have identified potential issues of non-compliance with these requirements, I have referred all such issues to the Compliance and Legal Departments for further review and follow-up. Apart from those referred issues, I am not currently aware of any potential violation of Federal health care program requirements, the requirements of the CIA, or any WellCare Policy. I understand that this certification is being provided to and relied upon by the United States. See WellCare CIA, Section III.A Abbott Labs CIA (May 2012) contains a detailed statement of management certification. I have been trained on and understand the compliance requirements and responsibilities as they relate to [department or functional area], an area under my supervision. My job responsibilities include ensuring compliance with regard to the [insert name of the department or functional area] with all applicable Federal health care program requirements, FDA requirements, obligations of the Corporate Integrity Agreement, and Abbott policies, and I have taken steps to promote such compliance. In the event that I have identified potential issues of noncompliance with these requirements, I have referred all such issues consistent with Abbott processes for reporting potential misconduct for further review and follow up. Apart from those referred issues, I am not currently aware in [insert department name] of any violations of applicable Federal health care program 6

7 requirements, FDA requirements, or the obligations of the CIA. I understand that this certification is being provided to and relied upon by the United States. See Abbott Labs CIA, Section III.A.4. From the perspective of the certifying business unit, as well as the compliance and legal functions, a key challenge associated with such a detailed certification requirement is the quantum of documentation required to demonstrate that the certification was supportable. D. Experts/Outside Consultants 1. The Bayer CIA (Nov. 2008) required that the Board retain a Compliance Expert Panel, made up of three independent and objective individuals or entities with expertise in compliance with Federal health care program and FDA requirements. The expert requirement was included in several other recent CIAs, including some companies outside the drug/device space. Such provisions are included in the Quest Diagnostics CIA (April 2009), Janssen Pharmaceuticals CIA (April 2010), Synthes CIA (Sept. 2010), Novartis CIA (Sept. 2010), and Maxim Healthcare Services CIA (Sept. 2011). However, the expert requirement was notably absent from the 2012 Abbott and GSK CIAs. The exclusion of the compliance expert requirement is somewhat puzzling in light of the positive statements in the White Paper on the February 2012 Compliance Roundtable concerning the role of compliance experts. As reported by the OIG, the roundtable participants were generally receptive to the concept of compliance experts and found such big picture evaluations sufficiently helpful that they would suggest undertaking a macro-level risk assessment even if not required by a CIA. 7