For Drug and Device Manufacturers:
Largest Settlement in History for Off-Label Drug Claims
Eli Lilly will pay about $1.42 billion after pleading guilty to criminal violations of the Food Drug and Cosmetic Act, and settling civil false claims actions with a number of qui tam relators, the United States, several states, and the District of Columbia.
The settlement arose out of allegations related to the marketing of Eli Lilly’s antipsychotic drug Zyprexa. Specifically, the government alleged that Eli Lilly instructed its sales force to promote the use of Zyprexa for the treatment of dementia although Zyprexa is not approved for such uses. This followed Eli Lilly’s abandoned effort to seek Food & Drug Administration ("FDA")approval for use of Zyprexa for dementia because of mixed clinical results and safety concerns.
Also, as part of the settlement, Eli Lilly has agreed to enter into a corporate integrity agreement with the Office of Inspector General of the United States Department of Health and Human Services. This agreement, in part, will require Eli Lilly’s corporate employees to certify annually that Eli Lilly is in compliance with Federal health care requirements. In addition, Eli Lilly must post on its website a list of physicians who receive payments from Eli Lilly for consultant or speaker services, along with the amount of money each such physician receives.
New FDA Guidance on Off-Label Information
On January 13, 2009, the FDA published final guidance, entitled Good Reprint Practices for the Distribution of Medical Journal Articles and Medical or Scientific Reference Publications on Unapproved New Uses of Approved Drugs and Approved or Cleared Medical Devices.
In general, FDA regulations prohibit manufacturers of new drugs and devices from advertising their products to doctors for any use that the FDA has not determined to be “safe and effective.” However, in the guidance, the FDA noted that it “recognizes the value of new indications and uses for approved products.”
To that end and in light of the public health and policy justifications of disseminating non-misleading and truthful health information, the new guidance sets forth a number of conditions for the appropriate publication of information on unapproved new uses of approved or cleared medical devices. Specifically, the guidance requires that the information contained in the article should address adequate and well-controlled clinical investigations that are considered scientifically sound by experts with scientific training and experience to evaluate the safety or effectiveness of the drug or device. Articles must be published by an organization that has an editorial board and a publicly stated policy regarding full disclosure of conflicts of interests. Further, all articles must be peer reviewed and should be generally available in bookstores or other independent distribution channels.
According to the guidance, the information that is distributed should not be marked, highlighted, summarized, or characterized by the manufacturer and should be accompanied by the approved labeling for the drug or medical device. The reprint should also be accompanied by a prominently displayed and permanently affixed statement disclosing: a) that the uses described in the information have not been approved or cleared by the FDA; b) the manufacturer’s interest in the drug or medical device that is the subject of the journal reprint or reference text; c) the financial interests of the authors; d) the identity of the study’s funders; and e) any significant risks of the unapproved drug use that are known to the manufacturer.
In support of the new guidance, the FDA stated that “public health may be advanced by healthcare professionals’ receipt of medical journal articles and medical or scientific reference publications on unapproved new uses of approved or cleared medical products that are truthful and not misleading.” Nonetheless, the FDA specifically encourages manufacturers to seek approvals and clearance for such new indications and intended uses.
New AdvaMed Code on Physician Relationships
On December 18, 2008, the Board of Directors of the Advanced Medical Technology Association (“AdvaMed”), a medical technology association, approved a significant update to its Code of Ethics on Interactions with Health Care Professionals (the “Revised Code”). The Revised Code clarifies and distinguishes between appropriate activity between health care professionals (HCPs) and AdvaMed member companies.
Effective July 1, 2009, the Revised Code contains a number of key revisions and expands into important new areas, including an explicit prohibition on providing entertainment or recreation to HCPs and a prohibition of gifts of any type, including all non-educational branded promotional items, regardless of value.
AdvaMed also broadened the definition of “HCPs” to include not only those individuals who purchase, lease, recommend, use, arrange for the purchase or lease of, or prescribe a medical technology product, but also all those who are involved in the provision of health care services and/or items to patients in the United States. AdvaMed also added a new term, “Medical Technologies,” which encompasses medical products, technologies and related services and therapies to diagnose, treat, and monitor or manage patient conditions.
Additionally, the Revised Code provides clarity in such areas as consulting agreements, company-conducted training of HCPs, grants, and compliance programs. Specifically, with respect to consulting services, companies may pay HCPs for consulting services only if such payments are fair market value for the services provided and based on the consultant’s past, present, or future business relations with the company. In addition, sales personnel may not control the decision to hire a particular HCP. Of further note, the Revised Code provides guidelines that allow for companies to enter into royalty arrangements with HCPs in exchange for substantial contributions that improve medical technology, but may provide input on the same.
Compliance with the Revised Code is not mandatory. To that end, AdvaMed strongly encourages companies to adopt the Revised Code and to submit to AdvaMed an annual certification that the company has adopted the Revised Code and implemented an effective compliance program. AdvaMed will publish a list of companies that have submitted this certification on its website.
In essence the Revised Code “reflects the medical technology industry’s ongoing commitment to openness, transparency and high ethical standards,” said Michael A. Mussallem, chairman and CEO of Edwards Lifesciences, and chairman of AdvaMed. He continued by saying that “our [the medical technology industry’s] primary focus is helping patients and we want to ensure that the public understands that collaboration between physicians and the industry’s scientists and engineers is critical for developing and delivering medical innovations.”
For Providers:
RAC Protest Resolved
On February 4, the parties involved in the protest of the CMS Recovery Audit Contractor ("RAC") contract awards settled their protest. This settlement allows CMS to proceed with implementation of the permanent RAC program. The four RAC contractors are:
Diversified Collection Services, Inc. - Initially working in ME, NH, VT, MA, RI, and NY
CGI Technologies and Solutions, Inc. - Initially working in MI, IN, and MN
Connolly Consulting Associates, Inc. - Initially working in SC, FL, CO, and NM
HealthDataInsights, Inc. - Initially working in MT, WY, ND, SD, UT, and AZ
HIPAA Provisions in Stimulus Package
President Obama will sign the economic stimulus package into law on February 17, including significant new changes to the federal HIPAA privacy and security rules. Dorsey & Whitney will be providing a full summary of these new rules in a Special Edition of Vital Signs later this week.
New OIG Advisory Opinions
OIG Advisory Opinion No. 08-21:
On November 25, 2008, the Department of Health and Human Services (“HHS”) Office of Inspector General (“OIG”) issued Advisory Opinion No. 08-21, in which the OIG reiterated is position regarding gainsharing arrangements, this time in the context of cardiac catheterization procedures. Consistent with prior guidance, the OIG found that the arrangement implicated the anti-kickback statute (42 U.S.C. § 1320a-7b) and the civil monetary penalties provisions of the Social Security Act (42 U.S.C. § 1320a-7a). However, also consistent with prior guidance, the OIG concluded that it would not impose administrative sanctions on the parties involved.
At issue in this opinion was an arrangement whereunder the hospital agreed to pay physician groups a share of cost savings resulting from changes the groups made to their cardiac catheterization practices over two years. The cost-saving measures involved standardizing use of medical devices and supplies and reducing inappropriate utilization of medical devices and supplies. This gainsharing program was implemented prior to the request for an opinion, but no money had been exchanged.
Given that supply use was determined on a case-by-case basis and that the range of supplies was not limited, the OIG concluded that the arrangement was sufficiently safeguarded to protect against inappropriate reductions in services. In addition, the OIG concluded that it would not seek sanctions because the arrangement used “objective historical clinical measures . . . to establish ‘floors’ beyond which no savings accrued” to the physician group. Further, patients were provided with written disclosure of the program and financial incentives were limited in duration and amount.
Although the OIG approved the gainsharing arrangement in this particular opinion, the OIG cautioned that other gainsharing arrangements that may include payments for cost savings could lead to different results, including arrangements where physicians are rewarded based on overall cost-savings without accountability for specific cost-reduction measures.
OIG Advisory Opinion No. 08-22:
On December 8, 2008, the OIG issued Advisory Opinion No. 08-22, indicating that a physician group’s proposal to employ part-time physicians to perform endoscopies on physician group’s premises would not generate prohibited remuneration under the anti-kickback statute (42 U.S.C. § 1320a-7b). The requestor of the opinion, a nonprofit, tax-exempt corporation that meets all of the requirements of a “physician group” under 42 C.F.R. § 411.352, proposed to pay part-time physicians a salary based on the fair market value of the professional services that the part-time physician personally provides while employed by the requestor.
The OIG indicated that “the anti-kickback statute does not prohibit payments made by employers to their bona fide employees, for employment in the furnishing of items or services for which payment may be made under Medicare, Medicaid, or other Federal health care programs.” Relying upon the certification of the requestor that the part-time employees at issue in the opinion are bona fide employees of the requestor in accordance with the definition of the term set forth at 26 U.S.C. § 3121(d)(2) and that such physicians would be paid fair market value for services performed, the OIG concluded that the wages paid to the part-time physicians would not constitute prohibited remuneration under the anti-kickback statute.
OIG Advisory Opinion No. 08-23
In an advisory opinion issued on December 12, 2008, the OIG said it would not penalize a county’s proposal to use tax revenues to cover cost-sharing amounts for residents who use emergency medical services ("EMS") transportation to hospitals.
The county in question provides EMS transportation through its fire department. It requested an advisory opinion from the OIG under a proposal not to bill county residents who received EMS transportation to hospitals for otherwise applicable cost-sharing amounts, such as deductibles and copayments. Instead, the county proposed accepting amounts received from third party payors (including federal health care programs) as payment in full for EMS transportation, and would treat revenues received from taxes as payment of the cost-sharing amounts.
Citing Chapter 16, Section 50.3.1 of the Centers for Medicare & Medicaid Services Medicare Benefit Policy Manual, the OIG determined that it would not impose administrative sanctions on the county. Section 50.3.1 provides that state or local government facilities that reduce or waive their charges for patients unable to pay, or charge patients only to the extent of their Medicare and other health insurance coverage, is not viewed as furnishing free services.
Consequently, since Medicare would not require the county to collect cost-sharing amounts from residents, the OIG would not impose sanctions under the anti-kickback statute where the cost-sharing wavier is implemented by the county categorically for bona fide residents of the county. However, the OIG did note that this advisory opinion would not apply to waivers of cost-sharing amounts based on criteria other than residency.
OIG Advisory Opinion No. 08-24
On January 7, 2009, the OIG issued an advisory opinion, approving an arrangement under which twenty-three physicians and podiatrists proposed to share a medical practice. Although the practice failed to satisfy the investments in group practices safe harbor under the anti-kickback statute (42 C.F.R. § 1001.952(p)), because one physician held a one-percent equity but did not treat patients at the practice, the OIG found no “appreciable additional risks” of fraud and abuse given the totality of the circumstances certified by the requestors. The OIG further noted that the absence of safe harbor protection was not fatal, noting that the practice otherwise complied with the safe harbor in nearly all other respects.
In reviewing the totality of the facts and circumstances, the OIG emphasized that all equity interests are held in the practice and not some subdivision thereof. Each investor holds a fixed percentage stake in the entire practice, rather than in a particular subdivision. Further, to a degree directly proportionate to their individual stake in the practice, each investor shares in the entire enterprise’s risks and returns. The OIG also observed that the requestors of the opinion certified that the proposed arrangement would comply fully in all respects with the requirements of the “group practice” definition under the physician self-referral law.
In light of these circumstances and others observed by the OIG, the OIG concluded that the proposed arrangement presented minimal risk of federal health care program abuse.