Fraud and Abuse and Why Little Fish Matter

[Ed. Note: We are pleased to welcome Andy Braver, Esq. to Health Reform Watch. Andy is a health care attorney and candidate for the Master of Laws in Health Law degree at Seton Hall University School of Law. Prior to entering the LL.M. program, Andy spent five years as a healthcare provider, running a state of the art medical diagnostic imaging center.  During that time, he dealt with many important health law issues faces by providers today, including Fraud and Abuse, Medicare and Medicaid licensing and reimbursement, state and private accreditation organizations, private payers, electronic health records, and HIPAA and other privacy issues, to name just a few. We look forward to bringing the law based perspective of a provider to the blog.]

Fraud and Abuse is a current health law hot button. Whether looked at from the standpoint of exploding healthcare budgets, or the amount of money being removed from the system by crooked and nefarious actors, there are many opinions on the problem, and what should be done about it.  My views on the subject are colored by my experience as both an attorney and a former healthcare provider.

Recently, I was lucky to hear an enlightening and informative panel discussion with a US Attorney whose post was created specifically to fight health care Fraud and Abuse, and a defense attorney, who spends a good portion of his time defending clients in prosecutions brought by this AUSA’s office.  One of the issues that struck me listening to the discussion is how the lack of resources to fight the problem so greatly affects the reality of how the problem is fought.  Put more succinctly, the government admits it can only go after the big offenders, and those that present immediate danger and potential harm to patients.  As a result, “small time” offenders are often left to flourish without much fear of finding themselves looking down the barrel of a False Claims Act [31 U.S.C. 3729, et seq.] or Anti-Kickback Act [41 U.S.C. 51, et seq.] criminal or civil investigation.

While the overall theory is understandable, does it make sense for the government to make these admissions?  Of course, the government needs to get the most from the resources it has to combat the problem– while also ensuring patient safety is not compromised in any way– but why advertise that limited resources limit investigations and prosecutions?  How then is an attorney to provide counsel in the following scenario: your client, an honest specialty medical provider who has unique offerings to the community (whether specialized training or advanced equipment not found elsewhere), is having trouble breaking into the local market because of a lack of referrals.  It turns out that the competition, in order to protect their business, is paying the gatekeeper (the doctor and/or office manager) at a few referring physician offices for each patient referred (Medicare, Medicaid and even private insurance), in the form of cash or gift cards, paid in small denominations, every week or two.  While the effect this might have on patient care is debatable, there is no question that these payoffs are illegal [41 USC 1320(b)] and [US Attorney Criminal Resource Manual].  There is some question, however, on how the problem should be handled.

The cynic and former healthcare provider in me wants to advise my client to take the easiest route and match the payoff since there is little to fear, but of course, I would NEVER offer such advice, nor condone such behavior.  How, then, do you level the playing field and advise a client who is trying to survive running an honest business, faced with dishonest competition that know that as long as they only cheat a little bit, they will not end up in any kind of trouble?

Is it realistic to ask your client to bring a Qui Tam action against those involved in the payoff schemes?  Was a whistleblower action meant to be used in this kind of small provider situation involving a mixture of federal and private insurance claims?  There will be no treasure trove of documents evidencing the payoffs, no smoking-gun Visa gift cards, and while your client may know the truth about the payoffs, it will ultimately turn into a he-said she-said case without assistance from professional investigators with badges.  Who knows what impact this will have on your client’s business, and whether other referring physicians will want to get involved with your trouble-maker client in the future?  Perhaps you might be able to convince an employee from the dishonest competition to come forward as a relator in order to share in the proceeds of any settlement [31 U.S.C. 3730(d)].  But will the government intervene in a small, low-profile case, then allowing your client to return to life as a full-time medical provider rather than a Qui Tam relator.

I believe that the government would be properly allocating its resources by, from time to time, looking into “smaller” complaints.  These low-hanging-fruit cases are ripe for the picking, and, from my experience as a provider competing in this kind of an environment, a little bit of deterrence will go a long way.  If nothing else, dishonest providers will be more likely to play by the rules if they are fearful that breaking them will result in in bad consequences, and honest practitioners will not have to become experts on the Qui Tam process.

Pharmaceutical Promotion, Prescriptions, Payors: Chain, Chain, Chain?

On February 16, 2011, Magistrate Judge Ramon E. Reyes issued a Report & Recommendation in Sergeants Benevolent Assn. Health & Welfare Fund v. Sanofi-Aventis U.S. LLP, Case No. 1:08-cv-00179-SLT-RER (E.D.N.Y. Feb. 16, 2011), recommending that the district court not certify a class of union health and welfare funds and other third-party payors claiming that they paid for prescriptions for the antibiotic Ketek that doctors would not have written but for the defendant Sanofi-Aventis’ fraudulent marketing.  Jim Edwards at Placebo Net summarizes the plaintiffs’ fraud allegations as follows:  “Basically, Sanofi knew in October 2001 that one of its main researchers on the drug was probably faking her data. That researcher was indicted for research fraud in April 2003. Yet in April 2004, the FDA approved Ketek for sale even though both it and Sanofi knew the data on which the approval was based was entirely bogus. In 2007, after 53 cases of liver failure including four deaths, the FDA all but withdrew Ketek from the market.”

Judge Reyes’ R & R is just the latest in a string of decisions rejecting plaintiffs’ attempts to fit the peg of fraudulent or illegal promotion of drugs and devices into the hole of a civil Racketeering Influenced and Corrupt Organizations Act (RICO) class action.  Writing in Defense Counsel Journal in April of 2010, J. Gordon Cooney, John P. Lavelle, and Bahar Shariati explain the reasons why civil RICO is attractive to class action plaintiffs.  The Food Drug & Cosmetic Act does not have a private right of action, so those harmed when a drug is promoted fraudulently or illegally (for an off-label use, for example) cannot simply allege a violation of the FDCA.  Frequently, they claim instead that the promotion at issue constituted mail or wire fraud, both of which count as racketeering activity under the RICO statute, and that the defendant was guilty of conducting a RICO enterprise.  The civil RICO vehicle has several advantages for plaintiffs, including the possibility of treble damages, broad choice of venues, and “[p]erhaps most importantly in the class action context, civil RICO claims conceivably allow plaintiffs to sidestep the predominating choice-of-law issues that typically prevent nationwide class actions based on fraud or deceptive practice law[.]”

As the authors of the defense-oriented blog Drug and Device Law explain, however, third-party payors like the union health and welfare funds who brought the Ketek case have encountered difficulty at the class certification stage.  This is because they have been unable to convince courts that the members of the class could rely on common evidence to prove their claims.  In particular, courts have held that class certification is not appropriate because each plaintiff would have to put on individualized prescription-by-prescription evidence to establish that the promotion in question caused it to pay for prescriptions that would not otherwise have been written.

As Jim Edwards puts it, Judge Reyes held that “[t]he doctor’s decision to write a Ketek prescription removes the ‘proximate cause’ necessary to establish that the plaintiffs paid for the drug based on fraud — even though the only reason the drug was on the market was because of Sanofi’s fraud, and individual doctors are in no position to know whether drugs are backed by fraudulent data or not.”  Edwards suggest that “[i]f Congress wanted to find a cost-free way of reducing government spending on medical bills, then loosening the legal definitions of fraud, kickbacks and false statements to include common sense interpretations of bad behavior would be one way to do it.”

Lawsuit Against Guidant for Making False Statements (Again)

As we reported a little while back, the Department of Justice obtained what FDA Commissioner Hamburg declared “the largest criminal penalty ever imposed on a device manufacturer for violating the Food, Drug and Cosmetic Act” against Boston Scientific subsidiary, Guidant LLC.

Following this record breaking performance, the Department of Justice filed suit against Guidant LLC on January 27, 2011.  Yes, that is correct — Guidant is once again subject to a federal claim resulting from false statements made regarding three models of its implantable cardioverter defibrillators that were recalled for short-circuiting failures.  This time, however, it is alleged that “Guidant knowingly caused the submission of false or fraudulent claims for implants of faulty… devices to the Medicare program” in violation of the False Claims Act.

John R. Marti, First Assistant U.S. Attorney for the District of Minnesota was quoted in the Department of Justice press release stating:

When companies like Guidant request and receive federal dollars for products they know to be defective, the United States is committed to aggressively seeking the recovery of those payments. That is especially true when the defective products endanger human lives. In today’s environment, it is essential that Medicare and other public health care programs be made whole to ensure their continued vitality for future generations.

Well that makes sense.  But why bring the False Claims Act claim separately from the claims for violations of the Food, Drug and Cosmetic Act (”FDCA”)?  The most obvious reason is as follows: the Department of Justice did not bring the False Claims Act claim against Guidant.  The United States joined a lawsuit filed by qui tam relator James Allen, a patient who allegedly received a defective device.

The complaint alleges that approximately 2,000 false claims were submitted to the Medicare program.  It also includes ten examples of individual false claims ranging from $20,201.14 to $ 46,130.20.  With treble damages and civil penalties of not less than $5,500 and up to $11,000 for each violation, the recovery could range anywhere from $132 million to $298 million.  The record-breaking $296 million in fines and forfeitures for violations of the FDCA standing alone looked formidable; coupled with this latest volley, it is staggering– a potential total minimum of $428 million, maximum  of just shy of $600 million.

According to Fox News, Boston Scientific “is disappointed that the federal government, after reaching a criminal resolution with Guidant LLC, has chosen to seek additional money in a civil lawsuit.  However, the company believes that the ultimate resolution of this matter should not have a significant financial impact.”

Res Ipsa Loquitur

Obama Signs Provision Contrary to Fraud Enforcement Trend

On December 15, 2010, President Obama signed the Medicare and Medicaid Extenders Act of 2010 (the Medicare Physician Pay Fix Bill).  In addition to its one-year delay of a 25% cut in Medicare reimbursements to physicians, the act repeals § 6502 of the Patient Protection and Affordable Care Act which would have become effective on January 1, 2011.  This move stands in stark contrast to a recent trend toward increased individual liability, specifically the increased exclusion of individuals from federal healthcare programs for fraud and abuse violations.

Enforcement Trends

The federal government, through the Department of Health & Human Services Office of the Inspector General (OIG), has increased its focus on individuals, with exclusions for fraud and abuse violations.  As previously reported, OIG released an internal advisory document on October 20, 2010, setting out nonbinding factors for permissive exclusions under § 1128(b)(15) of the Social Security Act.  The new Guidance changed the permissive exclusion standard to a quasi-mandatory standard, by creating a presumption in favor of exclusion when an individual exercises ownership, operational or managerial control over a sanctioned entity and there is evidence that such individual knew or should have known of the prohibited conduct.

OIG swiftly acted on the new Guidance by excluding Marc S. Hermelin, Chairman of the board and majority shareholder of K-V Pharmaceutical.  As a result, K-V announced on November 17, 2010 that Hermelin had resigned and agreed to divest himself of all K-V stock.  On December 7, 2010, Gregory E. Demske, Assistant Inspector General, announced that the exclusion of Hermelin was “preview of things to come.”

Further, on November 9, 2010, former GlaxoSmithKline Vice President and Associate General Counsel Lauren Stevens was charged with obstruction of justice and making a false statement in response to a Food and Drug inquiry.  Michael W. Peregrine, with McDermott Will & Emery LLP, told BNA that, “the Stevens prosecution is a piece of a broader puzzle based in part on the responsible corporate officer doctrine and reflects the government’s heightened interest in fostering individual accountability and that is consistent with other recent attempts by prosecutors to target individuals they believe are responsible for corporate misconduct.”

Section 6502

Section 6502, which was repealed on December 15, would have continued the trend toward increased individual liability.  It would have mandated state Medicaid agencies to exclude an individual or entity that “owns, controls, or manages” a Medicaid-participating entity that:

• Has delinquent, unpaid Medicaid overpayments
• Is suspended or excluded from participation in Medicaid, or
• Is affiliated with an individual or entity that has been suspended or excluded from participation in Medicaid

The Medicaid exclusion authority of § 6502 is different than § 1128(b)(15) of the Social Security Act.  Unlike § 1128(b)(15), which provides for permissive exclusion from all federal health care programs,  § 6502 would have provided for mandatory derivative exclusion from Medicaid only.  Laurence Freedman, an attorney with Patton Boggs told BNA that “this mandatory Medicaid exclusion needed to be repealed to avoid a broad, and I believe, unintended impact.  It would have reached former executives or board members of excluded subsidiaries, for example.”

Human Farming & the Limits of Medical Research

A Museum of Modern Art exhibit by Michael Burton once proposed that human beings themselves would be the soil for a “future farm:”

Future Farm predicts that the emerging pharmaceutical research in harvesting adult stem cells from fat tissues and its convergence with future nanotechnologies, will bring with it scenarios that reconsider the body as income. We live in a world where industries exist to offer financial rewards for those willing to sell a kidney or produce hair to beautify others. Industries have grown to facilitate transplant tourism as a result of the success of contemporary surgery. And scientific and technological advances continue to bring new possibilities for the practice of farming the body.

This may seem like an overly dramatic or even science-fictionalized description of desperation due to poverty and larger economic trends. But the global economic race to the bottom has now so influenced medical research that Burton’s dark vision is coming closer to realization.

A recent article by Bartlett & Steele and a book by Carl Elliott describe the rise of “contract research organizations” that organize the initial phases of drug trials. Bartlett and Steele choose a provocative metaphor to describe the trend:

To have an effective regulatory system you need a clear chain of command—you need to know who is responsible to whom, all the way up and down the line. There is no effective chain of command in modern American drug testing. Around the time that drugmakers began shifting clinical trials abroad, in the 1990s, they also began to contract out all phases of development and testing, putting them in the hands of for-profit companies.

It used to be that clinical trials were done mostly by academic researchers in universities and teaching hospitals, a system that, however imperfect, generally entailed certain minimum standards. The free market has changed all that. Today it is mainly independent contractors who recruit potential patients both in the U.S. and—increasingly—overseas. They devise the rules for the clinical trials, conduct the trials themselves, prepare reports on the results, ghostwrite technical articles for medical journals, and create promotional campaigns. The people doing the work on the front lines are not independent scientists. They are wage-earning technicians who are paid to gather a certain number of human beings; sometimes sequester and feed them; administer certain chemical inputs; and collect samples of urine and blood at regular intervals. The work looks like agribusiness, not research.

Because of the deference shown to drug companies by the F.D.A.—and also by Congress, which has failed to impose any meaningful regulation—there is no mandatory public record of the results of drug trials conducted in foreign countries. Nor is there any mandatory public oversight of ongoing trials.

Therefore, it is up to journalists like Bartlett & Steele to uncover problems. And they are legion:

The Argentinean province of Santiago del Estero, with a population of nearly a million, is one of the country’s poorest. In 2008 seven babies participating in drug testing in the province suffered what the U.S. clinical-trials community refers to as “an adverse event”: they died. . . . In New Delhi, 49 babies died at the All India Institute of Medical Sciences while taking part in clinical trials over a 30-month period. . . . In 2007, residents of a homeless shelter in Grudziadz, Poland, received as little as $2 to take part in a flu-vaccine experiment. The subjects thought they were getting a regular flu shot. They were not. At least 20 of them died.

Bartlett and Steele also discuss problems in research in the US. Exploitation probably should not be a surprise in a country where unpaid prison labor appears to be a strategy to boost productivity. US companies are also driving the “initial stages of distributed human computing that can be directed at mental tasks the way that surplus remote server rackspace or Web hosting can be purchased to accommodate sudden spikes in Internet traffic.” (Such “human intelligence tasks” can be purchased for as little as a penny each on Amazon’s Mechanical Turk.) But the slow infiltration of less developed countries’ standards into US drug testing should be a concern for the FDA.

The system also appears to give drug companies a wide latitude to manipulate results, leading to the rise of “rescue countries” that are particularly prone to produce positive results:

One big factor in the shift of clinical trials to foreign countries is a loophole in F.D.A. regulations: if studies in the United States suggest that a drug has no benefit, trials from abroad can often be used in their stead to secure F.D.A. approval. There’s even a term for countries that have shown themselves to be especially amenable when drug companies need positive data fast: they’re called “rescue countries.” Rescue countries came to the aid of Ketek, the first of a new generation of widely heralded antibiotics to treat respiratory-tract infections. . . In 2004—on April Fools’ Day, as it happens—the F.D.A. certified Ketek as safe and effective. The F.D.A.’s decision was based heavily on the results of studies in Hungary, Morocco, Tunisia, and Turkey. The approval came less than one month after a researcher in the United States was sentenced to 57 months in prison for falsifying her own Ketek data.

Massive global inequalities render populations around the world vulnerable to exploitative testing conditions.

Carl Elliott’s book White Coat, Black Hat covers similar terrain, as well as the conflicts of interest and other issues we’ve addressed at Seton Hall’s health law center. His review of recent books on medical research described a “mild torture economy.” His piece “Guinea Pigging” suggests that “rescue counties” in the US may complement the “rescue countries” of Bartlett and Steele:

This unit was in a university hospital, not a corporate lab, and the staff had a casual attitude toward regulations and procedures. “The Animal House of research units” is what [one research subject] calls it. . . . Although study guidelines called for stringent dietary restrictions, the subjects got so hungry that one of them picked the lock on the food closet. “We got giant boxes of cookies and ran into the lounge and put them in the couch,” Rockwell says. “This one guy was putting them in the ceiling tiles.” Rockwell has little confidence in the data that the study produced. “The most integral part of the study was the diet restriction,” he says, “and we were just gorging ourselves at 2 A.M. on Cheez Doodles.”

Elliott’s litany of poorly controlled or ramshackle studies gives us one more item to add to Dr. John Ioannidis’s many reasons for doubting medical research:

Ioannidis [has] laid out a detailed mathematical proof that, assuming modest levels of researcher bias, typically imperfect research techniques, and the well-known tendency to focus on exciting rather than highly plausible theories, researchers will come up with wrong findings most of the time. Simply put, if you’re attracted to ideas that have a good chance of being wrong, and if you’re motivated to prove them right, and if you have a little wiggle room in how you assemble the evidence, you’ll probably succeed in proving wrong theories right. . . .

When a five-year study of 10,000 people finds that those who take more vitamin X are less likely to get cancer Y, you’d think you have pretty good reason to take more vitamin X . . . But these studies often sharply conflict with one another. Studies have gone back and forth on the cancer-preventing powers of vitamins A, D, and E; on the heart-health benefits of eating fat and carbs; and even on the question of whether being overweight is more likely to extend or shorten your life. How should we choose among these dueling, high-profile nutritional findings? Ioannidis suggests a simple approach: ignore them all.

For starters, he explains, the odds are that in any large database of many nutritional and health factors, there will be a few apparent connections that are in fact merely flukes, not real health effects—it’s a bit like combing through long, random strings of letters and claiming there’s an important message in any words that happen to turn up. But even if a study managed to highlight a genuine health connection to some nutrient, you’re unlikely to benefit much from taking more of it, because we consume thousands of nutrients that act together as a sort of network, and changing intake of just one of them is bound to cause ripples throughout the network that are far too complex for these studies to detect, and that may be as likely to harm you as help you. . . .[S]tudies rarely go on long enough to track the decades-long course of disease and ultimately death. Instead, they track easily measurable health “markers” such as cholesterol levels, blood pressure, and blood-sugar levels, and meta-experts have shown that changes in these markers often don’t correlate as well with long-term health as we have been led to believe. . . .

And these problems are aside from ubiquitous measurement errors (for example, people habitually misreport their diets in studies), routine misanalysis (researchers rely on complex software capable of juggling results in ways they don’t always understand), and the less common, but serious, problem of outright fraud (which has been revealed, in confidential surveys, to be much more widespread than scientists like to acknowledge). . . .If a study somehow avoids every one of these problems and finds a real connection to long-term changes in health, you’re still not guaranteed to benefit, because studies report average results that typically represent a vast range of individual outcomes. Should you be among the lucky minority that stands to benefit, don’t expect a noticeable improvement in your health, because studies usually detect only modest effects that merely tend to whittle your chances of succumbing to a particular disease from small to somewhat smaller. “The odds that anything useful will survive from any of these studies are poor,” says Ioannidis—dismissing in a breath a good chunk of the research into which we sink about $100 billion a year in the United States alone.

To summarize: Ioannidis casts some doubt on even the best of studies, and Elliott, Bartlett, and Steele show that bad studies may be far more common than we suspect. It’s a troubling set of observations for all concerned. We should at the very least insist on much more systematic monitoring of global drug trials.

HHS-OIG Issues “Roadmap” to Help New Physicians Steer Clear of Fraud and Abuse

As others have noted, earlier this month the HHS-OIG issued “A Roadmap for New Physicians: Avoiding Medicare and Medicaid Fraud and Abuse,” a pamphlet which it developed to educate medical students, residents, and fellows about fraud and abuse law.  The HHS-OIG was spurred to act after a 2010 survey it conducted revealed that less than half of the nation’s medical schools provide instruction on the topic.  The Roadmap is sensibly organized around the relationships physicians have with (1) payers, with an emphasis on Medicare, (2) fellow health care providers, and (3) vendors.  It uses well-chosen “case examples” to make the rules governing those relationships concrete.  The Roadmap concludes with a helpful list of additional resources, a list of steps to take “[i]f you are engaged in a relationship you think is problematic or have been following billing practices you now realize were wrong,” and a plug for the HHS-OIG’s Provider Self-Disclosure Protocol.

As David Harlow points out on his HealthBlawg, the release of the Roadmap coincides with an effort by the federal government to re-think current fraud and abuse laws to facilitate the development of accountable care organizations and other efforts to better organize and pay for health care.  Harlow notes that “the fraud and abuse and self-referral rules, intended as a brake on bad behavior in the context of fee-for-service medicine, become less relevant — and even become an impediment — to new systems of care and new systems of financing of that care.”  (Professor Frank Pasquale discusses the move to modify or waive the rules in more depth here.)  Of course, fee-for-service medicine is not going to disappear overnight, so today’s doctors in training need to learn about the current legal regime.

The government’s new willingness to look beyond drug and device companies to hold physicians personally accountable for fraud and abuse violations should make it easier to get the attention of doctors in training.  The Roadmap highlights HHS-OIG’s ongoing investigation into many of the orthopedic surgeons who allegedly received kickbacks from the hip and knee implant manufacturers who entered into a landmark settlement with the U.S. Attorney for the District of New Jersey in 2007.  In May 2010, an orthopedic surgeon in Florida paid $650,000 to resolve claims that he was compensated by two device companies ostensibly for consulting services but allegedly “for ordering, or causing to order, … orthopedic products.”

The Roadmap also reminds physicians that transparency is coming, using large, orange text to emphasize that “[t]he public will soon know what gifts and payments a physician receives from industry.”

OIG Issues Guidance on Individual Permissive Exclusions

On October 20, the Department of Health & Human Services Office of the Inspector General, (”OIG”) released, Guidance for Implementing Permissive Exclusion Authority Under Section 1128(b)(15) of the Social Security Act (”Guidance”).  The Guidance provides owners, officers, and managing employees an opportunity to better evaluate their exposure and limit any liability resulting from their control over an entity subject to OIG enforcement action.

Section 1128(b)(15) of the Social Security Act provides the Secretary of HHS the authority to exclude owners, officers, and managing employees “of an entity that has been excluded or has been convicted of certain offenses.”  OIG, having been delegated this authority by the Secretary, has published this internal advisory document setting out nonbinding factors to be considered in deciding whether to impose an individual permissive exclusion, under § 1128(b)(15).

Historically, OIG has not often exercised its permissive authority to exclude individuals from participation in federal health programs.  According to OIG’s “List of Excluded Individuals,” 28 individuals controlling an excluded or convicted entity have themselves been excluded pursuant to § 1128(b)(15), including 16 owners or operators, 7 officers and 5 practitioners.  The Guidance may indicate a new enforcement direction for OIG.

According to DLA Piper, the Guidance “is further evidence that OIG is serious about its recent focus on individual accountability and that it intends to exclude officers and managing employees, even without evidence that those individuals knew or should have known about the conduct giving rise to the entity’s criminal liability or exclusion.”  Skadden takes a similar position, stating:

This guidance finds OIG asserting the breadth of its authority by creating a presumption in favor of exclusion in certain cases and endorsing a new strict liability exclusion standard in other cases.  These enforcement positions appear likely to accelerate the government’s recent efforts to hold individuals accountable for corporate wrongdoing.

Read more

Office of the Inspector General Releases 2011 Work Plan

On October 1, the Office of the Inspector General (”OIG”) of the U.S. Dept. of Health & Human Services (”HHS”) released its Work Plan for Fiscal Year 2011 (”Work Plan”).  Each year, the OIG briefly outlines activities that OIG “plans to initiate or continue with respect to the programs and operations” of HHS.  Various offices within OIG conduct audit, evaluation, investigation, enforcement, and compliance activities.

Continuing Work Within OIG

Many of the topics outlined in the Work Plan were included in last year’s plan.  Although the repeated inclusion of these areas of focus makes compliance easier for facilities, audits should still be conducted in the following areas:

• Provider-based status
• Observation services (as part of an outpatient visit)
• Part A hospital capital payment
• Critical access hospitals
• Medicare disproportionate share payments
• Duplicate graduate medical education payments
• Hospital readmissions
• Hospital admissions with conditions coded present-on-admission
• Inpatient rehabilitation facility transmission of patient assessment instruments
• Medicare excessive payments

New Issues to be Targeted

“What we’re really looking at are four or five really brand new issues,” said Stephen Miller, JD, chief compliance and privacy officer for Trenton, NJ-based Capital Health System, Inc. for HealthLeadersMedia.com.

• Brachytherapy reimbursement
• Replacement of devices received at no cost or reduced cost
  • According to Debbie Mackaman, RHIA, CHCO, regulatory specialist for HCPro, Inc., in Marblehead, MA, “Since the medical devices replacement issue can be a difficult billing procedure to comply with, facilities should certainly do an in-depth process audit in this area.”
• Safety and quality of intensity-modulated radiation therapy (IMRT) and image-guided radiation therapy (IGRT)
  • Indicates a responsiveness on the part of OIG to headlines regarding quality concerns.  In March, the Nuclear Regulatory Commission fined Philadelphia Veterans Affairs Medical Center $227,500, its second largest fine ever against a medical institution, after “unprecedented number” of radiation errors in treating prostate cancer patients.
• Hospitals’ application of the “three-day rule” and “one-day rule” under the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010
  • Many hospitals have had difficulty in billing under the new rules, which redefined what services are related to the admission, and therefore not eligible for Medicare payment within the defined window.  According to Mackaman, “IPPS facilities should be vigilant about reviewing the current three-day rule, and the non-IPPS hospitals should review the addition of the one-day rule.”  CMS guidance on this topic can be found here.

OIG Review of FDA Administration

As HealthReformWatch previously reported, nine Food & Drug Administration (”FDA”) scientists from the Center for Devices and Radiological Health (”CDRH”) sent a letter to President Obama stating, in relevant part, that:

the scientific review process for medical devices at the FDA has been corrupted and distorted by current FDA managers, thereby placing the American people at risk. Managers with incompatible, discordant and irrelevant scientific and clinical expertise in devices…have ignored serious safety and effectiveness concerns of FDA experts. Managers have ordered, intimidated and coerced FDA experts to modify scientific evaluations, conclusions and recommendations in violation of the laws, rules and regulations, and to accept clinical and technical data that is not scientifically valid.

These scientists also wrote to Congress in 2008, accusing the top FDA officials of “serious misconduct” in ignoring scientist concerns and “approving for sale unsafe or ineffective medical devices,” according to the N.Y. Times.

According to Washington G-2 Reports, OIG also stated on September 29 that “it would re-examine the concerns of those FDA reviewers, and broaden the scope of its inquiry.”

This coming year, OIG intends to investigate CDRH “policies and procedures for resolving scientific disputes about approval of devices.”  The Work Plan states that OIG will:

review a sample of administrative files for disputed device decisions and assess the extent to which regulations, policies, and procedures were followed during the dispute resolution process. We will also assess whether CDRH managers and staff are aware of and trained on policies and procedures for resolving scientific disputes.

Additionally, OIG will continue to review FDA oversight of investigational new drug applications, the process for device approval, and oversight of postmarketing surveillance studies of medical devices.

An Evening with New Jersey’s Top Cop

On September 23rd, 2010, Paul J. Fishman, United States Attorney for the District of New Jersey, provided insight into his state’s approach to prosecuting health care fraud. He spoke here at Seton Hall Law School, presented by our Center for Health & Pharmaceutical Law & Policy.

First, some background on the U.S. Attorney. Mr. Fishman graduated magna cum laude in 1978 from Princeton University and cum laude in 1982 from Harvard Law, where he served as the Managing Editor of the Harvard Law Review. After a clerkship with the Hon. Edward R. Becker of the U.S. Court of Appeals for the Third Circuit, he became an Assistant U.S. Attorney for the District of New Jersey, where he served as Deputy Chief of the Criminal Division, Chief of Narcotics, Chief of the Criminal  Division, and First U.S. Attorney. From 1994 to 1997, Mr. Fishman served as a senior advisor to the Attorney General and Deputy Attorney General of the United States on a variety of law enforcement, policy, legislative, national security, and international matters, as well as on specific investigations and prosecutions.

Mr. Fishman’s talk, entitled “Why Prosecuting Health Care Fraud is a Top Priority in New Jersey,” drew a diverse crowd comprised of professors and law students from Seton Hall, as well as many in the health care industry and government who were presumably keen to divine the U.S. Attorney’s future prosecutorial plans.  The talk opened with an acknowledgment that the Department of Justice  (DOJ) and the Department of Health & Human Services are working more closely than ever in terms of combating health care fraud. Mr. Fishman noted the importance of this relationship given the myriad opportunities for health care fraud that present themselves throughout the sector’s vast supply chain.

At the outset, Mr. Fishman underscored his desire to leverage emerging technology to better distill trends in the flow of health care dollars in New Jersey. Such analytical technology — already being employed in New Jersey — can help detect anomalous spending patterns that may signal potential fraudulent activity.

Mr. Fishman stated that over the next few years, the number of cases being prosecuted will go up, including both criminal and civil fraud prosecutions. Recognizing the budget shortfall facing New Jersey, Mr. Fishman was quick to note that DOJ is in fact cash flow positive, citing research finding that the DOJ collects $4 for every 1$ spent on investigations.

The U.S. Attorney discussed New Jersey’s unique demographics. With over 100 hospitals,  360-plus nursing homes, 200 private pay home care agencies, and scores of pharmaceutical companies, the New Jersey  health care industry is robust — making it a sizable target for health care fraud.

But as Mr. Fishman notes, it is not just the medical-industrial complex that distinguishes the Garden State’s health care landscape: 38 percent of NJ’s population is overweight, the state ranks ninth in the U.S. in terms of the percentage of elderly residents, and it spends 20 percent more on health care spending on the elderly than the national average. These statistics, according to Mr. Fishman, make the New Jersey health care system an even larger opportunity for fraud.

Mr. Fishman noted a number of specific areas of criminal activity that his office will be focusing on, including:

1. Cases in which people are providing services in a way that is “inconsistent with their stature in the health care industry.” This category would include, for example, individuals pretending to be licensed physicians.
2. Prosecuting fraudulent prescriptions that are written for unneeded services. Mr. Fishman mentioned fraudulent activity in the durable medical equipment field as an example.
3. Staged accidents that seek to defraud the reimbursement system.
4. Traditional Stark and Anti-kickback issues.

On the civil side Mr. Fishman mentioned a desire to reach out to those representing qui tam relators, presumably in an effort to increase the number of qui tam cases brought to his New Jersey office. Mr. Fishman’s qui tam discussion was followed by his general goal of broadening outreach efforts so as to take advantage of the possible early detection of fraud by individuals who may spot a fraudulent activity before such activity is formally recognized. Accompanying  greater outreach efforts will be a tighter integration between the criminal and civil investigatory arms.

Mr. Fishman rounded up his talk with a discussion of deferred prosecution agreements — noting that  while the DOJ often places a huge premium on resolving suits they have not historically focused enough on individual culpability. Accordingly, Mr. Fishman expressed a willingness to go after individuals, and not just corporations, for their actions — predicting an increase in individual prosecutions but maintaining that rates of corporate prosecutions will hold steady.

On the topic of the monitorships that take place in response to non-prosecution and deferred prosecution agreements, Mr. Fishman posited that the monitors should be located in or near the city in which the health care entity is headquartered. Thus, the New Jersey office will be encouraging those in non-prosecution and deferred prosecution to look for monitors in their area. Furthermore, monitors should not have clients with interests that are adverse to the DOJ office, and remained skeptical of the propriety of having white collar defense lawyers acting as the monitors of first resort, notwithstanding their skills. Rather, it is thought that health care entities should look outside the criminal defense bar for monitors, while ensuring that the entity has the requisite integrity and experience to tackle highly complex health care law issues.

In conclusion, Mr. Fishman underscored that deterrence was his guiding principle, with the ultimate goal being the wholesale prevention of health care fraud. Mr. Fishman focused on institutional shortcomings — particularly the lack of a robust relationship between his Office and the health care industry — as a reason his office has failed to sufficiently prevent health care fraud.  However deficient DOJ’s approach to health care fraud has been, the zealousness and creativity of the newly-appointed Mr. Fishman should make even the most seasoned New Jersey health care fraudster nervous.

US Attorney Paul Fishman to Address Health Care Fraud

Paul Fishman, United States Attorney for the District of New Jersey, will address the Seton Hall Law community on “Why Prosecuting Health Care Fraud is a Top Priority in New Jersey.”  The public lecture will be provided free of charge on Thursday, September 23, at 6:00 p.m at the Law School.

Since taking office in 2009, U.S. Attorney Fishman has restructured the Criminal Division, appointing new leadership and creating new units, including the Health Care and Government Fraud Unit, which is tasked with investigating and prosecuting crimes involving fraud and abuse in the healthcare industry. The unit will focus on major fraud and abuse against the Medicare, Medicaid and Veterans Administration programs, including the sale of unapproved or altered drugs, illegal kickbacks, improper billing, and improper diversion of controlled substances. To register for this special lecture, click here.

Are GPO’s Suppressing Safer Devices?

S. Prakash Sethi has called group purchasing organizations (GPO’s) an “undisclosed scandal in the U.S. health care industry.” Mariah Blake’s article in the Washington Monthly on GPO’s is a sobering “must-read” for those concerned about the future of health care in the US. She writes about the entrepreneur Thomas Shaw, who’s invented a syringe that drastically reduces the risk of bloodstream infections for patients and healthcare workers. (According to Barry Lynn, who’s also written on the issue, “each year about 6,000 medical workers come down with HIV or infectious hepatitis from such accidents, and dozens end up dead.”) Shaw’s brilliant innovation “added only a few pennies to the cost of production,” but it’s rarely used today. Blake traces the non-diffusion of this innovation to a complex set of deregulatory decisions relating to GPO’s.

GPO’s are supposed to use purchasing clout on behalf of buyers (like hospitals) to drive down prices from sellers. But it appears that these intermediaries, like large Wall Street firms, are often more interested in fees and payments from the sell-side than they are in helping the buy-side. As one analyst testified before the DOJ and FTC, “the compensation of most GPO management is almost always based on . . . fee income [from suppliers] rather than on the real savings to hospital members.”

Shaw’s bad luck was to enter the market shortly after a massive GPO, Premier, struck a multiyear deal with supplier Becton Dickinson. As Blake notes, “Premier signed a $1.8 billion, seven-and-a-half-year deal with Becton Dickinson [whereby its 1700 member hospitals] had to buy 90 percent of their syringes and blood collection tubes from” Becton Dickinson, which also “landed similar deals with all but one major GPO.” Lynn says that “many hospital buying agents won’t even dare to talk to Shaw for fear of upsetting their more powerful suppliers.”

How did the GPO-Supplier nexus grow so strong? Blake does a terrific job explaining developments that transmogrified many cost-cutting intermediaries into self-serving middlemen:

To keep costs in check, in the 1970s many medical facilities began banding together to form group purchasing organizations, or GPOs. The underlying idea was simple: because suppliers generally give price breaks to customers who buy large quantities, hospitals could get better deals on, say, gauze or gloves, if a group of them came together and bargained for ten cases, rather than each hospital buying a case on its own. . . . By decade’s end, virtually every hospital in America belonged to a GPO.

Then, in 1986 Congress passed a bill exempting GPOs from the anti-kickback provisions embedded in Medicare law. This meant that instead of collecting membership dues, GPOs could collect “fees”—in other industries they might be called kickbacks or bribes—from suppliers in the form of a share of sales revenue. (For example, in exchange for signing a contract with a given gauze maker, a GPO might get a percentage of whatever the company made selling gauze to members.) The idea was to help struggling hospitals by shifting the burden of funding GPOs’ operations to vendors. To prevent abuse, “fees” of more than 3 percent of sales were supposed to be reported to member hospitals and (upon request) the secretary of [HHS].

[This shift] turned the incentives for GPOs upside down. Instead of being tied to the dues paid by members, GPOs’ revenues were now tied to the profits of the suppliers they were supposed to be pressing for lower prices. This created an incentive to cater to the sellers rather than to the buyers. . . . Before long, large suppliers began using “fees”—sometimes very generous ones—along with tiered pricing to secure deals that locked GPO members into buying their products. . . .

This situation only grew thornier in 1996, when the Justice Department and the Federal Trade Commission overhauled antitrust rules and granted the organizations protection from antitrust actions, except under “extraordinary circumstances.” . . . Within a few years, five GPOs controlled purchasing for 90 percent of the nation’s hospitals, which only amplified the clout of big suppliers.

There are a few lessons here. Within the confines of competition law, the message should be clear: Einer Elhauge was right to state in 2003 that “Serious antitrust concerns remain about exclusionary agreements that charge higher prices to GPOs or hospitals that won’t commit to limiting purchases from rivals of dominant manufacturers to a small (often 5-10%) percentage of their purchases.” The broader lesson is that intermediaries in many fields are often tempted to put their own profits ahead of the entities they’re ostensibly serving. In the endless battle for compensation between providers, hospitals, and insurers, there are many profitable opportunities to shift alliances. Meanwhile, entrepreneurs like Thomas Shaw, patients, and thousands of medical workers are enduring unsafe conditions that could easily be remedied.

Taking the Fraud Out of Medicare Expansion

One of the ways the Obama administration hopes to pay for health care reform is through policing Medicare fraud.  It is estimated that the Centers for Medicaid and Medicare Services (CMS) spends $60 billion a year on fraudulent claims.  According to Senator Grassley of Iowa, the federal agency received warnings of fraud by watchdog organizations, but did not respond to most of them; these warnings fell upon the CMS’s shoulders under the Bush Administration.

A report by the Department of Health and Human Services finds that much of the fraud in the Medicare Prescription Benefit program could have been avoided through better management of the companies that were hired by the federal government in 2006 to investigate and monitor the fraud.  Grassley notes that the companies, called Medicare drug integrity contractors or Medics, were essentially a waste of money because they were never given the proper information to perform the audits.  The New York Times reports that the Bush Administration did not allow for the audits by Medics to proceed until its final few months in office.

Under the current model, scams to get Medicare reimbursement for non-existent services are easier than one might think.  Just this past July, a couple who owned a medical business was indicted for submitting false reimbursement bills to the CMS for power wheelchairs that they claimed had been lost or destroyed during Hurricane Katrina.  Other scams include medical suppliers billing Medicare for equipment that was never given to patients, creation of fake medical supply companies, and acceptance of illegal kickbacks for referring Medicare patients to unneeded services.

Solutions to fraud, however, are not as clear-cut as one might wish.  For example, there is a worry that over-policing the CMS will lead to valid claims being denied at greater rates. Also, enforcement and punishment are issues.  Some health care companies have been able to escape criminal prosecution by paying restitution amounts for the fraudulent claims.  Finding restitution to be an insufficient deterrent to would-be fraudsters,  Senator Arlen Specter of Pennsylvania wants to see scammers put behind bars. But there is also something to be said for the realization that the “Arthur Anderson solution” is really no solution at all.

Another interesting aspect to consider here is that the CMS finds that provisions of the House bill intended to reduce Medicare fraud will not save all that much money.  In spite of this (or perhaps because of it) many of our leaders have demanded that some action be taken to reduce Medicare fraud– even Sarah Palin says fraud is an issue.  One hopes that the Obama administration will learn from its predecessor’s mistakes (if in fact they be such) when it comes to creating watchdogs such as Medics, but then muzzling and not feeding them.

Turning Up the Heat on Fraud and Abuse–Part of the Solution to Health Reform?

[Ed. note: As noted in the post above, we are very pleased to welcome the Executive Director of the Center for Health & Pharmaceutical Law & Policy, Tracy E. Miller, J.D., to Health Reform Watch today.]

As the search for new sources to fund health care reform intensifies, it seems more certain that increased enforcement of fraud and abuse will be part of the equation.  Both the House and Senate have incorporated increased enforcement as part of health care reform legislation. The health care reform bill released by House Democrats on July 14, 2009, included an additional $100 million to combat fraud and abuse as well as increased mandates for regulatory oversight and provider compliance programs.  The reform bill adopted by the Senate Health, Education, Labor and Pensions Committee on July 15 also embraced new enforcement measures, creating senior level positions at HHS and DOJ to coordinate oversight activities.  The bills follow on the heels of an announcement in May by the Obama Administration that it had created an interagency task force to coordinate fraud and abuse enforcement.

These new enforcement initiatives and proposals add to an already burgeoning increase in enforcement initiatives at the state and national levels, raising the question of whether additional programs can actually have a substantial impact beyond those already underway to combat fraud and abuse in the  health care sector.

The Deficit Reduction Act (DRA) of 2005 provided states with an incentive to enact False Claims Act statutes similar to the Federal False Claims Act, allowing states to retain 10% of any funds collected under such acts. The impact of the laws adopted in the wake of the DRA is unfolding now in many states and will no doubt lead to a significant jump in qui tam actions.  After a hiatus caused by litigation challenging the program, CMS has continued to roll out the Recovery Audit Contractors Program (RAC) which retains contractors paid on a contingency basis to identify fraud and abuse in the Medicare program.  With funding and a mandate from Congress, CMS also established the Medicaid Integrity Program. The program authorizes CMS contractors to use data mining and analysis techniques that combine health care quality indicators, billing practices, and Medicaid reimbursement rules to predict aberrant billing practices in order to identify providers for audit.

At the state level, Attorneys General as well as state Medicaid fraud offices are also turning to data mining and analysis, enhancing their capacity to identify fraud and target their investigations.[1] State Attorneys General have increased their cooperation nationally, heightening the effectiveness of investigations and actions against corporations that conduct business in multiple states.

Whether increased enforcement funds and cooperation among federal agencies will actually produce significant dollars for health reform remains to be seen. But without question, the combined effect of mounting federal and state enforcement efforts has substantially increased the stakes for health care providers in undertaking a proactive approach to compliance.  Indeed, growing use by federal and state enforcement agencies on data mining and analysis challenges providers to determine how they can use their own internal data to identify compliance problems and address them in advance of government action.[2]

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[1] Using Data to Advance Compliance: Emerging Practices in Industry and Government
June 4, 2008

Seton Hall Law’s Center for Health & Pharmaceutical Law & Policy program focused on best practices by industry to use data for compliance, and government use of data mining and analysis to enhance oversight. Lori Queisser, Senior Vice President, Global Compliance & Business Practices of Schering Plough and Eileen Erdos, Principal of Ernst and Young, provided insight about how industry can use data to inform internal compliance programs. James Sheehan, New York State Medicaid Inspector General and John Krayniak, Assistant Attorney General, New Jersey Medicaid Fraud Control Unit, spoke about government initiatives to use data to target and pursue enforcement. The program, by invitation only, afforded industry counsel the opportunity to have a dialogue with the region’s two leading state prosecutors. The point being, that the success of enforcement initiatives is not only measured in prosecutions, but also in industry tailoring its behavior to be in compliance.

[2] Using Data to Advance Compliance
On March 16, 2009, the Center for Health and Pharmaceutical Law & Policy co-sponsored a program with KPMG on Using Data to Advance Compliance.  The program, held in New York City for an audience comprised primarily of hospital leaders in compliance, finance, and in-house legal services, featured a presentation by James Sheehan, Medicaid Inspector General for New York State, who discussed how the Office of Medicaid Inspector General is using data to target and pursue investigations.  Experts from KPMG presented practical, concrete strategies for how facilities can use data to advance internal compliance efforts. Ed Kornreich, a partner at Proskauer Rose, examined the implications of data mining for Board fiduciary duties.

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Third Circuit Recognizes Federal Civil Rights Action for Death Caused by Substandard Nursing Home Care

[Ed. note: Today's post comes from Danielle Y. Alvarez. She is a Seton Hall Law student and a graduate of NYU, where she majored in Political Science. Ms. Alvarez is a research assistant to Dean Kathleen M. Boozang, and a former legal assistant to the Augulius Law firm.]

State and federal legislatures won’t fix the health care system by themselves, which is why a recent Third Circuit decision is a welcome tool to fight substandard long-term residential care.  A few enforcement officials have been aggressively creative in using false claims act theories to pursue providers of substandard health care (See here and here).  In short, the government claims that the submission of a bill to Medicare for services that were so bad they were the equivalent of no care at all is a false claim for which the government should be reimbursed and recover penalties.  And now the Third Circuit has recognized that the provision of such substandard care violates an individual’s civil rights.

In Grammer v. Kane, a nursing home resident’s child sued the nursing home, operated by Allegheny County in Pittsburgh, Pennsylvania, alleging the home’s failure to provide adequate care caused her mother to develop ulcers, become malnourished and develop sepsis, from which she died. Plaintiff invoked  42 U.S.C. §1983 to argue that the nursing home had violated decedent’s civil rights by breaching a duty to provide the standards of care delineated by the Federal Nursing Home Reform Amendments (FNRA), contained in the Omnibus Budget Reconciliation Act of 1987 (OBRA). The district court granted the nursing home’s  motion to dismiss, finding that FNRA merely sets forth requirements for nursing homes to comply with but does not grant the deceased rights that are enforceable under §1983. The United States Court of Appeals for the Third Circuit reversed and remanded, concluding that FNRA grants Medicaid recipients like the deceased rights whose violation can be remedied under §1983.

Congress passed FNRA in 1987 to address the substandard conditions in nursing homes that participated in the Medicare and Medicaid programs. FNRA sets forth various quality and residents’ rights standards to which the nursing homes must adhere in order to be paid by the federal government.  And yet, as everyone knows, the problems persist. And so it should be a welcome outcome that the Third Circuit held that FNRA unambiguously confers federal rights upon Medicaid recipients in nursing homes, which gives rise to an action under §1983 which imposes liability on every person who, under color of state law, deprives another of “rights, privileges, or immunities secured by the Constitution and laws.” 42 U.S.C. §1983 (2009).

To determine that FNRA affords protection under §1983, the court applied a three factor test set forth by the Supreme Court in Blessing: first, the court determined that Congress intended FNRA to protect personal rights of Medicaid beneficiaries and nursing home residents rather than the nursing homes themselves; second, the court found that the rights asserted are not so “vague or amorphous” that their enforcement would strain judicial resources; third, the court concluded that the statutory language is sufficiently mandatory in nature with its repeated use of “must” such as “a nursing facility must provide services and activities to attain or maintain the highest practicable physical, mental and psychosocial well-being of each resident.” See Blessing v. Freestone, 520 U.S. 329 (1997); 42 U.S.C. §1396r(b)(2)(A) (emphasis added). Furthermore, the court found Congressional intent to create a right of action through rights-creating language, legislative history, statutory structure and Congress’ failure to set forth a more comprehensive remedial scheme. Thus, the Third Circuit recognized individual rights conferred by FNRA that are presumably enforceable under §1983.

District Judge Stafford, sitting by designation, wrote a dissenting opinion finding that FNRA is Spending Clause legislation which does not confer upon funding beneficiaries individual rights to sue funding recipients. The dissent highlighted specific statutory language to conclude that FNRA focuses on what nursing homes must do in order to receive federal funds rather than focusing on the individuals who benefit from the federal funds. Absent unambiguous Congressional intent to the contrary, FNRA does not grant nursing home residents individual rights to sue nursing homes under §1983 for alleged violations of FNRA. As such, the dissent argued that the District Court properly granted Appellee’s motion to dismiss.

Synthes Legal Troubles –Again

[Today's Post is by Maansi K. Raswant, a Seton Hall Law student pursuing the Health Law concentration. She is a research assistant to the Center for Health & Pharmaceutical Law & Policy and an intern at the NYC Health and Hospitals Corporation.]

Recently, the Synthes corporation has been garnering a lot of attention, but for all the wrong reasons. A June 17^th indictment comes a little over a month after the New Jersey Attorney General announced that the medical device maker had entered into a settlement agreement for failing to disclose financial conflicts of interests held by physicians conducting clinical trials for its products (see prior post, “Clinical Research: When the Compensation Begs the Answer“). Filed by the United States Attorney for the Eastern District of Pennsylvania, the recent 52-count indictment alleges that from May 2002 to Fall 2004, the Swiss company Norian, and its parent company Synthes, (both based in West Chester, Pennsylvania) conspired to conduct unauthorized clinical trials of Norian XR and Norian SRS, bone cement products used in surgery to treat vertebral compression fractures of the spine. Not only did the trials lack FDA authorization, but the FDA had specifically warned Synthes against using Norian XR for spinal surgery due to safety concerns.

The indictment explains that preliminary studies using human blood in test tubes found that the bone cement products chemically reacted with the blood to create blood clots. In further studies of the prod in a pig, the clots became wedged in the lungs. Despite this knowledge, Synthes continued to market the Norian products for use in spinal surgery, and did not stop doing so until after three patients had died on the operating table.  According to the indictment, rather than recall the products following the patient deaths, the company engaged in a cover up by lying to FDA officers during an official inspection in May and June 2004.

The two recent legal actions against Synthes break new ground, and represent significant inroads by prosecutors in the arena of clinical research. Among other remedies, the settlement with the State of New Jersey required Synthes to disclose all relevant financial interests of its investigators on a public website, and barred the company from compensating investigators with stock, a practice the Attorney General called widespread in the industry. The latest indictment contains not just the usual charges against the corporations, but also criminal charges against four corporate executives charged with shipment of unauthorized devices. If found guilty, each executive faces up to a year in prison.

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