CIAs: OIG’s Favorite Enforcement Tool

April 25, 2012 by · Leave a Comment
Filed under: Compliance, Health Law 

hammer_1657In an attempt to stem health care fraud, the government’s use of Corporate Integrity Agreements (CIAs) is growing. In Professor Zack Buck’s Health Care Fraud and Abuse class here at Seton Hall Law, students were given the benefit of  a discussion on the topic by two industry veterans, Tim Grimes and Brett Bissey.  Grimes is the Health Care Compliance Officer for the North American Pharmaceuticals branch of Johnson & Johnson, where he oversees the development, improvement and management of health care compliance and government contract compliance systems.  Bissey is Senior Vice President, Chief Ethics and Compliance Officer at the University of Medicine and Dentistry of New Jersey (UMDNJ), where he is responsible for the management and direction of all compliance and ethics related programs.

Grimes and Bissey spoke on the proliferation of, and challenges associated with, the use of CIAs in the health care industry.  A CIA is a restrictive agreement, usually lasting five years, entered into by the Office of Inspector General of the U.S. Department of Health & Human Services (OIG) and a health care entity alleged to have engaged in fraudulent or abusive practices.  CIAs impose numerous compliance obligations, which are intended to stop fraudulent behavior from occurring in the future.  These compliance obligations range from requiring employee training, to mandating the appointment of a compliance officer, to implementing a communications hotline.  Both Grimes and Bissey have personal experience working under a CIA, as Johnson & Johnson and UMDNJ, like many others in the industry, have or are currently operating under such integrity agreements.

Grimes and Bissey explained that CIAs can be cumbersome because the terms of the agreements are often unclear and the costs of compliance obligations, such as employee training, can be immense.  For example, CIAs generally require proper compliance training for any “relevant covered person” within the organization.  However, what defines such persons is generally unclear, and the costs and logistics of implementing a training program for all employees who come in contact with a medication, from local pharmaceutical representatives to researchers working in another country, can be expensive and complex.

To help address such issues, Grimes participated in the Pharmaceutical Compliance Roundtable hosted by the OIG in February 2012, which brought together compliance professionals from 23 pharmaceutical manufacturers currently operating under a CIA.  By establishing the Roundtable, the OIG sought to foster an open dialogue between private industry and government addressing the implementation and operational challenges of CIAs.

While the difficulties of working under CIAs were mentioned, Grimes and Bissey also acknowledged the benefits that companies can reap by their use.  CIAs can also, it was said,  be extremely beneficial because they increase the individual responsibility on corporate officers and board members, grabbing the attention of upper-level management who may have previously been less responsive to compliance concerns.  Further, the proliferation of CIAs is said to have changed the attitude of some company officers toward compliance initiatives–bringing a level of enthusiasm which may have been absent in the past.

On a parting note, Grimes and Bissey agreed that the government shows no signs of slowing down on its use and enforcement of CIAs in the health care industry.  Commenting about the state of the industry, they said the question is not “Who is under a CIA?”  Rather, it’s “Who isn’t?”

Photo Credit by Hedwig Storch

Rigid, Severe Penalties of FCAs On Full Display

April 15, 2012 by · 2 Comments
Filed under: Fraud & Abuse, Health Law 


News of the $1.2 billion verdict against Johnson & Johnson and its subsidiary Janssen Pharmaceuticals Inc. for their roles in marketing Risperdal during the middle of last decade sent reverberations through the industry earlier this week.  The award resolved Arkansas’ claims that the companies fraudulently marketed the “second generation” antipsychotic, misleading doctors and deceiving the state’s Medicaid program into paying for 239,000 prescriptions of the drug.  Specifically, the state claimed the companies minimized Risperdal’s dangerous side effects by not disclosing the risks on its label, marketed the drug for unapproved uses, and characterized it as more effective than competitors’ drugs.

After the jury found that the companies had misled doctors about the risks associated with Risperdal, Judge Tim Fox awarded $11 million for the violation of the state deceptive trade practices act. Further, Judge Fox turned to the Arkansas’ False Claims Act (FCA) – which carries a minimum $5,000 civil penalty for each violation of the Act (the federal FCA requires a minimum civil penalty of $5,500) – and applied Arkansas’ statutory penalty to the 239,000 prescriptions of Risperdal paid for by Arkansas Medicaid between 2002 and 2006, totaling $1.195 billion in damages.  According to Janssen, the state paid only $8.1 million for Risperdal during the 3½ year time period, which amounts to less than 1% of the damages amount.  The companies plan to appeal.

Arkansas adds itself to a growing list of states taking legal action relating to Risperdal’s marketing – trials in Louisiana and South Carolina have already resulted in damage awards of $258 million and $327 million, respectively.  Earlier this year, the state of Texas settled its allegations for $158 million.  And the federal government is also pursuing the companies, reportedly seeking between $1.3 and $1.8 billion to resolve its claims.

The Arkansas award provides an opportunity to engage in serious “Monday morning quarterbacking” as to why the companies did not settle the case, with a settlement estimate perhaps as low as $30 million.  In addition to providing an opportunity to second-guess the trial strategy, the court’s award also places the mandatory and stark penalties of state and the federal FCAs – blunt, severe governmental tools – into public discussion.  Due to the statutes’ structures, the damages amounts often far exceed the amounts of monetary damages the government initially suffers.  Further, as in federal fraud recoveries, the award amount does not go to those who may have been personally harmed by the Risperdal marketing tactics (notably, however, at trial, the state failed to show any patient harm, according to Janssen).  Instead, the recovery goes into the Arkansas Medicaid program (which, as pointed out by the Associated Press, is facing a $400 million shortfall for 2013).

The huge damage amount required by the federal FCA prompted one court in a widely publicized non-health-related fraud case in February to refuse rewarding any damages after finding FCA liability.  See U.S. ex rel. Bunk v. Birkart Globistics GMBH & Co., 2012 WL 488256 (E.D. Va. Feb. 14, 2012).  In Bunk, qui tam relators had brought a lawsuit (in which the government eventually partially intervened) alleging that bidders to a contract with the U.S. military had engaged in price collusion.  After the bidder had certified to the government they had independently arrived at their prices and denied collusion, the parties entered into a contract relating to transporting goods belonging to U.S. military members and their families.  Once relators found that the bidders had in fact colluded in setting the price, they brought suit.  The court found the defendants liable under the federal FCA, and proceeded to determine damages.

The defendants had filed 9,136 invoices under the contract, mandating damages under the FCA of at least $50 million (at least $5,500 per violation).  However, the court concluded that the prices under the contract – even if not independently reached – were fair and reasonable.  Further, the court found that the government was not financially harmed, and as such, the statutory penalty constituted an excessive penalty under the Eighth Amendment.  After finding that it lacked discretion to reduce the statutory penalty, the court refused to award any damages to the relators.

Both cases demonstrate the seriousness and rigidity mandated by both the federal and Arkansas FCAs.  Where the Risperdal settlement is staggering in its amount, the Bunk court’s failure to impose any damages is equally stunning.  As the government continues to rely on big FCA penalties to combat and deter healthcare fraud, defendants are incentivized to settle before trial, and more courts may be forced into a Bunk-like analysis.


Ruane v. Levy: Both Sides of the Bar Meet in Health Care Fraud and Abuse Class

March 15, 2012 by · Leave a Comment
Filed under: Fraud & Abuse, Health Law 
Pictured, from left: Bruce A. Levy, Director, Criminal Defense Department, Gibbons P.C.; Maureen A. Ruane, Chief, Health Care & Government Fraud Unit, US Attorney's Office for the District of New Jersey; Chris Zalesky, Vice President of Global Policy & Guidance for Johnson & Johnson

Pictured, from left: Bruce A. Levy, Director, Criminal Defense Department, Gibbons P.C.; Maureen A. Ruane, Chief, Health Care & Government Fraud Unit, US Attorney's Office for the District of New Jersey; Chris Zalesky, Vice President of Global Policy & Guidance for Johnson & Johnson

[Ed note: This article was authored by John Barry '13, a second year law student pursuing a Health Care Concentration at Seton Hall Law.  A native of New York, he graduated in 2005 from the University of Pennsylvania with a degree is psychology.]

Recently, Professor Zack Buck’s Health Care Fraud and Abuse class was treated to a spirited panel on the current state of health care fraud, prosecution and defense.  The panel, meeting again this year to allow students an opportunity to hear details about actual practice from both sides of the bar, was moderated by Chris Zalesky, the Vice President of Global Policy & Guidance for Johnson & Johnson in the Office of Health Care Compliance & Privacy.  Zalesky has more than 20 years of experience in regulatory affairs, quality assurance and research and development functions within the medical device and pharmaceutical industries. He has also taught as an Adjunct here at Seton Hall Law.

The panel included Maureen Ruane, Assistant U.S. Attorney and Chief of the Health Care & Government Fraud Unit for the United States Attorney’s Office, District of New Jersey, and Bruce Levy, an attorney with the firm of Gibbons, P.C.  Ruane served as Assistant United States Attorney from 1998 to 2004, and returned to the office in 2010 after working as a partner in the law firm of Lowenstein Sandler.  Levy, also formerly an Assistant U.S. Attorney, currently focuses his practice at Gibbons on criminal, civil, and administrative cases arising from federal and state health care fraud investigations, health care compliance, The False Claims Act and qui tam cases, corporate investigations, and white collar criminal law.

Touching on a wide variety of topics, Ruane explained that the “sea of health care fraud is so deep” that it affects all aspects of the American health care system, from hospitals to physicians to pharmacies and all other health care providers.  Many of the fraud prosecutions that flow through Ruane’s office come in the form of qui tam actions under the False Claims Act.  Coming from a Latin phrase meaning “[he] who sues in this matter for the king as [well as] for himself,” a qui tam action is a unique fixture of the False Claims Act that allows private citizens to act as whistleblowers and sue health care corporations for perpetrating fraud on the government.  The whistleblower, or “relator,” stands to gain a percentage of the civil damages awarded against the corporations.

Having seen countless relators over her time with the government, Ruane was in a rather unique position to speak about the underlying motivations behind the people who sue on behalf of “king and self.”  Contrary to common thinking, Ruane explained that whistleblowers generally did not act out of greed or a desire to hurt the company.  In fact, she felt the opposite:  most relators were actually intensely loyal to their companies and had usually tried to voice their concerns multiple times in-house before bringing a complaint to the attention of government prosecutors.

Working as defense counsel, Levy voiced the concerns of private industry, in particular about the lack of guidance in the current law.  He stressed that many pharmaceutical companies, hospitals, physicians and health care providers feel as if they are trying to act within the bounds of the law when in reality those boundaries are more blurry than clear.  As an example, Levy talked about how he felt the need for clearer guidance on pharmaceutical marketing of “off-label” medications.   When the Food and Drug Administration approves a medication for use in the U.S. health care market, the drug is approved for a specific use or indication.  However, clinical studies often show beneficial uses for medications for additional aliments, and it is legal for physicians to prescribe the drugs for these other uses.  In addition, Medicare and many private insurers will pay for use of a medication for different indications than what the FDA approved, in effect, subsidizing “off-label” use. There are thus competing federal agency views on medications, with the FDA only approving the drug for a particular use, but the Center for Medicare Services alternatively approving use of the drug for other, off-label uses.  Problems arise because there are complex, and Levy felt unclear, regulations as to how pharmaceutical companies may represent or market the drug for off-label use.  Levy explained that he felt new legislation was required to give clear guidance to the industry.

Both Ruane and Levy, approaching the bar from different perspectives,  engaged in lively conversation and took questions from the audience, giving students numerous real-world examples of the theories and topics they learn about in class.  As might be imagined, bringing with them contrasting prosecution and defense-side perspectives, the two often approached the same issues from opposing viewpoints, providing a unique experience for the class.  However, the one thing they both agreed on was that with rising health care costs directly on the government’s radar, aggressive prosecution of health care fraud will not slow down any time in the future.


Office of the Inspector General Releases 2011 Work Plan

Photo by rebekah615 via Flickr

Photo by rebekah615 via Flickr

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

  • 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)
  • 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

September 29, 2010 by · Leave a Comment
Filed under: Fraud & Abuse 

paul-fishman-seton-hall-lawOn 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.


Next Page »