2011 Winston & Strawn LLP

Transcription

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2 Penalties, Prosecutions and Exclusions: Navigating a New Era of Stepped Up Health Care Enforcement Brought to you by Winston & Strawn s Healthcare Practice Group. 2

3 Today s elunch Presenters Marion Goldberg Heathcare Washington, D.C. MGoldberg@winston.com Tom Mills Healthcare Washington, D.C. TMills@winston.com Elizabeth Papez Litigation Washington, D.C. EPapez@winston.com 3

4 Overview: Combating Fraud Remains a Political Priority Congress and the Executive Branch June 2011 Executive Order and Campaign to Cut Waste S. 890 (Leahy/Grassley): (5/19/11 out of Judiciary Comm.) Greater funding for agency investment in enforcement/recovery efforts S. 454 (Grassley): (3/2/11 referred to Finance Comm.) Expansion of exclusion; public access to Medicare provider data Delay payments if fraud suspected; State certification of drug marketing H.R. 675 (Herger/Stark): (2/11/11 referred to Budget Comm.) Would amend 42 U.S.C. 1320a-7(b)(15) to allow exclusion of: Any affiliated entity of a sanctioned entity and current and former officers and managers or person[s] with an ownership or control interest... [who] knows or should know... of [culpable] conduct 4

5 Overview: DOJ Fraud enforcement viewed as key to health reform $2.5 B in healthcare fraud recoveries since 1/09 (34% of all fraud recoveries) Jan 2011: 1,341 qui tam cases awaiting intervention decisions (66% allege health care fraud; 500+ CIDs in Q4 2010) 5

6 Overview: DOJ Assistant AG Lanny A. Breuer (DOJ Criminal) The era of getting away with Medicare fraud is over. 6

7 Overview: DOJ Assistant AG Tony West (DOJ Civil) Unparalleled focus on aggressive civil enforcement action and pursu[ing] individuals... just as vigorously as companies 7

8 Overview: HHS Mary Riordan, Sr. Counsel OIG Government will continue to bring large numbers of cases against drug manufacturers and device manufacturers Government is looking to change corporate behavior through penalties and individual prosecutions and exclusions where appropriate 8

9 Overview: HHS HHS-DOJ HEAT Task Force & Medicare Strike Forces HHS OIG Hospital Audits & New Guidance on Permissive Exclusion CMS Medicare Crackdown (July 2011 computer modeling) FDA Pharma Fraud Pilot Program; New Guidance on Prosecution 9

10 Overview: Courts PPACA likely before the Supreme Court Decision could affect entire Act (including overpayment and other FCA expansions and compliance plan requirements) Increase in FCA and whistleblower exposure Supreme Court restricts, lower courts expand, exposure Parallel SEC whistleblower regime will increase compliance and defense burdens for public companies Prosecutions & exclusions Judicial backstop for some cases (Stevens-Glaxo) Limited reach 10

11 Recent Cases & Headlines 9/30: LHC Group $65 M FCA settlement & HHS CIA Alleged overbilling of home health services to Medicare 9/22: Hill Dermaceuticals FDCA Consent Decree Corporate and individual consent decree 9/16: 50-Year Prison Sentence for Medicare Fraud Lawrence Duran (ATC) $87 M restitution; 50 years prison 9/12: Maxim $130 M civil/criminal & HHS CIA Medicare fraudulent billing 9/7: 91 Individuals/8 cities for Medicare Fraud Medicare Strike Force takedown (including doctors and nurses) 11

12 Civil Liability: Statutory Expansions FERA (2009) and PPACA (2010) FCA amendments Expand definition of false claims Expand indirect liability (i.e., liability for entities that do not themselves submit claims to federal programs) Impose new and significant liability for retention of overpayments (reverse false claims) Expand whistleblower protections Eliminate certain judicial protections against suits 12

13 Civil Liability: Judicial Decisions Schindler Elevator (S. Ct. 2010) FOIA responses are government reports that may trigger the public disclosure bar to FCA whistleblower suits Summers (CA6 2010, cert. denied 2011) new circuit split about when to dismiss FCA cases for plaintiff s failure to file under seal Baltazar (CA7 2011) allowing FCA suit despite reports of industry-wide fraud Wilkins (CA3 2011) express or implied certification of Anti-Kickback Statute (AKS) compliance can give rise to FCA exposure Blackstone Medical (CA1 2011) downstream third parties can face FCA liability for another entity s breach of implied AKS certification 13

14 Civil Liability: Lessons Learned Large recoveries and whistleblower incentives top enforcement priority (federal and state) Statutory amendments and lower court decisions expanding liability increased costs and exposure Ramifications may justify new and more aggressive compliance and defense strategies Civil cases are often the starting point for criminal prosecution and corporate and individual exclusions 14

15 Criminal Enforcement: Statutes Criminal Statutes Anti-Kickback Statute (42 U.S.C. 1320a-7b(b)) (automatic civil FCA liability) Health Care Fraud (18 U.S.C. 1347) Mail and Wire Fraud (18 U.S.C. 1341, 1343) Social Security Act (SSA) (42 U.S.C. 1128, 13120a-7b) Food, Drug, & Cosmetic Act (FDCA) (21 U.S.C. 301) 15

16 Example: InterMune Civil FCA claims and investigation into off-label violations criminal prosecution and exclusion Actimmune FDA approval to treat two orphan indications (low profit) Clinical trials for treatment of a fatal lung disease (idiopathic pulmonary fibrosis) Increase in overall survival rate was insignificant Increased survival, however, for patients with mild-tomoderate disease 16

17 InterMune August 28, 2002, Company press release stated a strong trend in survival for overall patient population and statistically significant survival in patients with mild-to-moderate disease Company representatives reported to have told an investors conference that its sales force included 60 pulmonary specialists to call on every lung doctor in the country in the context of its education and awareness program 17

18 InterMune October 2006, InterMune was charged with FDCA violation by promoting with intent to defraud or mislead, off-label promotion and false claims for unnecessary and off-label use Settlement 2-year deferred prosecution agreement Company barred from entering into a joint defense agreement $30.2 M to Medicare, VA, DOD, Federal Employees Health Program, and federal portion of Medicaid Close to $6.7 M to state Medicaid programs 18

19 InterMune March 18, Former CEO, W. Scott Harkonen, M.D. indicted on wire fraud and felony FDCA charges Promotion and causing promotion of off-label use Press release was part of a scheme to induce doctors to prescribe, and patients to take, Actimmune for IPF DOJ conceded data in the press release was accurate but prosecuted Harkonen for his interpretation of the data September 29, 2009 Harkonen found not guilty of off-label promotion and guilty of wire fraud 19

20 InterMune Sentence Three years probation 200 hours community service $20,000 fine 6 months home confinement if appeal is unsuccessful Judge criticized government bringing the charges Felony wire fraud conviction resulted in Harkonen s exclusion Conviction of a criminal offense related to fraud in connection with the delivery of a health care item or service. 20

21 Example: Perdue Pharma Civil FCA claims and investigation into off-label violations criminal prosecutions and exclusions Promoted OxyContin as less addictive and less subject to abuse than other painkillers Purdue Frederick (subsidiary) pled to single felony count of misbranding $276.1 M Parent Purdue Pharma $19.5 M to 27 states $634.5 M to federal government (90% of the profits) Non-prosecution Agreement (NPA) 21

22 Purdue Pharma Executives charged under responsible corporate officer doctrine CEO, General Counsel, and Chief Medical Officer each pleaded guilty to misdemeanor counts of misbranding CEO $19 M fine; General Counsel $ 8 M; Chief Medical Officer $7.5 M Exclusion 12 years each for CEO, GC and CMO Exclusions now on appeal to D.C. Circuit 22

23 Responsible Corporate Officer Doctrine Initially introduced in US v. Dotterweich, 320 U.S. 277 (1943) The offense is committed by all who do have such a responsible share in the furtherance of the transaction which the statute outlaws Principle FDCA protects the public by keeping impure and adulterated food and drugs out of commerce Therefore, law dispenses with the conventional requirement for criminal conduct awareness of some wrongdoing 23

24 Responsible Corporate Officer Doctrine Refined in U.S. v. Park, 421 U.S. 658 (1975) Government establishes a prima facie case when it introduces evidence sufficient to warrant a finding that the defendant had, by reason of his position in the corporation, responsibility and authority either to prevent in the first instance, or promptly to correct, the violation complained of, and he failed to do so. FDCA imposes the highest standard of care and permits conviction of corporate officials who, in light of this standard of care, have the power to prevent or correct violations of its provisions. 24

25 Example: Synthes Norian Civil investigation RCO pleas October 4, 2010: Norian paid selected spine surgeons to travel to seminars to learn to use a bone cement to treat spine fractures (a procedure for which it was not FDA-approved) in a test market Conduct of illegal clinical trials Promotion of off-label use Shipping adulterated and misbranded products Three patients died from blood clots could not rule out bone cement as a factor 25

26 Synthes Norian Settlement Norian pled guilty to 1 felony count and 110 misdemeanor counts adulterated and misbranded products introduced into interstate commerce Paid $22.5 M Synthes (parent) pled guilty to one misdemeanor count Criminal penalties $669,800 Civil penalties for false claims $138,000 Repayment of unallowable costs Forced to sell Norian to avoid exclusion 26

27 Synthes Norian Norian sale Assets sold to Kensey Nash for $22 M cash ($.5M less than the fine) Four executives Pled guilty to misdemeanors a responsible corporate officers Paid $100,000 fines In June 2011 presentencing hearing, government asked for prison terms 27

28 Example: Maxim Healthcare Services Civil investigation RCO issues and indictments Home health service provider charged with: $61 M of fraudulent billing overstated number of hours of services provided Licensed offices billed for services provided by unlicensed offices hidden from government inspectors Fraudulently represented that supervision was provided Settlement $20 M criminal penalty $130 M civil penalties Deferred prosecution agreement 28

29 Maxim 6 individuals (lower-level executives) were indicted Company terminated senior executives and other employees identified as responsible for the conduct Company established and filled positions of CEO, Chief Compliance Officer, COO/Chief Clinical Officer, Chief Quality Officer/Chief Medical Officer, Chief Financial and Strategy Officer, and VP of Human Resources, hired a new General Counsel Not clear if other indictments will issue 29

30 Criminal Enforcement: Prosecutions New & Aggressive FDCA Prosecution Agenda 1/2011: FDA: New Guidance and Procedures re Strict Liability Criminal Prosecutions FDA to increase the appropriate use of misdemeanor prosecutions Knowledge of, involvement in, or negligence re offense is not required for prosecution New Regulatory Procedures Manual (RPM) provisions relax prosecution criteria and erode 21 U.S.C. 335 protections Criminal enforcement based on discretionary agency consideration of three primary and seven discretionary factors 30

31 Criminal Enforcement: Prosecutions 2011 Primary Factors in Recommending RCO/Park Prosecutions: Individual s position in the company; Individual s relationship to the violation; Individual s authority to correct or prevent the violation. 31

32 Criminal Enforcement: Prosecutions 2011 Additional, discretionary factors: whether the violation involves actual or potential harm to the public; whether the violation is obvious; whether the violation reflects a pattern of illegal behavior and/or failure to heed warnings; whether the violation is widespread; whether the violation is serious; the quality of the legal and factual support for the proposed prosecution; and whether the proposed prosecution is a prudent use of agency resources. 32

33 Criminal Enforcement: Prosecutions Not unreasonable to expect Government to extend aggressive FDCA prosecution agenda to other areas of criminal health-care enforcement and statutes Medicare Strike Force takedowns High concern for patient well-being Concern for public fisc Congressional pressure to incent corporate compliance through individual officer accountability 33

34 Criminal Enforcement: NPAs and DPAs Non-Prosecution Agreements (NPAs) and Deferred Prosecution Agreements (DPAs) Trend toward standardization (including of provisions giving USG sole discretion to determine breach) Heaviest use remains FCPA but some health care and SEC Elan Corp NPA Drug Misbranding $203 M penalty; 5 yr CIA Forest Labs NPA Drug Misbranding $313M penalty; 5 year CIA May 2011: U.S. Atty Declares Wright Medical Breach of DPA Sept 2010 DPA resolving Anti-Kickback allegations DPA gave U.S. Atty sole discretion to determine breach Collateral consequences; resignations; potential shareholder claims 34

35 Example: Forest Labs Civil FCA claims and investigation criminal pleas by the company but NO permissive exclusion of CEO September 15, 2010 Levothroid (hypothyroidism) Sold without FDA approval Celexa and Lexapro (anti-depression drugs) Promoted off-label pediatric use Paid kickbacks (grants, consulting fees, expensive meals, and entertainment) to physicians to prescribe False claims resulted 35

36 Forest Labs Criminal and Civil Penalties Against the Company Criminal Offenses and Guilty Pleas Distributing a misbranded drug (Celexa) Distributing an unapproved new drug (Levothroid) Felony obstruction of FDA investigation into Levothroid Criminal Penalties $150 M fines and $14 M asset forfeiture Civil Charges & Liability $149 M False Claims Act liability 36

37 Forest Labs April 2011 OIG issued intent to exclude letter to CEO Howard Solomon Basis for exclusion Solomon was a managing employee of a sanctioned entity No allegation of wrongdoing September 2011 OIG decided to close the case without exclusion HHS cited as the basis for the decision review of the information in our file and consideration of the information that your attorneys provided to us 37

38 Exclusion Professional death sentence Cannot work in, for, or provide any item to any entity that received federal or state health-care program funds Imposed by HHS OIG Mandatory (SSA 1128(a)) Following certain criminal convictions Permissive (OIG discretion) (SSA 1128(b)) October 2010 OIG guidance and factors trigger presumption in favor of exclusion 38

39 Mandatory Exclusion Mandatory exclusion 5 year+ minimum periods Conviction of program-related crimes (5 yrs) Felony conviction relating to health-care fraud (5 yrs) Conviction relating to patient abuse or neglect (5 yrs) Convictions of two mandatory exclusion offenses (10 yrs) Conviction on 3 or more occasions of mandatory exclusion offenses (permanent exclusion) Felony conviction involving controlled substance (5 yrs) 39

40 Permissive Exclusion Permissive exclusion under 1128(b) of the Social Security Act 15 different grounds One subsection permits exclusion from participation in any Federal health care program [of] [a]ny individual who is an officer or managing employee of [a sanctioned] entity Managing employee means: individual...who exercises operational or managerial control... or who directly or indirectly conducts the day-to-day operations of the entity. A sanctioned entity is an entity that has been convicted of an offense that qualifies for mandatory exclusion or has otherwise been excluded. 40

41 Permissive Exclusion Offenses resulting in 1 or 3-year minimum exclusion: Misdemeanor conviction relating to health care fraud (3 yr) Conviction relating to non-health care program fraud (3 yr) Conviction relating to obstruction of an investigation (3 yr) Misdemeanor conviction involving controlled substance (3 yr) Claims for excessive charges, unnecessary services, services that fail to meet standards of health care, failure of an HMO to furnish medically necessary services (1 yr) 41

42 Permissive Exclusion Offenses where exclusion keyed to triggering event Exclusion under federal or state health-care program (min. of other exclusion) Entity controlled by a sanctioned individual (same as the individual) Individuals controlling a sanctioned entity (min. same as entity) Entities controlled by a family or household member of an excluded individual where there has been a transfer of ownership/control (same as individual) 42

43 Permissive Exclusion Offenses with no minimum exclusion period Fraud, kickbacks, and other prohibited activities Failure to disclose required information, supply requested information on contractors and suppliers, or supply payment information Failure to grant immediate access Failure to take corrective action Making false statements or misrepresentations of a material fact 43

44 October 2010 OIG Exclusion Guidance Individuals with ownership or control interest in sanctioned entity May be excluded if knew or should have known of the conduct that led to the sanction Presumption in favor of exclusion Presumption may be overcome if OIG finds significant factors weigh against exclusion 44

45 October 2010 OIG Exclusion Guidance Officers and managing employees Prong 1: Presumption of Exclusion Applies where there is evidence that an individual officer or managing employee knew or should have known of the conduct giving rise to corporate conviction or exclusion. The individual bears the burden of showing significant factors against exclusion to overcome the presumption. Prong 2: No Presumption In the absence of evidence that the individual knew or should have known of the conduct, the individual may still be excluded. HHS will consider several factors in determining whether exclusion is warranted. 45

46 October 2010 OIG Exclusion Guidance Discretionary Exclusion Factors: Circumstances/Seriousness of Misconduct Nature and scope of misconduct (any other misconduct, level of company where occurred) Was criminal sanction imposed on entity or related entities or on individuals (amount of criminal or civil penalty, length of entity exclusion) Evidence of actual or potential harm to individuals or financial harm to a federal health-care program or other entity Isolated incident or pattern of wrongdoing over a significant period of time 46

47 October 2010 OIG Exclusion Guidance Discretionary Exclusion Factors: Individual s Role at Sanctioned Entity Current position, positions held over time and at time of misconduct, degree of individual s managerial control Relation of individual s position to the conduct, was it within the individual s chain of command 47

48 October 2010 OIG Exclusion Guidance Discretionary Exclusion Factors: Individual s Response to Misconduct Did individual take steps to stop or mitigate the conduct Did the individual disclose the misconduct, cooperate in investigation? 48

49 October 2010 HHS OIG Guidance Discretionary Exclusion Factors: Information About the Sanctioned Entity Has the entity previously been convicted or a crime or found to have administrative or civil liability, or settled with the government; what was the prior conduct? Size of the entity (employees, revenue, product lines) Corporate structure (how many subs and their size) 49

50 Strategies Consider more aggressive compliance and defense approaches to civil liability and FCA cases Attempt to leverage joint DOJ-HHS investigations Consider and attempt to avoid corporate exclusion as a consequence of civil settlement Removes a predicate for certain individual exclusions Know and understand statutory and OIG grounds for permissive exclusion and account for them in Stipulated Facts or settlement documents 50

51 OIG Areas of Particular Interest Home Health Agencies Payments to third parties for items included in HHA payment Whether claims meet coverage requirements Appropriateness of services Relationships between hospices and SNFs Appropriateness of outpatient therapy services Payments for off label anticancer pharmaceuticals and biologicals 51

52 Self-Disclosure OIG program Anti-Kickback violations Stark Law violations only if also involves a kickback Must meet minimum threshold Will likely have to pay back a multiple of the amount CMS program for Stark Law New Disclosure to U.S. Attorney (DOJ) Reporting and Return of Program Overpayments PPACA amendments to FCA effective March

53 Overpayments: Reporting & Return PPACA identifies the retention of any overpayment as decreasing an obligation to the Government in violation of the FCA Overpayments must be reported in writing and returned to the Government by the later of 60 days after identification (undefined) or, for cost-reporting entities, the date the relevant cost report is due Overpayment violations can FCA liability, treble damages, and monetary penalties, administrative exclusion Claims may be calculated as number of contracts or number of invoices or services Section 2 of the Improper Payments Information Act of 2002 (31 U.S.C note), as amended, contains some helpful definitions 53

54 Compliance Corporate Executives cannot monitor every company function or claim submission Companies can implement programs and mechanisms to detect fraud and other wrongdoing DOJ and OIG expect robust Compliance Programs The larger the company, the more sophisticated the program PPACA mandates Compliance Programs HHS Guidance on compliance programs has issued HHS Rules on mandatory PPACA programs are forthcoming 54

55 Essential Elements of a Compliance Program Compliance Officer should report to Board Policies and Procedures designed to prevent wrongdoing and identify wrongdoing that occurs Reporting mechanism hot line Serious actions against wrongdoers Protection of individuals who report violations and potential violations in good faith Culture of Compliance Only thing worse than not having a program is not enforcing it 55

56 PPACA Provisions re Compliance Plans PPACA Compliance Program Provisions Programs required for Medicare/caid and CHIP providers OIG to develop core elements 6102 nursing and skilled nursing facilities by March 23, 2013 Must be effective in preventing and detecting criminal, civil, and administrative violations and in promoting quality of care consistent with regulations developed by the HHS 6401 all health care providers no statutory timetable 56

57 OIG Compliance Guidance February 2, 2011 Federal Register request for comments re PPACA 6102/6401 Compliance Program Elements 2010 Federal Sentencing Guidelines (FSG) Manual Criteria would be basis for core elements: Written policies & procedures Designated compliance officers & committee Training and education programs on policies and procedures Designated reporting channels that allow anonymous reporting Internal monitoring and periodic self-audits Enforcement through publicized disciplinary policy Respond to offenses and document corrective actions 57

58 General Compliance Strategies Internal reporting and certification Adhere to statutory provisions & rules requiring compliance programs Review HHS OIG & FDA Rulemakings and Guidance Monitor HHS rulemakings on required compliance elements OIG website: Compliance Program Guidance (CPG) manuals and case examples Consider outside billing and coding consultants to identify risks Understand express and implied certifications Mitigating potential exclusion and criminal exposure Take steps to minimize corporate exclusion Review 10/2010 OIG Guidance and factors for permissive exclusion Know Jan 2011 FDA RPM revisions and RCO guidelines Review internal structures and civil stipulations/settlements carefully 58

59 Questions? 59

60 Thank You. 60

61 Contact Information Marion Goldberg Health Care Washington, D.C. (202) Tom Mills Health Care Washington, D.C. (202) Elizabeth Papez Litigation Washington, D.C. (202)