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Blog
New DOJ Case Shows Cross-Silo Accuracy a Key Function of Compliance
Mark Scallon, Senior Principal, Commercial Compliance
Sep 18, 2019
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  • New DOJ Case Shows Cross-Silo Accuracy a Key Function of Compliance

An announcement from the Department of Justice should put all Life Sciences companies on notice. The United States Attorney’s Office for the Southern District of New York recently filed a civil healthcare fraud lawsuit with significant implications: Regulators are actively examining the data manufacturers submit to comply with the Sunshine Act and comparing it with companies’ own internal data. When discrepancies arise, the legal ramifications can be severe.

Manufacturers should consider this a cautionary tale: Those which find themselves embroiled in an investigation must prioritize a new imperative in addition to the completeness and accuracy of their own internal data; namely, manufacturers need to make sure they have cross-silo systems in place to ensure accuracy and mitigate errors both internally and externally.

The allegations in the government’s case against Life Spine, Inc. along with two of its key executives, pertain to compensation surrounding HCP relationships. The false claims complaint alleges that kickbacks were paid to hospitals and surgeons in the form of payments such as consulting fees, royalties, and intellectual property acquisition fees. This, in turn, triggered false claims submissions to Medicare and Medicaid, the DOJ alleges. Those fees were often codified into training, education and product development agreements, but the Justice Department’s complaint alleges that these payments were in fact tied to the surgeons’ frequent and continual use of the company’s products. The complaint alleges that internal Life Spine documents show that the company tracked the volume of sales generated by these surgeons with which Life Spine had relationships and that both parties were in acknowledgment of the expectations.

These payments totaled more than $7 million over a time frame of roughly seven years, payments that were not appropriately documented according to regulations stipulated by the Centers for Medicare and Medicaid Services Physician Payment Sunshine Act. The complaint also noted that the surgeons recruited by the company were responsible for roughly half of the company’s domestic sales for the time period under investigation.

The complaint, and the language in it, make it clear that regulatory and law enforcement bodies are evaluating the material submitted by companies to the federal Open Payments data platform and will not hesitate to take action if they uncover discrepancies — and the industry should expect that this would hold true for even inadvertent mistakes.

The stakes here are high: This case should serve as a reminder to all Life Sciences companies that merely documenting and reporting HCP compensation in the context of promotional education, speaker programs and consultative relationships is not enough. The onus is on the industry to be proactive: Manufacturers of drugs and medical devices need to establish comprehensive, compliance-centric systems for monitoring and reporting. Error mitigation and, when necessary, rectification needs to be a top goal.

The increasing scrutiny of the Life Sciences industry and regulatory zeal for investigating perceived infractions means that companies without such managerial infrastructure are exposed to the risk of legal scrutiny and even prosecution. Due diligence in cross-referencing reporting results needs to be integrated at the most fundamental level of all HCP management platforms.

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