Anti-Kickback Settlement Surge

Recent Increase in Anti-Kickback Settlements Among Drugmakers Already, the month of June has seen drugmakers Mallinckrodt and Insys face settlements with the Department of Justice due to allegations that they had bribed doctors and set up sham speaker programs.  These suits come after leaked information suggesting that another drug company, Novartis, may be hit with similar charges. In the case of Mallinckrodt, the company had bought another company called Questcor, and had paid doctors to increase growth for their drug Acthar while using “dirty data” to hide its illicit marketing strategies.  As for Insys, this company was sued due to its scam involving paying doctors through a fake speaker’s program between 2012 and 2015. The future of Novartis looks similarly grim, particularly now that the government is investigating its actions, and it could face close to one billion dollars in settlement.   Are Compliance Programs Working? One question that this string of cases has raised is whether or not the compliances programs in place at these companies have actually been effective.  The Department of Justice has released some guidance on this subject, and one of the primary actions they suggest is that companies work on the development and distribution of codes of conduct.  Further, they recommend that companies designate a compliance officer or team to report directly to a board of directors, and open up lines of communication between the two groups by using processes such as hotlines.  Other techniques such as audits and risk evaluations should also be used to help boost compliance within companies. How Are Compliance Programs Assessed? The U.S. Department of Justice released a new guidance document on April 30th 2019 regarding the evaluation of compliance programs—primarily dealing with these programs’ level of effectiveness.  Federal prosecutors refer to this document when determining whether or not to charge a given corporation, and so it becomes important for companies to ensure that their compliance programs are meeting this document’s guidelines.  According to the guidance, prosecutors should look at the seriousness of the offense, including the risk of harm to the public, as well as complicity in wrongdoing by corporate management and the company’s history of similar misconduct.   How Companies are Prosecuted These companies are prosecuted in a variety of ways depending on different factors.  In the case of Novartis, for instance, it might not make sense to exclude this company due to the significant and harmful impact that exclusion may have on the public.  Some of the other factors that prosecutors must consider before enforcing penalties include whether or not a company’s compliance program is well-designed, effectively implemented, and works in practice.  Depending on these factors, it may be appropriate to dissolve corporate criminal cases by means other than indictment, such as by deferred prosecution agreements. Overall, there is a significant amount of information and guidance surrounding how to prosecute and charge in cases of healthcare fraud.  Companies looking to market their products should remain vigilant in ensuring that their own speaker systems are compliant with federal laws, and should consider setting up compliance programs—an integral part of preventing potential scams and the resulting penalties.