preparing for healthcare professional transparency

Presented by

Sponsored by

© 2013 Huron Consulting Group. All Rights Reserved. Confidential - Not for Distribution

2© 2013 Huron Consulting Group. All Rights Reserved. Confidential - Not for Distribution

Paul Silver

Managing Director

Huron Consulting Group

Manny Tzavlakis

Managing Director


Nikki Reeves

Partner

FDA & Life Sciences Practice

King & Spalding LLP

Seth Lundy

Partner


King & Spalding LLP

Moderated by Ben Comer, Senior Editor, Pharmaceutical Executive, the following leaders from Huron Consulting Group and King & Spalding will serve as today’s

webinar speakers:

IntroductionWEBINAR MODERATORS AND SPEAKERS

http://www.google.com/url?sa=i&source=images&cd=&cad=rja&docid=_a6PNbmXyAQCCM&tbnid=3kvxiEVU_GCX9M:&ved=0CAgQjRwwAA&url=http://www.exlpharma.com/speakers/manny-tzavlakis&ei=VCeBUq7XD4vgsATo-oCACg&psig=AFQjCNGPMCMhl6Ct7QBVBqVU1e-wbIL_nQ&ust=1384282324300944

http://www.google.com/url?sa=i&source=images&cd=&cad=rja&docid=SaSs7JPYIapWOM&tbnid=b2_PuM2MMnReLM:&ved=0CAgQjRwwAA&url=http://www.kslaw.com/people/Seth-Lundy&ei=wl2CUrv8NsLj4AOBzYBA&psig=AFQjCNGmveWZKqRaXto0ubWaYEHCJtFOkQ&ust=1384361794934058

After this webinar, you will gain additional insight into: How various entities (e.g., regulators,

competitors, customers, etc.) could interpret Open Payments data and the associated risks to your company

The potential for personal liability with regards to wrongful reporting

Ways to utilize this information to add greater business value


IntroductionWHY ARE WE HERE TODAY?

http://www.google.com/url?sa=i&source=images&cd=&cad=rja&docid=NK2tEOwcDZx5PM&tbnid=QUUU3CJy0cqnIM:&ved=0CAgQjRwwAA&url=http://mendham.wmrhsd.org/faculty_site/facultyPage.asp?facultyID%3D307%26pageID%3D1179&ei=62mCUv-DNLfK4AO0z4C4Dg&psig=AFQjCNHojwAoMRAVWOAsMbNjQX8UOE3mLQ&ust=1384364907880527

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=NWSd66AoUltb_M&tbnid=YDt2O9Jr_ag4wM:&ved=0CAUQjRw&url=http://www.buddyleejumpropes.com/&ei=D2qCUoaCLvWy4AOB6ICwBw&bvm=bv.56146854,d.dmg&psig=AFQjCNGVdkbBxq8qmoOmAgR1K4W_KL8NZQ&ust=1384364924240841

Introduction & Review of the External Landscape

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RECENT INDUSTRY HEADLINES

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Introduction


DISCLOSURE, LITIGATION & THE FUTURE

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Approximate amount of HCP payments publicly

disclosed as of 2013 by 15 pharmaceutical and

medical device companies– under Corporate Integrity

Agreements or voluntarily. 2

$2.1

billionPayments the pharmaceutical and medical device

industry has paid for civil and criminal penalties to the

US and state governments- the industry continues to

face more allegations of wrongdoing on a global scale

(i.e., China).1

$30.2

billion

$?

billion

What will be the total number disclosed to CMS

in 2014 by industry?

How will this impact/influence future litigation,

media and public opinion?

Introduction

1. Source: Kelton, Erica. Is Big Pharma Addicted To Fraud. Forbes. July 2013.

2. Source: www.ProPublica.com. November 2013.


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Introduction

1. Source: Clips sourced on www.youtube.com

How will the

media

interpret

open payments

disclosure data

to grab attention,

to tell a story…

Will your company have the facts and be prepared to respond?


MEDIA PLAYS A ROLE IN TELLING THE STORY

Making Sense of the Publicly Available Data


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THE AFTERMATH OF DISCLOSING DATA

All payments and transfers of value exceeding $10 must be reported and tracked against the individual HCP who received it by the company. The report is due March 31, 2014.

HCPs will have access to the total reported information prior to public posting.

HCPs will have the right to dispute and/or question the expenditures with the company.

Once this information is publicly posted, it is available to regulators, newspapers, customers, patients, competitors, and the general public .

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Publicly Available Data

Source: CMS App for Open Payments for Physicians, CMS website


http://www.google.com/url?sa=i&source=images&cd=&cad=rja&docid=qkIZvFrnNkfeXM&tbnid=lAEqSarh3rrLEM:&ved=0CAgQjRwwAA&url=http://www.hrsonline.org/Practice-Guidance/Legislation-Advocacy/Legislation-Topics/Sunshine-Law-CMS-Mobile-Application&ei=zWqCUqP3AsHfkQfV34CADg&psig=AFQjCNEaqUDcLv-e1NzTmgqyWo-Wz9e--g&ust=1384365133102995

Awareness is driven by mainstream media as well as by alternative media, such as ProPublica, which has published detailed information about physician compensation from Life Sciences companies.

The table below in as example of the data available from ProPublica:

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Publicly Available Data

ProPublica also provides profiles for each individual HCP detailing information such as: total compensation by company, specialty, and prescribing patterns.

Name / Payee City Year Category Amount

Jane Physician Worcester 2012 Research $2,762

Jane Physician Jamaica Plain 2012 Meals $281

Joe Roberts Holyoke 2011 Items, Gifts $251

Joe Roberts Boston 2011 Consulting $2,400

John Smith Worcester 2010 Speaking $65,890

John Smith Worcester 2011 Speaking $17,400

John Smith Worcester 2011 Travel $5,073


CURRENT PUBLIC DISCLOSURE

Mitigating Risk:The Changing Market Landscape


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Healthcare

Professional

Engagement

Clinical Development

Product Commercialization

Compliance

Publicly disclosing payment information and the increased scrutiny from industry-related entities are causing changes in the market landscape.

Companies are being forced to adapt by:

Assessing their internal and external strategies

Strengthening processes and controls

Increasing collaboration across Compliance, Commercial and Clinical Development to mitigate risk and become more efficient

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Mitigating RiskCHANGING MARKET LANDSCAPE


The media, customers, patients, and others may review this data for:• Spend outliers within company peer groups• Relationships between companies and HCPs – particularly those under or

related to an investigation(s)• Since primary specialty will be posted, engagements with healthcare

professionals that may be off-label in nature• Research related information such as which researchers are working for

competitors

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Companies should be prepared to respond to media or other outside

inquiries related to these types of scenarios.

Mitigating RiskMEDIA / INQUIRY PREPARATION


http://www.google.com/url?sa=i&source=images&cd=&cad=rja&docid=NK2tEOwcDZx5PM&tbnid=QUUU3CJy0cqnIM:&ved=0CAgQjRwwAA&url=http://mendham.wmrhsd.org/faculty_site/facultyPage.asp?facultyID%3D307%26pageID%3D1179&ei=62mCUv-DNLfK4AO0z4C4Dg&psig=AFQjCNHojwAoMRAVWOAsMbNjQX8UOE3mLQ&ust=1384364907880527

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=NWSd66AoUltb_M&tbnid=YDt2O9Jr_ag4wM:&ved=0CAUQjRw&url=http://www.buddyleejumpropes.com/&ei=D2qCUoaCLvWy4AOB6ICwBw&bvm=bv.56146854,d.dmg&psig=AFQjCNGVdkbBxq8qmoOmAgR1K4W_KL8NZQ&ust=1384364924240841

http://www.google.com/url?sa=i&source=images&cd=&cad=rja&docid=SzhOAPr0ih500M&tbnid=R0hSd3vNOqlVWM:&ved=0CAgQjRwwAA&url=http://www.mediabistro.com/fishbowlny/gawkers-fox-news-mole-reveals-nothing_b57750&ei=-2uCUv2dOo20kAeewIGADg&psig=AFQjCNHnDLIR1sO2Bv7wOersVBCVeSYJAw&ust=1384365436076585

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Loss of KOLsRisk

•Changes in the business and transparency

landscape may change the willingness of HCPs to

engage with pharmaceutical and medical device

companies

Mitigating RiskKEY RISK: LOSS OF KEY OPINION LEADERS

Strategic relationships will

be even more critical in the

future.


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Potential Outcome

•Because even small transactions will typically be

posted under Open Payments, HCPs may no longer

accept sales rep “lunch-n-learns”, educational items, or

even samples (which must also be disclosed separately

from the Open Payments report)

•Potentially more significantly, HCPs may no longer wish

to serve as Key Opinion Leaders (KOLs) for clinical

trials, speaker programs, consulting, or for other

engagements

Mitigating RiskKEY RISK: LOSS OF KEY OPINION LEADERS

Strategic relationships will

be even more critical in the

future.


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Proactively prepare responses for

relationships that are likely to be highlighted in

the media or in other outlets.

Consider “Pre-Disclosing” transactions to

key KOLs to ensure their awareness of what

will be posted prior to actual public posting.

Handle inquiries and disputes promptly,

accurately, and consistently per established

policies & SOPs.

Mitigating RiskPLAN: PROACTIVELY MANAGE KEY OPINION LEADERS


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Potential Risk

A disorganized, insufficient or lack of data

gathering & data reporting processes,

capabilities, and systems.


Mitigating RiskKEY RISK: INACCURATELY REPORTING PAYMENT DATA

:

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Potential Outcome

May result in inaccurately reported payment

data, which can damage reputation and the

relationship between the companies and

HCPs.


Mitigating RiskKEY RISK: INACCURATELY REPORTING PAYMENT DATA

:

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PLAN: DEVELOP RISK REMEDIATION FOR REPORTINGKey Account Management (KAM) is a systematic process for managing interactions and relationships with your most

valuable customers.

Specific Risks Associated with Data Remediation Steps

• Manual data entry into the systems of record may be carried out incorrectly.

• Targeted training to ensure that employees understand the importance of complete and accurate data capture.

• File transmission errors may occur – these include issues related to date ranges, missed files, or other system issues.

• Ensure that transactions from given systems or date ranges are present in the collected aggregate spend data (based on outlier observations).

• Transaction data fields may be incorrectly mapped to final report data.

• Update reporting engine business rules or configuration to ensure that expected reports are produced.

• When the federal government, institutions, or the media display and analyze company reporting data, aggregation, calculation, or other types of errors may result.

• Where aggregation or mathematical errors have been identified, contact the federal government or other source to ensure that displayed data is corrected.


Mitigating RiskDEVELOP RISK REMEDIATION FOR REPORTING

http://www.state.gov/m/a/os/41014.htm

Impacts To You & Personal Liability


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Business and reputational risk Corporate legal liabilities Individual legal liabilities

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Types of Potential Impact and Liability


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Jan. 1, 2014 – end of CY 2013 reports; begin tracking for CY 2014

March 31, 2014 – CY 2013 reports due May – June 2014 – 60-day dispute resolution period

begins September 30, 2014 – CMS publication date for CY

2013 data

Calendar the Key Dates


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Regulatory and Enforcement

Agencies

Industry/HCP

Relationships

U.S. Congress

IOM

PressIndustry Groups

Medical Institutions

State Legislatures Physician Groups

Effects of Increased Transparency


http://www.nytimes.com/

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There is little doubt that transparency of these relationships will further increase scrutiny of industry/health care professional relationships

Publication, communication and misunderstanding of these reports may affect:– Customer purchasing

– Ability to successfully contract

– Patient perception

– Public perception

– Government agency perception

– Peer relationships

Business and Reputational Risks


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Corporate Legal Liabilities

Penalties For Failure to Report (42 C.F.R.§403.912)

Manufacturers are subject to civil money penalties for failing to timely, accurately, or completely report the required information

Inadvertently failing to report data subjects an applicable manufacturer to a civil monetary penalty between $1,000 and $10,000 for each payment or other transfer of value not reported timely, accurately, or completely (for each annual submission, the total penalties for inadvertent failures to report may not exceed $150,000)

Knowingly failing to report data subjects an applicable manufacturer to a civil monetary penalty between $10,000 and $100,000 for each payment or other transfer of value not reported timely, accurately, or completely (for each annual submission, the total penalties for knowing failures to report may not exceed $1,000,000)


Anti-Kickback Statute – 42 U.S.C. §1320a-7a(b) The Anti-Kickback Statute makes it a criminal offense to knowingly

and willfully to offer, pay, solicit, or receive any remuneration to induce or reward referrals of items or services reimbursable by a federal health care program.

Penalties: • Felony charge, punishable by maximum of $25,000 fine and up to

five years imprisonment, or both for each offense. • Automatic exclusion from federal health care programs. • Administrative proceedings to impose

• Civil money penalties• Exclude party from federal health care programs. See Section 1128(a)(7) and

Section 1128(b)(7) of Social Security Act.


© 2013 Huron Consulting Group. All Rights Reserved. Confidential - Not for Distribution 26

False Claims Act (qui tam) 31 U.S.C. § 3729• “Any person who:

– (2) knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government;

– (3) conspires to defraud the Government by getting a false or fraudulent claim paid or approved by the Government;. . . or

– (7) knowingly makes, uses, or causes to be made or used, a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to the Government,

– allows whistleblowers to bring a suit on behalf of the government against individual or company responsible for the alleged fraud.” 31 U.S.C. § 3729.

– “Knowing” or “knowingly” means: “(1) has actual knowledge of the information; (2) acts in deliberate ignorance of the truth or falsity of the information; or (3) acts in reckless disregard of the truth or falsity of the information, and no proof of

specific intent to defraud is required.” 31 U.S.C. § 3729.



False Claims Act (qui tam) 31 U.S.C. § 3729 (continued) Penalties:

– “Civil penalty of not less than $5,000 and not more than $10,000, plus three times the amount of damages which the Government sustains because of the act of that person.” 31 U.S.C. § 3729 (emphasis added).

No actual knowledge required– Person who acts in reckless disregard or in deliberate ignorance

of truth or falsity of information can be found liable under the Act.

31. U.S.C. § 3729(b).



Federal Food Drug & Cosmetic Act (FDCA) Section 303(a) of FDCA imposes criminal sanctions against any person who

committed a prohibited act or caused such acts to be committed. 21 U.S.C. § 333. – Fines and prison sentences determined by Federal Sentencing Guidelines.

Criminal Charges: Section 303 discusses the penalties for a violation of Section 301. – A violation of 21 USC § 331, a second violation, or the intent to defraud or

mislead results in the following consequences. • “(1) Any person who violates a provision of section 301 shall be imprisoned

for not more than one year or fined not more than $1,000, or both.• (2) Notwithstanding the provisions of paragraph (1) of this section, if any

person commits such a violation after a conviction of him under this section has become final, or commits such a violation with the intent to defraud or mislead, such person shall be imprisoned for not more than three years or fined not more than $10,000 or both.” 21 U.S.C. § 333.

– Felony if action done with intent to defraud or mislead, or a second offense without intent

– Misdemeanor if no showing of intent



State Transparency/Aggregate Spend Disclosure Laws and Compliance Program Laws

California Compliance Program Law, (Cal. Health & Safety Code §§ 119400-119402) Connecticut Compliance Program Law, (CT S.B. 428) Nevada Marketing Code of Conduct and Compliance Program Law (Nev. Rev. Stat. §

639.570) Massachusetts Code of Conduct and Practitioner Payment Reporting (MA SB 2863) Washington, DC Marketing Disclosure Laws - D.C. Code §§ 48-833.01-.09 Minnesota Gift Prohibition and Payments to Practitioners Reporting Laws (Minn. Stat.

§§ 151.461; 151.47) Vermont Prescribed Products Law West Virginia Marketing Costs Disclosure Law (W.Va. Code § 16-29H-1)



PARK DOCTRINEWhat is the Park Doctrine?

• Permits misdemeanor convictions against company executives for violations of the FDCA, even if the executive had no knowledge or involvement in the offense, so long as the person is a “responsible corporate officer.” – Personal knowledge is not required, but only a factor that “may be relevant” in

deciding whether to bring criminal charges. • Strict liability crime - can be convicted of federal crime based solely

on position in company.

Individual Legal Liabilities


United States v. Park, 421 U.S. 658 (1975)– Defendant Park was the president of a large national food store and was convicted of

causing adulterated food to enter interstate commerce. Id. at 658.– The Court of Appeals reversed, reasoning based on Dotterweich, that an individual had

to have some knowledge of wrongdoing. Id. The Supreme Court overruled this, and held that knowledge of wrongdoing was not a requirement. Id.

– “The Act imposes upon persons exercising authority and supervisory responsibility reposed in them by a business organization not only a positive duty to seek out and remedy violations but also, and primarily, a duty to implement measures that will insure that violations will not occur.” Id. at 658-59.

– “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 that he failed to do so. The failure thus to fulfill the duty imposed by the interaction of the corporate agent's authority and the statute furnishes a sufficient causal link.” Id. at 674.

– Supreme Court held that individuals who have the authority to prevent violations can be held vicariously liable for the illegal acts of subordinates. Id.

• Responsible corporate officers have an affirmative duty to seek out and remedy violations, and implement measures to prevent those violations. Id.

• Delegation to subordinates does not negate liability. Id.

History of the Park Doctrine


Anyone with authority to prevent or correct violations Decisions regarding who is the “responsible corporate

officer” are left to “the good sense of prosecutors, the wise guidance of trial judges, and the ultimate judgment of juries.” United States v. Dotterweich, 320 U.S. 277, 285.

Typically:– Highest ranking corporate officer (CEO)– Executive with direct authority to implement corrective actions (i.e.

compliance officer)– Examples - CEO, President, Chief Compliance Officer, Vice

President

Park Doctrine: Who is a “Responsible Corporate Officer”?


Park doctrine has been taken to apply beyond FDCA– Anti-kickback Statute– False Claims Act

Beyond the Park Doctrine


Most CIAs implemented since 2008 have required disclosure of payments to HCPs and HCIs

“[T]he requirement of public disclosure of these payments will help the Government, as

well as the health care industry and the public, to monitor relationships and should

have a sentinel effect to deter kickbacks and other inappropriate payment

relationships.”

Gregory E. Demske, Chief Counsel

Office of Inspector General of the Department of Health and Human Services Testimony to the U.S. Senate Special Committee on Aging Roundtable (Sept. 12,

2012)

Disclosure Under CIAs


Certain senior management identified as “Certifying Employees” are required to monitor their areas of authority and annually certify compliance with federal health care program requirements, FDA requirements, and the CIA. • “I have been trained on and understand the compliance requirements and responsibilities as they relate to

[department or functional area], an area under my supervision. My job responsibilities include ensuring compliance with regard to the [insert name of the department or functional area.] To the best of my knowledge, except as otherwise described herein, the [insert name of department or functional area] of [company] is in compliance with all applicable health care program and FCA requirements, and the obligations of the CIA.”

Recent Trends in CIA: Accountability


Attestations: (42 C.F.R. § 403.908(h))

Each report, including any subsequent corrections to a filed report, must include a certification by the CEO, CFO,

Chief Compliance Officer, or other Officer of the applicable manufacturer that the information submitted is true,

correct, and complete to the best of his or her knowledge and belief.

If filing a consolidated report, the attestation applies to all applicable manufacturers covered by the consolidate

report.

If an applicable manufacturer submits updated data to resolve disputes, the applicable manufacturer must re-attest

to the timeliness, accuracy, and completeness of the data, as required during the original data submission. (78 Fed.

Reg. 9502)


Budget appropriately (dollars and personnel)– Quick changes and responses may be required

Benchmark carefully Consider some or all of the following proactive steps:

– Internal audits of payment data for accuracy and overall compliance (e.g., kickbacks, industry codes and state gift bans)

– Policy/procedure reviews to ensure that reported payments are consistent with the company’s internal requirements

– Tax reviews/opinions

– PR and crisis management planning for possible media reports

– Continue training efforts

– Coordinate with industry on uniform messaging

Protect Against Potential Liabilities


Turning Risk & Liability into Corporate Value:

Benefits of Disclosing Data


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Turning Risk & Liability into Corporate ValueBENEFITS OF OPEN PAYMENT REGULATIONS

After the disclosure data has been analyzed and the trends have been identified, a company can react to operational changes by:

Altering sales and other go-to market strategies

Developing robust data gathering & reporting processes and systems

Providing insight into competitor’s and industry’s actions & strategies


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Spend Analysis

Example of how to view and show company spend on

individual HCPs by specialty area and allows the ability to

break down the data by specialty area, payment nature,

and time frame.

Results may include analysis that shows company spend

on HCPs by specialty area in order to help identify which

specialty area(s) and HCPs are receiving the most

payments.

Turning Risk & Liability into Corporate ValueANALYZE SPEND FOR BETTER BUSINESS INSIGHTS


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For illustrative purposes only.

Turning Risk & Liability into Corporate ValueBETTER UNDERSTANDING OF KEY OPINION LEADERS

With detailed disclosure data available in the near future, compliance-based influence networks can be created to help understand therapeutic markets and how to

market more effectively in a compliant manner.


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Turning Risk & Liability into Corporate ValueHELP MAKE BETTER ORGANIZATIONAL DECISIONS

Disciplined

influence intelligence

better informs

organizational decision making,

leading to improved outcomes

in product development and

commercialization.

Companies that adopt a comprehensive enterprise approach to influence mapping can

drive competitive advantage in their respective markets.


Questions To Consider How concerned is your organization that Open Payments disclosure will impact your

relationships with KOLs? What is your most significant concern about Open Payments disclosure in 2014? What topics related to disclosure, transparency and data would you like to know more

about for future webinars?

To access the ProPublica data, please visit: http://projects.propublica.org/docdollars/


http://projects.propublica.org/docdollars/

http://projects.propublica.org/docdollars/

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Paul Silver

Managing Director


678-672-6160

[email protected]

Manny Tzavlakis

Managing Director


646-520-0247

[email protected]

Nikki Reeves

Partner


King & Spalding LLP

202-661-7850

[email protected]

Seth Lundy

Partner


King & Spalding LLP

202-626-2924

[email protected]

Please contact our speakers for information presented during today’s session.


Thank You

mailto:[email protected]


