US Pharma Probes Go Global

Foreign governments are enacting anti-fraud legislation as part of broader efforts to crack down on corrupt practices involving pharmaceutical companies and healthcare professionals. The trend reflects more aggressive campaigns to squelch long-accepted payments to doctors and hospitals and draws heavily on US and European policies designed to uncover violative pharmaceutical promotional and sales activities. Evidence of illegal practices abroad, moreover, provide evidence for US prosecutors of violations of the Foreign Corrupt Practices Act (FCPA) and other laws governing industry relations with healthcare providers.

The Chinese campaign against bribery and corruption of health professionals has set the tone for aggressive pharma probes and harsh penalties. In September 2014, a Chinese court imposed a near-$500 million fine on GlaxoSmithKline for bribing doctors and hospital officials with payments through travel agencies and industry associations. Novartis has reported an investigation by Chinese authorities into allegations of misconduct by certain employees. China's anti-fraud efforts show no sign of fading, as seen in recent "circulars" that permit "blacklisting" a company from doing business with government health programs if there any any signs of paying commissions and fees to physicians or making "improper" donations.

"The globalization of anti-corruption activities is on the march," observed Saul Helman of Navigant Consulting at last month's Pharmaceutical Regulatory and Compliance Congress in Washington, D.C. He noted that pharma marketers face increased scrutiny for potential corruption in many regions. Brazil's Clean Company Act of 2014, for example, holds companies responsible for the corrupt acts of its employees. Canadian legislation makes it a criminal offense for private-sector employees to bribe public officials. Sanofi recently acknowledged investigations into alleged bribery and payoffs to medical professionals in the Middle East and Kenya. Foreign clinical research practices also are drawing more scrutiny, as seen in charges by Japanese prosecutors against a Novartis unit found to tamper with study data. And many governments seek to uncover illicit behavior through new laws requiring transparency and public disclosure of industry financial relationships with healthcare professionals.

No let-up at home

These foreign investigations provide ammunition for US officials to probe FCPA violations, which involve payments to foreign government officials, including doctors employed by national health systems. GSK has reported that both the US Department of Justice (DOJ) and the Serious Fraud Office in the United Kingdom are investigating whether Glaxo payments to foreign officials violate the FCPA and British law, which could result in more fines and penalties.

The US Securities and Exchange Commission (SEC) has become more aggressive in pursuing FCPA cases, and "fines are going up everywhere," noted Susan Markel, managing director at AlixPartners and former chief accountant at the SEC. The Dodd-Frank Act rewards whistle-blowers for informing SEC of situations involving payoffs and bribery that could lead to fraud situations related to inadequate financial disclosure and stock misrepresentation, pointed out Sara Bloom, assistant US attorney in Boston. Pharma corporate mergers and acquisitions are triggering similar investigations into whether material filings have important omissions or misstatements.

Prosecutors also continue to investigate traditional collusion and fraud cases, as seen in recent DOJ probes of alleged price fixing by generic drugmakers. And investigators remain on the lookout for evidence that can hold individuals responsible for company transgressions, as seen in corporate integrity agreements that require a high-level executive to certify compliance with its provisions. If executives blame violations on a "rogue employee," explained Bloom, the firm will need to provide evidence that the individual was clearly told not to commit the violative action.

OIG priorities

Many of these issues are being investigated by the Health and Human Services (HHS) Office of the Inspector General (OIG), which has long been involved in pharma cases involving off-label promotions and kickbacks that violate the False Claim Act (FCA). Notable settlements this past year have involved Endo Pharmaceuticals, Teva, Astellas Pharma, and Shire. Most recently, medical device makers Biomet and Biotronik have settled kickback charges alleging improper payments to physicians to influence product use.

The OIG "work plan" for 2015 reveals continued interest in FDA operations and pharma sales to government health programs. The analysts will be looking at FDA inspections of generic drug manufacturers, whether pharma companies meet initial requirements for tracking drugs through the supply chain, how well FDA monitors postmarketing studies for new drugs, and whether sponsors comply with requirements for registering and reporting results to the http://ClinicalTrials.gov/ website. Several studies will examine Medicare Part B spending on drugs, including the need for closer scrutiny of Part B payments for off-label uses of drugs listed in compendia, and how much money Medicare could save if it paid for Part B drugs at 340B prices.

OIG senior counsel Mary Riordan noted that her office will continue to monitor whether pharma promotional messages encourage the use of products for unapproved uses, looking specifically at sales reps providing billing and coding advice to doctors to support off-label prescribing, and whether messages to payers and formulary committees are accurate and balanced.

With the advent of the HHS Open Payments program, the OIG plans to explore how Sunshine Act data may help investigators identify financial relations between pharma companies and healthcare providers that could influence the purchase of medical products. The OIG is looking to track pharma company payments to hospitals and formulary P&T committees and the resulting discount and rebate agreements. And it's interested in reassessing how the risk of becoming entangled in illegal kickbacks may arise from seemingly common company arrangements with healthcare professionals, such as speaker programs, consulting contracts, and payments for training activities.

Riordan advised pharma companies to use Sunshine reports for their own internal monitoring programs by looking at where there are outliers in payments and recipients and spending spikes in certain markets. The Open Payments data provides an "additional tool" for law enforcement programs, Riordan commented. "Whistleblowers will be looking at it and analyzing the data," she noted, "as will the media."

Jll Wechsler is Pharmaceutical Executive's Washington correspondent. She can be reached at jwechsler@advanstar.com