Off-label Drug Promotion: The False Claims Act and Anti-Kickback Statute

June 2012Articles Staying Well Within the Law

Physicians sometimes prescribe a drug or medical device for a use that has not been approved by the Food and Drug Administration, a so-called “off label” use. A great deal of focus has been placed on pharmaceutical manufacturers’ off-label promotion of drugs and the compliance issues confronting those manufacturers. Often absent from that discussion is any recognition of the compliance issues challenging the recipients of those promotional activities, specifically, the health care industry. Health care companies must be alert to the unique compliance questions facing them (e.g., preventing their employees from bowing to the pressure and accepting some form of remuneration in exchange for increasing the use of a particular drug — even when the drug may have been illicitly promoted for non-approved, off-label uses).

The laws that create compliance incentives

In some respects, compliance programs begin and end with the federal False Claims Act (FCA)1 and Anti-Kickback Statute (AKS).2 Stated differently, government enforcement of these statutes emphasizes the need for compliance both for companies and their owners, officers, and managers. The FCA makes it a violation to:

  • knowingly present or cause to be presented a false or fraudulent claim for payment or approval;
  • knowingly make or use a false record or statement material to a payment of a false or fraudulent claim; and/or
  • conspire to defraud the government by getting a false or fraudulent claim paid or allowed.

The concept of a “knowing” violation is broadly interpreted. Importantly, “relators” (i.e., whistleblowers) can bring a fraud action on behalf of the government. Similarly, the AKS makes it illegal to offer to pay to induce a person to purchase or order any item or service for which payment may be made under a federal health care program, or recommend purchasing or ordering such an item or service. Prosecutors do not need to prove that a defendant had actual knowledge of the AKS or a specific intent to violate the statute.

Violations of the FCA and the AKS can result in penalties, convictions, and exclusion from federal health care programs.

Massive corporate penalties—many exceeding $100 million—have garnered recent headlines. The government’s use of exclusion from federal programs as a remedy would be a “career killer” for most individuals. This fact is highlighted by a recent example, in which three pharmaceutical executives personally paid over $30 million in combined penalties, yet challenged the imposition of a 12-year ban from federal health care programs.3

Policies and guidelines shape compliance efforts

Medical practitioners retain the ability to prescribe drugs for off-label uses. Nevertheless, health care compliance officers should also be aware of other policies and guidance that concern the interaction between pharmaceutical manufacturers, their sales representatives, and the health care industry.

The Accreditation Council for Continuing Medical Education (ACCME) has policies and guidelines designed to ensure independence of continuing medical education programs. These require the disclosure of program sponsorship and conflicts of interest to avoid improper preferential status being given to a particular drug or medical device.

Additionally, the Department of Health and Human Services (DHHS) Office of the Inspector General (OIG) guidance, titled Compliance Program for Pharmaceutical Manufacturers,4 includes elements of an effective compliance program, (e.g., encouraging “hotline” reporting when sales representatives improperly promote off-label uses). Importantly, it also includes safe harbors that may shield the remuneration paid by manufacturers.

Regulatory safe harbors impact promotional efforts

In assessing the legality of pharmaceutical programs directed at the health care industry, savvy compliance personnel recognize that the financial incentives for manufacturers to promote off-label uses are such that there will always be tension in the “grey areas” of drug promotion. Accordingly, compliance personnel should stay abreast of the regulatory safe harbors which are, essentially, pronouncements that establish which promotional practices are acceptable.

Among other things, the safe harbors shield certain remuneration applicable to group purchasing organizations, discounts, personal services, management contracts, and a litany of other activities pertinent to the health care industry.5 Even particular arrangements that do not fall within a safe harbor are not, in and of themselves, illegal; rather, they will be subject to greater government scrutiny.

Creating compliance assets

When approaching off-label issues and implementing compliance programs, several over-arching themes should be developed, including:

  • enacting a compliance program, business code of conduct, and standard operating procedures;
  • appointing a compliance officer and a compliance committee;
  • imposing mandatory training;
  • reviewing and overseeing conference presentations and the circulation of journal articles;
  • enforcing compliance accountability via performance evaluations;
  • establishing an internal disclosure program.

In the health care industry, particular focus should be paid to:

  • preventing unearned compensation to pharmacists;
  • ensuring that fair market value is paid for all drugs;
  • avoiding situations where over-filled drug vials or “free” quantities are nevertheless billed to Medicare at full value;
  • scrutinizing the methods for coding drug reimbursement; and
  • ensuring that the exchange of off-label information is undertaken only for medical or scientific reasons.

Compliance officials should also pay special attention to social media which, by its very nature, encourages dialogue outside of normal channels. It also presents additional challenges for monitoring personnel, as well as the interaction with the public. Although the Food and Drug Administration (FDA) was intent on adopting guidelines,6 6 it has yet to act to finalize any, leaving companies to guess the proper compliance approach for social media.

The next step is to seek out information and immediately deal with adverse results. In some respects, this should involve the use of audits to discover compliance issues, which also signals to staff that someone is watching (e.g., auditing contracts to ensure fair market value has been paid or that volume discounts are not masquerading as “trials”).

Audits, however, are not the only method to create a dynamic and responsive compliance system. There should be a process in place to implement—and test—the compliance plan to ensure its continuing viability. This is not an audit but, perhaps, it can be viewed as an audit of the compliance program itself, rather than the underlying substantive activities. Also, it is just as important to manage the “compliance assets” by choosing the appropriate systems to tackle priorities.

Simply put, consider auditing the auditors. Finally, all good compliance programs anticipate new issues. To the extent you can, plan ahead.

This article first appeared in HCCA's Compliance Today and is reprinted here with permission.

  1. 31 U.S.C. §§ 3729 to 3733.
  2. 42 U.S.C. §§ 1320a-7b.
  3. Friedman v. Sebelius, Docket No. 11-5028 (D.C. Cir.). Oral argument of the defendants’ appeal was conducted on December 6, 2011, but an opinion had not yet been issued when this article went to press.
  4. 68 Fed. Reg. 23731 (May 5, 2003).
  5. See 42 C.F.R. § 1001.952.
  6. 74 Fed. Reg. 48083 (September 21, 2009).