Life Science Compliance Update November 2016

Life Science Compliance
Update
Contact: www.lifescicompliance.com
U.S. EDITION
Volume 2.11 | November 2016
Thomas Sullivan . . . . . . . . . . . . . . . . . . . . . . . . . Publisher
Seth Whitelaw, JD, LLM, SJD . . . . . . . . . . . . . . . . Editor
Cheryl Landis,
LANDIS DESIGN STUDIO . . . . . . . . . . Graphic Design
Value Based Contracts
and Government
Pricing
A Cross Functional View
By Chris Cobourn, Managing Director and
Clay Willis, Director Huron Life Sciences1
Abstract: Value Based Contracts are becoming increasingly important and
commonplace. VBCs also have important implications for Government Pricing
programs. Therefore, life sciences companies need to take a coordinated and
collaborative approach towards compliance that involves multiple stakeholders
to evaluate the agreements and the potential impact on Government Pricing.
Value Based Contracts (“VBCs”) are the talk of the town these days.
But for all of the talk there is little substantive information or guidance
to help the pharmaceutical manufacturer understand the landscape
of VBCs. This includes the potential impact and risks related to
Government Program (“GP”) reporting requirements.
It is one thing to evaluate the value to patients, as well as the potential
business value of these arrangements; it is another to understand
the implications on GP, especially on a price sensitive value such as
Medicaid Best Price (“BP”). Given the importance of GP Compliance,
and the dramatic impact that these arrangements could have on
government pricing, it is critical that manufacturers develop an
appropriate process across the organization to thoroughly vet these
INSIDE
1 The authors of this article are consultants with Huron Life Sciences, which serves the
continuum of life sciences organizations to deliver unique solutions that bridge the process
of scientific discovery and sustainable business model creation with strategies that reduce
the risks associated with regulatory and government scrutiny. Views expressed in this article
are that of the authors and not necessarily those of Huron Consulting Group, or its clients,
and should not be interpreted as legal advice. If you have questions about sValue Based
Contracts or any other considerations, please feel free to contact Chris Coburn at 207-841-1353
or ccobourn@huronconsultinggroup.com.
FEATURE
• Value Based Contracts and . . . . . . . . . . . . 1
Government Pricing - A Cross
Functional View
ENFORCEMENT
• SEC Provides Explicit Whistleblower . . . 6
Guidance – Hunting Season
Is Now Open
• Examining the FY2015 Report . . . . . . . . . . 8
on Medicaid Fraud Control Units
• GSK & China - The Latest FCPA . . . . . . . . 11
Settlement Isn’t the End
• Tracking Towards a Banner Year . . . . . 14
for FCPA and FCA Enforcement
COMPLIANCE OPERATIONS
• Retaliation, Pre-taliation, and . . . . . . 17
Whistleblower Hotlines: How
Compliance Officers Can Fight the
Biggest Challenge They Face
• The Dilemma of Co-Pay Charities . . . 20
and Patient Access to Medication
FDA
• Are We Seeing the End of OPDP? . . . . 23
BRIEFLY NOTEWORTHY . . . . . . . . . 26
Feature Article

Life Science Compliance Update U.S. Edition
Contents 2
arrangements and understand the net impact across
commercial and government programs. It requires a
coordinated and collaborative process across functions at
the manufacturer, across compliance, GP, market access,
legal, finance, and regulatory.
The focus in on this article is the potential impact on
government pricing, and how VBCs can impact statutory
pricing under Medicaid (with additional impacts on the
340B drug pricing as well as Medicare Part B Average
Sales Price (“ASP”)). A few areas we will touch upon
include:
1. What is a value based contract?
2. Why the momentum now, and where is it
trending?
3. What is the potential gp impact?
4. How should a pharmaceutical manufacturer
approach evaluating these arrangements?
5. What operational considerations should a
pharmaceutical manufacturer evaluate?
The VBC Landscape: An Overview of
VBC and Industry Trending
Value Based Contracts can generally be described as
arrangements where the end price or reimbursement of
pharmaceutical products is based upon some performance
criteria or outcome.
However, despite that commonly accepted viewpoint,
there is no single definition for VBC. For example, the
Biotechnology Innovation Organization (“BIO”)—a trade
association representing innovative biopharmaceutical
developers, goes a step further, describing several
minimum standards for Value Based Agreements,
including that the arrangement must:
1. Be patient centered and support better outcomes
for the patient,
2. Measure value using validated, meaningful metrics
and data, and
3. Encouragethecontinueddevelopmentofinnovative
new medicine and advancements in “beyond the
pill” innovations that further improve patient care
(e.g., Medicare adherence programs).2
Broadly speaking, the industry has been at the forefront
of exploring the potential barriers to, and the promise of,
VBC. For example, Eli Lilly & Company, a BIO member,
announced a collaboration with Anthem, one the five
largest U.S. insurers, earlier this year with a focus on
promoting VBC arrangements.
The two Indiana-based companies noted that “[w]hile
there has been substantial innovation in how health plans
and the government reimburse for hospital and physician
payments…payment for prescription drugs is often
based on more traditional outcomes. Given the role that
prescription drugs play in the treatment of and spending
for many complex and chronic conditions, health plans
and manufacturers seek greater opportunity to align
payment with quality, accountability, and coordination.
Ultimately, these arrangements can encourage access to
high-value medicines and treatments and ensure that
patients are getting the best value for their healthcare
dollars.”3
Alongside industry and payer interest, the prominence of
this issue in current national discussions on healthcare
is driven by the reality that new and higher hurdles have
evolved in the demonstration of the “value” of new
products. Furthermore, Real World Evidence (“RWE”)
has been cited as a major factor in recent decisions by
retailers/PBMs related to reimbursement status and level
and product utilization decisions. VBCs can be this direct
mechanism linking reimbursement with impact to the
patient.
In fact, industry trends suggest that that VBC’s are
gaining critical momentum and are even approaching
a tipping point. We, currently, are seeing this traction
across both commercial and government payers.
For example, CMS has set an objective of 50% Medicare
payments in value-based purchasing categories by the
end of 2018. While CMS does not explicitly consider cost
in coverage decisions, cost has been cited as a reason for
Medicare to open a national coverage analysis.
2 Biotechnology Innovation Organization (BIO), 2016 (May ), Comments
Re: Medicare Program; Part B Drug Payment Model [CMS-1670-P],
available at: https://www.bio.org/letters-testimony-comments/bio-
submits-comments-re-medicare-program-part-b-drug-payment-model-
cms (last accessed October 13, 2016).
3 Lilly, Anthem, 2016 (January 29), Promoting Value-Based Contracting
Arrangements, available at: https://lillypad.lilly.com/WP/wp-content/
uploads/LillyAnthemWP2.pdf (last accessed October 13, 2016).

Life Science Compliance Update U.S. Edition Volume 2.11 | November 2016
Contents 3
This industry momentum puts the manufacturer in an
interesting position of trying to get ahead of the curve
on VBCs to evaluate these evolving agreements in terms
of impact on the business, compliance considerations,
including the potential GP Impact.
The Potential GP Impact –
Applying Current Guidance
Statutory pricing under government programs, such as
Medicaid Average Manufacturer Price (“AMP”) and BP are
based upon commercial relationships.4
Manufacturers are
required to evaluate contracting and commercial activity
and from it calculate the various price points that set the
government price or reimbursement under that particular
program. CMS provides guidance to help manufacturers
develop methodologies for performing the calculations,
such as inclusion or exclusion of various customer types
(Class of Trade), transaction types, or types of payments
(price incentives or excluded Bona Fide Service Fees).
Current guidance does not provide much direction on
how to evaluate complex VBCs relative to Medicaid AMP
and BP. So, although public policy seems to be pushing
value based evaluations, CMS has not provided guidance
on how to treat these agreements in the calculations.
• On March 8, 2016, the Centers for Medicare &
Medicaid Services (CMS) released the proposed Part
B Drug Payment Model rule which plans to test a new
Medicare Part B payment model for
reimbursement of ASP products.
– The objective of the proposed rule
is to test whether an alternative
payment structure and/or use
of value-based purchasing tools
can reduce Medicare spend
and improve quality of care to
Medicare beneficiaries.
• On July 14, 2016, CMS issued
Manufacturer Release #99 (State
Release # 176) which provided
minimal guidance on value based
purchasing (VBP) arrangements.
– The release indicated that manufacturers should
refer and adhere to existing regulations when
determining which transactions are eligible for
BP, which is not new guidance.
– The guidance did, however, encourage
manufacturers to consider VBP arrangements with
state Medicaid agencies.
– Encouraged any manufacturer that has these
arrangements to submit any issues or questions to
the CMS Division of Pharmacy at RxDRUGPolicy@
cms.hhs.gov.
So where does this leave us?
Current guidance directs us to apply current guidance.
This means taking established guidance related to areas
such as Bundling, Stacking Lagged Pricing Concessions,
and Free Goods, and applying them to these complex
arrangements.
Is it a like a Bundle?
And where does that get us?
In the 2007 AMP Final Rule, CMS established a definition
and approach around “bundles.”5
Bundles can generally
be understood as where there are some criteria that
Pharmaceu)cal prices have been the focus of intense public scru)ny in the past 18
months, and the public wants manufacturers to prove the value of their innova)ons and
jus)fy the corresponding prices
Since 2012, three prominent provider organiza)ons put forth recommenda)ons &
tools to address the high cost of oncology drugs: the Mayo Clinic, the American
Society of Clinical Oncology, and Memorial Sloan KeHering Cancer Center.
In market condi)ons where access is an increasingly important basis of compe))on,
innova)ve payer contrac)ng approaches are cri)cal points of diﬀeren)a)on.
Policymakers con)nue to advocate for value-based pricing mechanisms (ACA
enablement: CMMI, BPCI, MSSP, VBPM; CMS proposed Part B payment model; CMS
Commissioner comments
4 See C. Cobourn, What You Don’t Know About AMP Can Hurt You - Part
1 - In the Beginning, 2.7 Life Science Compliance Update 14 (Jul. 2016).
5 See Medicaid Program; Covered Outpatient Drugs, 81 Fed. Reg. 5169
(Feb 1, 2016) at https://www.federalregister.gov/d/2016-01274/p-249.

Contents 4
impacts net pricing of a drug, such as a price on one drug
being dependent upon pricing and or market or volume
criteria on another drug, such as volume, market share,
or performance over time.
Applying current guidance to VBCs generally can mean
that some of these arrangements may have to be treated
as a bundle. We call a bundle that has performance
criteria over some elapsed time period to be a “temporal
bundle.” This means that there can be an initial price,
but some price adjustment based upon criteria over time,
such as volume or market share. This requires a complex
approach to developing an allocation of the net pricing
over time, and allocating price adjustments across the
time period of the performance criteria.
VBCs, with some performance criteria over time, can
be viewed as a temporal bundle. This guidance directs
manufacturers as to how to evaluate them and implement
pricing methodologies.
So what does this mean to Medicaid
Statutory Pricing?
Manufacturers calculate and report AMP on a monthly
and quarterly basis, and BP on a quarterly basis. Pricing
is due 30 days after the end of a given period. If VBCs are
considered a Temporal Bundle, it will require adjustment
of historically reported pricing data. This will potentially
impact the Medicaid rebate paid to the states, as well as
the Public Health Service (“PHS”) price. This presents
both compliance and operational challenges to ensure
that the manufacturer is properly evaluating the bundle
and incorporating it in to their methodologies, as well as
performing ongoing true-ups and adjustments.
BP is based upon what is “earned” in each quarter. Since
the net pricing is not normally known by 30 days after the
end of a period, manufactures have to have some method
of estimating the BP, and then “truing it up” at some
point once all payments and adjustments are realized,
often up to 3 years after a quarter.
BP is a key component in the calculation of the Unit
Rebate Amount (“URA”), or the amount per paid to
the state on a quarterly basis for Medicaid Utilization.
Adjustments to BP after the fact can change the Medicaid
URA calculation, requiring prior period adjustments to the
states for historical rebates paid. The URA also directly
impacts the 340B price,6
so an historical adjustment can
also require credits back to Covered Entities based upon
an adjusted price.
So, if a VBC is considered a bundle, manufacturers have
to develop methodologies and operational procedures
to perform initial reporting, as well as BP True-Ups,
including
1. Determine an approach to the initial BP estimate,
due 30 days after a particular quarter
2. Determine a time frame for a reasonable BP true up
(i.e. 1 year)
3. Determine a BP True-Up allocation methodology
(which would occur each quarter for a previous
quarter)
4. Determine reasonable assumptions by VBC
agreement for situations that fall outside current
BP guidance (i.e. outside the 3 year CMS window to
restate BP, non-unit based prices and/or discounts,
etc.)
5. After each True-Up
a. Report and adjusted BP based upon the results
of the VBC agreement
b. Evaluate the impact on the Medicaid URA for the
historical period, and if there is an additional
Medicaid liability due to the states
c. Evaluate the impact on the historical PHS price,
and whether refunds are due to 340B Covered
Entities based upon the updated pricing
d. Evaluate reasonable assumptions and document
any necessary updates based upon the result of
the VBC agreement
6 The Veterans Health Care Act of 1992 enacted section 340B of the
Public Health Service Act (“PHS Act”), which created the “Limitation of
Prices of Drugs Purchased by Covered Entities.” Section 340B provides
that a manufacturer who sells covered outpatient drugs to certain
eligible entities agrees to charge a price for covered outpatient drugs
that will not exceed that determined under a statutory formula (also
referred to as the ceiling price, and calculated at Medicaid AMP minus
the Medicaid URA). 340B covered entities are Disproportionate Share
Hospitals, Federal Grantee Clinics, and other safety net entities.

Contents 5
Below is an example of typical BP process and how it
could be impacted by VBAs as a Temporal Bundle:
our monthly and quarterly GP calculations? VBCs have a
different feel than normal agreements. This could stem
from the fact that they are new, so many unknowns, or
overall concerns. From a GP calculation perspective,
we need to be prepared so we can operationalize these
arrangements and determine how to manage these
moving forward. This includes what this will mean
for manufacturers systems, data, and processes. We
recommend:
• Engaging with IT to assess what technology platforms
or partnerships are needed to support VBC from a data
collection and analytics standpoint.
• If your current IT infrastructure is insufficient, the
time is now to consider platform investments or novel
partnerships.
• Assess available data to actually determine utilization,
efficacy, and outcomes and will the data be auditable
and reliable.
• Begin dialogue with relevant GP system vendors to
assess capabilities for VBC agreements.
• Assess impact this will have on current monthly and
quarterly processes for GP calculations across all
government programs.
• Assess what document assumption document will need
to be created or updated to address a VBC agreement.
Where Does This Leave Us?
Although there are compliance, legal, operational, and
GP hurdles to overcome before VBC agreements become
commonplace, current trends indication this is the
direction the industry is headed. Whether a manufacturer
Evaluating Value Based Contracts
Across the Organization
Given the potential complex compliance, legal, and
GP risks, these agreements should be vetted through a
process across the business value, the compliances risks,
and the potential impact on Government Pricing and
government programs. Participation in these programs
cannot just be evaluated based upon perceived business
value, as the compliance and GP risks can be far reaching,
and hard to understand without the appropriate analysis.
We recommend a cross functional approach, where
appropriate functions are involved up front in the
evaluation, to conduct the appropriate analysis and price
modeling, so that an appropriate decision can be made
upon a known ROI and analysis of value and risks prior
to arrangement become effective. Functions involved can
include compliance, GP, market access,
legal, finance, and regulatory.
A proposed approach to the evaluation
of these agreements is outlined to the
right.
Operational Impact
Considerations
From the GP perspective, can we hear
about VBCs and quickly direct our
attention to the operational impact,
how would we incorporate them in to

Contents
6
has already signed a VBC agreement, there have been
a few, or has only just begun to consider them, there
are numerous action steps or consideration that can be
pursued today:
• Understand how likely your company is to engage in
these types of arrangements (may not be within your
control… you need to be prepared).
• Don’t wait for regulatory policy to catch up; partner
with your contracting, market access, legal, finance,
and GP colleagues, understand current contractual
arrangements and VBC ambitions, and define the
critical regulatory scenarios and sign posts needed
to make VBC a reality.
• Define regulatory sign post events needed to pave
the way for VBC at your organization, and build
relationships with the appropriate stakeholders.
• Ensure that your company’s GP team is involved
at the beginning of the process, and that they have
the information they need to model the potential
agreement and educate the organization of the
potential impacts.
• Monitor government program regulations to see if
VBC arrangements are addressed.
• Ensure informed decisions are made to maximize
access and revenue and avoid unanticipated impacts
on government program.
SEC Provides Explicit
Whistleblower Guidance
– Hunting Season
Is Now Open
By Robert N. Wilkey, Esq.,
Staff Writer for Life Science Compliance Update
Abstract: The SEC’s Office of the Whistleblower recently
announced that its whistleblower awards have now exceeded
over $100 million including the approximately $500 million
regarding financial remedies in the form of SEC fines, forfeiture,
and other penalties. The Program established by Congress to
incentivize whistleblowers with specific, timely and credible
information about federal securities laws violations to report to
the SEC, continues to be a very integral part of the SEC’s overall
enforcement and compliance plan.
Compliance officers have long talked about the “threat”
whistleblowers pose to companies, especially as
whistleblowers started coming forward in the hopes of big
payouts. However, in August, the Securities and Exchange
Commission (“SEC”) revealed just how lucrative it has
been for whistleblowers.7
Since 2011, with the help of
whistleblowers, the SEC has awarded over $100 million
to recover more than $500 million.8
As part of its August announcement, the SEC’s Office
of Whistleblower reaffirmed the agency’s regulatory
position that any “assistance and information from
a whistleblower who knows of possible securities law
violations can be among the most powerful weapons
in the law enforcement arsenal of the SEC.”9
The SEC
continues to realize the integral role that whistleblowers
play in identifying possible fraud, SEC violations, and
providing other information which allows the SEC to
“minimize the harm to investors, better preserve the
integrity of the United States’ capital markets, and more
swiftly hold accountable those responsible for unlawful
conduct.”10
Background of the SEC’s Whistleblower
Enforcement Program
Congress mandated that the SEC establish a Whistleblower
Enforcement Program (“The Program”) in 2011. The
Program had the explicit policy goal of incentivizing
whistleblowers with specific, timely and credible
information about federal securities laws violations to
report to the SEC.11
Andrew Ceresney, Director of the SEC
Division of Enforcement, has described that the “ultimate
goal of our whistleblower program is to deter securities
violations.”12
It also significantly expands the SEC’s
ability to gather information about potential infractions.
7 See U.S. Securities and Exchange Commission, Office of the
Whistleblower, Press Release, Whistleblower Awards Top $100
Million, (Aug 30 2016) available at https://www.sec.gov/news/
pressrelease/2016-173.html
8 Id.
Whistleblower, Welcome to the Office of the Whistleblower, October
2016, available at https://www.sec.gov/whistleblower/
10 Id.
Million, (Aug 30 2016) available at https://www.sec.gov/news/
12 Id.

Contents 7
The SEC paid its first award in 2012, just over a year
after its Office of the Whistleblower was established.
Since then, the Office has received more than 14,000
whistleblower tips from individuals in all 50 states and
the District of Columbia and 95 foreign countries.13
Some
states, however, rank more highly regarding tips. For
example, states with a high proportion of tips include
California (2,046), Texas (740), Florida (892), and New
York (950).14
As tips from whistleblowers have increased by 30% from
2012 to present, so too have the awards. In 2016, the
Agency, so far, has received nearly 4,000 tips resulting
in six of the SEC’s top-ten awards.15
Despite the size of
the awards to whistleblowers, overall whistleblowers take
only 20 cents of every dollar recovered, making it a very
efficient tool.
How Does the SEC Whistleblower
Enforcement Program Work?
According to the SEC, whistleblowers may be eligible for
an award when they voluntarily provide the SEC with
unique and useful information that leads to a successful
enforcement action. Also, the monetary sanctions
imposed need to exceed $1 million. If both conditions
are satisfied the whistleblower awards can range from 10
percent to 30 percent of the money collected.16
The SEC is openly, actively and transparently marketing
its Program to prospective whistleblowers, and it openly
discloses the claims, review, and investigation process
as part of this marketing campaign.17
The SEC summary
of its Whistleblower Enforcement Program is depicted
in the figure.
The Whistleblower Enforcement Program typically
commences with the voluntary submission of tips and
information to the SEC by a qualified whistleblower.18
Under the Securities and Exchange Act, a qualified
whistleblower is “a person who voluntarily provides us
with original information about a possible violation of
the federal securities laws that has occurred, is ongoing,
or is about to occur.”19
The SEC clearly states that one
or more people are allowed to act as a whistleblower,
but companies or organizations cannot qualify.
Whistleblowers also do not need to be employees of the
company to submit information about that company.20
As with False Claims Act whistleblowers, the SEC defines
“original information” as information derived from an
individual’s knowledge of facts known by that individual
and not information derived from a publicly available
source.21
In other words, the original information is
likely to be an independent analysis (i.e. evaluation of
information that may be publicly available but which
reveals information that is not generally known) that is
unknown to the SEC.22
In short, whistleblowers cannot
“piggyback” off of the work of others.
To be viable, the information provided by a whistleblower
must be provided “voluntarily,” which includes
information provided to the SEC directly from the
whistleblower, another regulatory agency, or law
enforcement authority.23
Finally, as noted previously,
to qualify for a whistleblower award, it “must lead to a
successful SEC action resulting in an order of monetary
sanctions exceeding $1 million.”24
13 Id.
14 Id.
15 Id.
16 Id.
Whistleblower, Frequently Asked Questions (FAQ), available at https://
www.sec.gov/about/offices/owb/owb-faq.shtml
18 Id.
19 Id.
20 Id.
21 Id.
22 Id.
23 See Section 21F of the Securities Exchange Act of 1934 (“Exchange Act”)
(15 U.S.C. § 78u-6) (“Rule 21F-4(a)”).

Contents 8
The SEC requires that the whistleblower initiates the
process by submitting information either through
the SEC’s online Tips, Complaints and Referrals
Questionnaire or by completing the SEC’s hardcopy
Form-TCR (“Form TCR”) and mailing or faxing it to the
SEC Office of the Whistleblower.25
The SEC notes that
such tips or information can be submitted anonymously,
where an attorney has been retained and submitted
such forms on behalf of the whistleblower.26
Once a
tip or information is submitted, the SEC conducts a
rigorous claims analysis and investigation.27
If the SEC
determines the claim to be viable, the Commission
will proceed to seek an order of penalties.28
If the SEC
determines that there is justification to issue fines,
penalties, and sanctions exceeding $1 Million, it will
publicly announce the situation by way of a Notice of
Covered Action,29
which “will allow anyone who believes
they may be eligible will have an opportunity to apply for
a whistleblower award.”30
The SEC highlights that there are a number of factors in
determining the amount of an award based on the unique
facts and circumstances of each case and that the SEC has
the discretion to increase the award percentage based on
the existence of these factors:
• The significance of the information provided to the
success of any proceeding brought against wrongdoers.
• The extent of the assistance provided in the SEC
investigation and any successful proceeding.
• The law enforcement interest in deterring violations of
the securities laws by making awards to whistleblowers
providing information that leads to the successful
enforcement of these laws.
• The extent to which, the whistleblower participated
in the company’s internal compliance systems, legal
or compliance procedures before, or at the same time,
reported to the SEC.31
Additionally, the SEC notes they have the discretion to
reduce an amount of an award based on some factors
including if the whistleblower was a participant or
culpable in the securities laws being reported as violated
or the whistleblower interfered with a company’s internal
compliance and reporting systems.32
In other words, “bad
actors” cannot reap the rewards of being a whistleblower.
25 Id.
26 Id.
27 Id; see also SEC: What happens to whistleblower tips? FCPA Blog,
available at http://www.fcpablog.com/blog/2016/6/22/sec-what-
happens-to-whistleblower-tips.html
28 Id.
Whistleblower, Claim an Award, https://www.sec.gov/about/offices/
owb/owb-awards.shtml
30 Id.
(15 U.S.C. § 78u-6) (“Rule 21F-6”).
What’s the Takeaway?
Whistleblowing has become a lucrative endeavor thanks
in large measure to the SEC’s ongoing marketing efforts.
From the SEC’s point of view, the fact that awards have
topped the $100 million mark highlights that the role
of whistleblowers remains a very integral part of the
Commission’s overall compliance and enforcement
strategy. From the manufacturer’s viewpoint, while
whistleblowers remain a “threat,” the SEC’s transparency
about its whistleblower processes and procedures is
helpful in understanding how and why these cases are
brought. It also is an example of excellent compliance
marketing.
Examining the FY2015
Report on Medicaid
Fraud Control Units
By Kaitlin Fallon Wildoner, Esq.,
Senior Staff Writer, Life Science Compliance Update
Abstract: Medicaid Fraud Control Units play an important, if
often overlooked, role in the Government’s continuing effort
to control program, fraud and abuse. The recently released
FY 2015 report sheds light on the work of the Units as well as
confirms trends seen by other enforcement agencies.
Life science compliance officers are accustomed to
reviewing the OIG’s annual work plans and statistics
for insights on how to improve company compliance
programs. However, the work of the state Medicaid Fraud
Control Units (“MFCU”) has mostly gone unnoticed. With

Contents 9
the recent trend to more local regulatory intervention,
we thought it was important to take a look at the MFCUs’
activities.
Background
The Social Security Act (“SSA”) requires each state to
operate an MFCU to investigate and prosecute Medicaid
provider fraud, as well as patient abuse or neglect in
health care facilities and board and care facilities. States
are not required to operate a MFCU if the Secretary of
Health and Human Services (“HHS”) determines that (1)
operation of a unit would not be viable because minimal
Medicaid fraud exists in a particular State and (2) the
State has other adequate safeguards to protect Medicaid
beneficiaries from abuse or neglect. Forty-nine states and
the District of Columbia have MFCUs.33
Each Unit is required to employ an interdisciplinary staff
that consists of at least an investigator, an auditor, and
an attorney.34
The unit staff works to review referrals of
potential fraud and patient abuse or neglect to determine
the potential for criminal prosecution and civil action.
Referral sources can include the public, the State
Medicaid Agency, and other Federal and State Agencies.
Once the MFCU has the referral, they do an intake,
investigate, and determine whether to take any further
action.35
Outcomes of a MFCU referral can include:
convictions, criminal recoveries, civil settlements, civil
recoveries, exclusions, program recommendations, and
overpayment recoveries.36
MFCU Funding
Each MFCU is funded jointly by State and Federal
governments. Federal funding is provided as part of the
Federal Medicaid appropriation, but is administered
by the Office of Inspector General (“OIG”). Each Unit
receives Federal financial assistance equivalent to 75%
of its total expenditures, while State funds contribute
the remaining 25% of expenditures. In Fiscal Year
(“FY”) 2015, 2015 expenditures for the Units totaled
approximately $251 million.37
Administration and Oversight
The United States HHS OIG is the federal agency
designated with responsibility for overseeing State
MFCUs. To receive federal reimbursement from the OIG,
each Unit is required to submit an initial application to
OIG for approval and be recertified each year after that.
During the recertification process, OIG evaluates MFCU
compliance with Federal requirements (found in the
SSA, regulations, and policy guidance) and adherence to
performance standards (published by OIG, and address
topics such as staffing, maintaining adequate referrals,
and cooperation with Federal authorities).38
OIG can also perform onsite reviews of the Units,
evaluating compliance with laws, regulations, and
policies, as well as adherence to performance standards.
OIG makes observations about best practices, provides
recommendations to the Units, and monitors the
implementation of the recommendations.39
OIG also provides oversight on the collection and
dissemination of performance data, training, and
technical assistance. The OIG website has pertinent
information for each MFCU, including an interactive map
with statistical data.40
The FY2015 Annual Report
In September 2016, the HHS OIG released its annual
report on MFCUs.41
The report compiles data on
investigations and prosecutions by the 50 MFCUs across
the United States. The HHS OIG based the information
on its analysis of data from three sources: (1) annual
statistical reports submitted for FY 2015; (2) quarterly
statistical reports for FYs 2011 through 2014; and (3)
onsite review reports published in FYs 2011 through
2015.42
MFCUs recovered a total of $744 million in criminal
and civil fines in FY 2015, which was down significantly
from the $1.5 billion to $2.6 billion range over the
previous four years. The OIG attributes this decrease
33 See HHS OIG, Medicaid Fraud Control Units Fiscal Year 2015 Annual
Report, at https://oig.hhs.gov/oei/reports/oei-07-16-00050.pdf
34 Id.
35 Id.
36 Id.
37 Id.
39 Id.
40 See HHS OIG, Medicaid Fraud Control Units – MFCUs, available at
https://oig.hhs.gov/fraud/medicaid-fraud-control-units-mfcu/
Report: Summary, at https://oig.hhs.gov/oei/reports/oei-07-16-00050.
asp

Contents 10
to “a national trend of declining civil health care fraud
complaint settlements, especially those involving large
pharmaceutical companies.”
Convictions
As noted above, in FY 2015, MFCU reported 1,553
convictions, nearly thirty-three percent of which involved
personal care services attendants or other home health
care aides. Another eleven percent (166 convictions)
were of licensed nurses, physician assistants, or nurse
practitioners. These convictions involved abuse or
neglect, provision of services without a license, and
services not rendered, among other charges. The number
of convictions has increased over the past five years, from
1,235 in FY 2011 to FY 2015’s 1,553. During that same
period, civil settlements and judgments decreased from
908 in FY 2011 to 731 in FY 2015.
MFCU reported the highest number of convictions in
the last five years, and OIG exclusions resulting from
Unit conviction referrals have grown since 2011. Civil
settlements and judgments have decreased modestly over
the previous five years, and civil recovery amounts have
decreased significantly. Many Units also made operational
improvements in response to OIG recommendations.
Fraud cases accounted for almost three-fourths (71%)
of all convictions. There were also 731 civil settlements
and judgments in FY 2015, including 297 involving
pharmaceutical manufacturers and fifty-four involving
pharmacies.
Pharmaceutical Manufacturers
Of the 731 civil settlements and judgments reported,
thirty-eight percent (279) involved pharmaceutical
manufacturers, making it the provider type that
accounted for the greatest percentage of settlements and
judgments. Most of the settlements for pharmaceutical
manufacturers were related to the marketing of drugs,
while an additional fifty-four settlements and judgments
involved retail and wholesale pharmacies. For example,
in one such settlement, a pharmacy automatically refilled
prescriptions that were not requested by the patients or
caregivers, requiring a payment to the State of more than
$1.5 million in restitution for the overpayments.
Individual State Recoveries
Out of the $744 million in recoveries reported, the Texas
Unit reported over a quarter of the total recoveries ($210
million), while expending only seven percent of the
total expenditures. More specifically, Texas accounted
for twenty-eight percent of total Unit recoveries and
fifty-nine percent of all Unit criminal recoveries. While

Contents 11
Not long after GlaxoSmithKline plc (“GSK”) settled with
the U.S. Department of Justice (“DOJ”) for three billion
dollars, the Company found itself in serious trouble in
China.43
The allegations were that GSK had developed
schemes spanning a period of years involving the transfer
of money, gifts, and other items of value to health care
professionals.44
According to the SEC, as well as the
Chinese authorities, this led to GSK receiving millions of
dollars in increased product sales to China’s state health
institutions.45
Now in the latest chapter, GSK and the United States
Securities and Exchange Commission (“SEC”) have come
to a $20 million agreement to settle charges that GSK
violated the Foreign Corrupt Practices Act (“FCPA”)
when its China-based subsidiaries engaged in a pay-to-
prescribe scheme to increase sales.46
an impressive number, the Texas Unit had several large,
multiple defendant cases that all came to fruition during
FY 2015, resulting in an unusually large number of
enormous restitution amounts being reported.
New York, Tennessee, California, Florida, and Wisconsin
accounted for fifty percent of the civil recoveries,
combined, reporting $196 million of the $394 million in
civil recoveries.
OIG Recommendations
The OIG makes recommendations to individual units for
improvements – between FY 2011 and FY 2015, the OIG
published 32 onsite review reports. In those reports, the
most common recommendations were in response to a
lack of case file documentation of supervisory reviews
and approvals, late or no required report of convictions
to OIG and the National Practitioner Data Bank (NPDB),
deficiencies in Units’ MOU with State Medicaid program
integrity units, and Unit policies and procedures.
Each of the thirty-two Units reviewed received at least
one recommendation related to those areas, for a total
of sixty-five recommendations, sixty-two of which were
implemented by MFCUs.
Despite the OIG recommendations, the MFCUs have
proven to be a valuable tool in the Government’s
efforts to reduce fraud and abuse. At the same time, the
decreasing trend in convictions and settlements mirrors
statistics from the other major enforcement agencies.
However, as the MFCU report illustrates, this is not the
time for complacency.
GSK & China -
The Latest FCPA
Settlement Isn’t the End
By Kaitlin Fallon Wildoner, Esq.
Abstract: GlaxoSmithKline(“GSK”) reached a settlement with
the Chinese government in 2014 related to bribes and improper
actions taken by company officials. Recently, GSK reached an
agreement with the United States Securities and Exchange
Commission for allegations that GSK violated the FCPA. While
the SEC settlement is nowhere near the value of the 2014
Chinese settlement, they are both worth taking a look at.
43 See, e.g., Eric Palmer, GSK China scandal resolved with $500M fine
and suspended jail sentence, FIERCEPHARMA (September 19, 2014)
available at http://www.fiercepharma.com/pharma/gsk-china-
scandal-resolved-500m-fine-and-suspended-jail-sentence
44 See SEC, GlaxoSmithKline Pays $20 Million Penalty to Settle FCPA
Violations, (File No. 3-17606) at https://www.sec.gov/litigation/
admin/2016/34-79005-s.pdf
45 Id.
46 Id.
47 Id.
2012: $3
billion
se/lement
with the DOJ
2014: $489
million ﬁne
from China
2016: $20
million
se/lement
with SEC
GSK Settlements Through the Years
The participants included individual complicit sales
and marketing managers within GSK’s China-based
subsidiaries. According to the SEC, “GSK failed to
devise and maintain a sufficient system of internal
accounting controls and lacked an effective anti-
corruption compliance program to detect and prevent
these schemes.”47
The costs were recorded in official
books and records as legitimate expenses, such as
medical association sponsorship, employee expenses,
conferences, speaker fees, and marketing costs. As such,
the improper payments were not accurately reflected in
GSK’s books and records.

Contents 12
The SEC’s Order finds that GSK violated the FCPA’s
internal controls and books-and-records provisions.
Not surprisingly, GSK consented to the order without
admitting or denying the findings and agreed to pay a
$20 million civil penalty. GSK also agreed to provide
status reports to the SEC for the next two years on its
remediation and implementation of enhanced anti-
corruption compliance measures.48
The GSK case is just the latest in China’s efforts to
crack down on the fraud and corruption that is rampant
throughout the country. For example, in August 2013,
a closed door meeting was held between several United
States multinational companies and an official from the
PRC’s National Development and Reform Commission.49
According to sources who attended the meeting, an
NDRC official allegedly pressured foreign companies’
in-house lawyers to confess to violations and warned
them against retaining counsel to defend against
government investigations. Since that meeting, at least
sixty pharmaceutical companies have been targeted by
the NDRC as part of an ongoing probe into pricing and
cost-calculation issues in the industry.50
2014 China Settlement
This settlement follows on a 2014 court decision in
Changsha, China fining GSK $489 million for bribery. The
Chinese authorities accused GSK of paying $488 million
in bribes to health officials and doctors to boost sales.51
China’s Ministry of Public Security claimed in 2013 that
GSK had funneled up to 3 billion yuan to travel agencies
to facilitate bribes to doctors and officials, using 700
travel agents to deliver the illegal payments since 2007.
According to documents reviewed by the Wall Street
Journal, GSK employees often treated physicians and
others to trips, with all expenses paid.52
GSK was also
accused of bribing government officials, hospitals, and
doctors to sell more drugs, at higher prices.53
GSK’s former head of China operations, who supposedly
endorsed the program, Mark Reilly, was given a three-
year prison sentence. That sentence was suspended, and
Reilly deported. Other China nationals working as GSK
executives were sentenced to between two and four years
in jail; light sentences in PRC terms.54
After the sentencing, GSK apologized and said it remained
committed to China. “GSK plc fully accepts the facts
and evidence of the investigation and the verdict of
the Chinese judicial authorities. Furthermore, GSK plc
sincerely apologizes to the Chinese patients, doctors,
and hospitals, and to the Chinese Government and the
Chinese people.”55
2016 SEC Settlement
According to the SEC, the improper practices were
pervasive among GSK China sales and marketing
representatives and condoned by both regional and
district managers. Between 2010 and mid-2013, GSK
China spent nearly $225 million on planning and travel
services.
Roughly forty-four percent of sampled invoices were
inflated, and about twelve percent of sampled invoices
were for events that didn’t occur. Of the estimated
$17 million in speaker fees spent by GSK China in
2012, $2 million was paid to people whose health care
qualifications could not be verified.
According to GSK, the SEC settlement took into account
changes GSK has made over the past few years to its
commercial practices.56
The changes include the way
GSK’s sales representatives are compensated, stopping
“payments to healthcare practitioners to speak to other
prescribers about the company’s products,” and further
disclosure of payments to healthcare practitioners for
providing services or participating in clinical research.
48 Id.
49 See John Tan and Christine Lu, China Life Sciences Regulatory
Crackdown: September 10 Update, ReedSmith (September 2013) at
https://m.reedsmith.com/files/Publication/307ce2a7-6c70-4377-ab82-
66ed8f268319/Presentation/PublicationAttachment/df2edc56-59f7-
4e0c-862e-b12249802b1a/alert13244.pdf
50 Id.
51 See Eric Palmer, GSK China scandal resolved with $500M fine and
suspended jail sentence, FIERCEPHARMA (September 19, 2014)
52 See Hester Plumridge and Laurie Burkitt, GlaxoSmithKline Found
Guilty of Bribery in China (September 19, 2014) available at http://
www.wsj.com/articles/glaxosmithkline-found-guilty-of-bribery-in-
china-1411114817
53 Id.
54 See Eric Palmer, GSK China scandal resolved with $500M fine and
suspended jail sentence, FIERCEPHARMA (September 19, 2014)
55 Id.
56 See Richard L. Cassin, GSK pays SEC $20 million to settle China FCPA
violations, FCPA BLOG (September 30, 2016) available at http://www.
fcpablog.com/blog/2016/9/30/gsk-pays-sec-20-million-to-settle-china-
fcpa-violations.html

Contents 13
Many of these changes were implemented first in the U.S,
and it is not clear if they are worldwide practices.
The settlement documents have been released and
look eerily similar to what one might expect from the
Corporate Integrity Agreement (“CIA”), which GSK
currently is subject to. The Order includes remedial
efforts and undertakings that GSK has agreed to,
including: reporting to the Commission staff periodically
the status of its remediation and implementation of
compliance measures; certifying compliance with
undertakings of periodic reviews and reports, including
proprietary, financial, confidential, and competitive
business information; and completing at least two follow-
up reviews, incorporating any comments provided by the
Commission staff in the previous report.57
GSK notes that it “remains strongly committed to these
changes and to operating its commercial activities in a
responsible, ethical, and professional manner consistent
with the company’s values.”58
International Climate Differences
It is interesting to note that the $20 million United States
SEC settlement is paltry compared to the $489 billion
settlement from two years prior in China. However, it
is consistent with other recent SEC FCPA settlements
involving life sciences companies (see table).
While much notice surrounded the Chinese decision, the
U.S. settlement was announced with little fanfare.
However, the SEC settlement does not completely resolve
the China situation for GSK. The United Kingdom’s
Serious Fraud Office (“SFO”), which is responsible
for enforcing the U.K.’s anti-bribery provisions, is
still conducting their “criminal investigation into the
commercial practices of GlaxoSmithKline PLC and its
subsidiaries.”60
The investigation was opened in May
2014 and, like many other investigations and eventual
settlements, relies heavily on whistleblowers. Given that
GSK is a U.K.-based company, it is a very real possibility
that its home country may be the harshest punisher yet.
Also, China tends to do much of its work behind closed
doors, and it has been predicted that the crackdowns
will continue as part of a way to help Chinese companies
better compete, and for the government to extract price
cuts from foreign companies. According to two antitrust
lawyers who spoke with the New York Times, cases
against companies have been hurried by the courts,
giving companies little time to prepare.61
Therefore,
should additional evidence be uncovered by the SFO,
China conceivably could seek to reopen the case.
Conclusion
The 2014 settlement underlines, and this most recent
case confirms, the dangers for multinationals as they
do business in a country where corruption has been
widespread and where the legal and regulatory system
has shown a greater willingness to prosecute foreign
companies. Takeaways from the recent settlement should
once again include having staff understand the local
culture, understand the local laws, and have a compliance
program in effect that takes those local factors into
account and combines them with the “home state”
approach.
57 See Order Instituting Cease-and-Desist Proceedings, available at
https://www.sec.gov/litigation/admin/2016/34-79005.pdf
58 Id.
59 See SEC, SEC Enforcement Actions: FCPA Cases, available at https://
www.sec.gov/spotlight/fcpa/fcpa-cases.shtml
60 See UK SFO, GlaxoSmithKline, PLC, at https://www.sfo.gov.uk/cases/
glaxosmithkline-plc/
61 See Keith Bradsher and Chris Buckley, China Fines GlaxoSmithKline
Nearly $500 Million in Bribery Case, NEW YORK TIMES, (September 19,
2014) at http://www.nytimes.com/2014/09/20/business/international/
gsk-china-fines.html
Company
Settlement
Amount
GlaxoSmithKline $20 million
Anheuser-Busch InBev $6 million
AstraZeneca $5 million
LAN Airlines $22 million
Novartis AG $25 million
Bristol-Myers Squibb $14 million
Alcoa
$384 million
(included parallel
criminal case)
Recent SEC FCPA Settlements59

Contents 14
62 See Michael Volkov (2016). Headlines from Mid-Year FCPA Enforcement
Review, JD Supra Business Advisor, available at http://www.jdsupra.
com/legalnews/headlinesfrommidyearfcpa23415/
63 Id.
65 See U.S. Securities and Exchange Commission (“SEC”), FCPA Cases,
list of the SEC’s FCPA enforcement actions listed by calendar year,
available at https://www.sec.gov/spotlight/fcpa/fcpa-cases.shtml
67 See U.S. Securities and Exchange Commission, Press Release,
VimpelCom to Pay $795 Million in Global Settlement for
FCPA Violations, available at http://www.sec.gov/news/
68 Id.
69 Id.
actions will exceed all prior years through 2011 (except
2010, which had a total of 72 enforcement actions).”64
The corporate life sciences defendants in 2016 represent a
cross-section of the industry and include, among others:
• GlaxoSmithKline,
• Nu Skin Enterprises,
• AstraZeneca,
• Novartis-AG,
• Nordion, Inc., and
• SciClone Pharmaceuticals.65
The most notable FCPA case is 2016 does not involve life
sciences, but telecommunications. In a case involving
the Dutch firm, VimpelCom, where the DOJ obtained the
largest criminal fine in FCPA history.66
The VimpelCom Case
On February 18, 2016, the SEC, along with the DOJ and
Dutch regulators, announced a global settlement that
required telecommunications provider VimpelCom Ltd.
to pay more than $795 million.67
The company agreed
to the settlement to resolve violations of the FCPA
stemming from its efforts to win business in Uzbekistan.68
Additionally, VimpelCom entered into a deferred
prosecution agreement with the DOJ in connection
with a criminal information charging the company with
conspiracy to violate the FCPA’s anti-bribery and books
and records provisions, and a separate count of violating
the FCPA’s internal controls provisions.69
Finally, the
Tracking Towards a
Banner Year for FCPA
and FCA Enforcement
By Robert N. Wilkey, Esq.,
Staff Writer for Life Science Compliance Update
Abstract: There are some strong indicators to suggest that
2016 is on track to be a real banner year regarding Foreign
Corrupt Practices Act (“FCPA”) enforcement and qui tam actions.
One of the most notable indicators is that FCPA enforcement
for 2016 is on track to exceed actions for 2015. Additionally,
newly unsealed qui tam cases show the FCPA focus on health
care and hi-tech companies and the enforcement actions
involving other countries, in particular, China is growing. This
year is also an introduction to the DOJ’s pilot program for self-
disclosure, corporate transparency, and continued support for
whistleblower rewards.
Although all the data is not in yet, based on what we can
see so far, in comparison to FY 2015, FY 2016 is on track
to exceed the previous year’s Foreign Corrupt Practices
Act (“FCPA”) and False Claims (FAC) enforcement
levels. This is particularly true when qui tam cases and
whistleblower awards are factored in.
FCPA Enforcement
So far in 2016, the U.S. Securities and Exchange
Commission (“SEC”) has brought actions involving
a total of 16 separate FCPA enforcement actions (13
corporations and three individuals).62
During the same
period, the U.S. Department of Justice (“DOJ”) in 2016
has brought a total of 10 enforcement actions with six
involving corporations and four involving individuals.63
According to Michael Volkov, “if the pace of enforcement
continues, the total number of [overall] enforcement
Target of Action SEC DOJ
Corporations 13 6
Individuals 3 4
FY 2016 FCPA Enforcement Actions

Contents 15
settlement requires VimpelCom to pay $167.5 million
to the SEC, $230.1 million to the DOJ and $397.5 million
to Dutch regulators, as a well as a requirement that
company must retain an independent corporate monitor
for at least three years.70
The SEC alleged that “VimpelCom offered and paid bribes
to an Uzbek government official related to the President
of Uzbekistan as the company entered the Uzbek
telecommunications market and sought government-
issued licenses, frequencies, channels, and number
blocks.”71
The SEC describes that at least $114 million in
illegal payments that were funneled through an entity
affiliated with the Uzbek official, and approximately a
half-million dollars in bribes were disguised as charitable
donations made to charities directly affiliated with the
Uzbek official.72
While this case does not involve a life science company,
nevertheless, it is instructive for three reasons. First,
it is a strong illustration of how the SEC, DOJ, and
foreign governments are working together to address
international bribery. Second, it shows how extensive
liability can be under the FCPA. Finally, given how
the bribery allegedly transpired, it serves as a reminder
to compliance officers to pay close attention both to
charitable donations as well as entities connected to
healthcare practitioners such as independent research
foundations.
Going Global
One of the most significant FCPA trends in 2016, has
been the growing number of foreign countries, in
particular, China involved in such actions.73
This trend
has highlighted the “International cooperation among
regulators” and “extraordinary efforts of the SEC,
Department of Justice, and law enforcement partners
around the globe to jointly pursue those who break the
law to win business.”74
This was especially true in the
VimpelCom case discussed above.
The number of FCPA enforcement actions in China “is
increasing as an overall percentage of countries involved
in FCPA enforcement. Before this year, almost one-third
of FCPA enforcement actions involved China, and this
year the number is closing in on 50 percent.”75
Some
speculate that this is because China “poses unique and
significant risks for healthcare and hi-tech companies
70 Id.
71 Id.
72 Id.
VimpelCom to Pay $795 Million in Global Settlement for
FCPA Violations, available at http://www.sec.gov/news/
75 Id.
76 Id.
Million, August 30, 2016, available at https://www.sec.gov/news/
78 See Robert N. Wilkey, Esq. “SEC Provides Explicit Whistleblower
Guidance – Hunting Season is Now Open” Life Science Compliance
Update, November 2016.
80 See Mintz Levin (2016). Mintz Levin Health Care Qui Tam
Update -Recently Unsealed Whistleblower Cases, August
2016, available at http://www.jdsupra.com/legalnews/
mintzlevinhealthcarequitamupdate12245/
in particular [where] both industries depend on local
distributors who are often involved in bribery schemes
using gifts, hospitality, and travel to confer benefits on
critical foreign officials.” 76
On August 30, 2016, the SEC’s Office of Whistleblower in
publicly announced that its Whistleblower Enforcement
Program (“Program”) had exceeded over $100 million
in awards.77
As outlined in our companion article in
this issue, the announcement by the SEC highlights
the agencies continued support of its whistleblower
program as a means to further its FCPA enforcement
goals.78
Additionally, unlike prior years, the DOJ has
implemented its pilot program seeking to further self-
disclosure, corporate transparency, and continued
support for whistleblower rewards.79
FCA Enforcement –
Examining the Qui Tam Health Care Cases
In evaluating some now unsealed qui tam cases whistle-
blower cases, some significant trends are evident. First,
of the 31 newly unsealed qui tam cases, 28 were filed
before 2015.
Of those 28, three unsealed complaints date back to 2010,
and of the remaining complaints, four were filed in 2012,
eight in 2013, 12 in 2014 and three in 2015.80
The statis-
tics corroborate what we have seen in other contexts;
that after an enforcement spike around 2014, enforce-

Contents 16
ment actions in the
healthcare space are
declining for reasons
that are unclear.81
Second, the cases
iden-tified were filed
in federal district
courts in 18 states,
including multiple
cases in California (3),
New York (4), Florida
(4), Kentucky (2),
Massachusetts (2),
O h i o ( 2 ) , a n d
Pennsylvania (3),
which may evidence
geographic locations where there is a prevalence of
both technology, pharmaceutical, and health care based
industries.82
Third, the Federal authorities intervene in very few cases.
According to these statistics, the authorities decline
approximately three cases for every one accepted (23 vs.
eight where n=31).83
Finally, these 31 cases provide a glimpse into the nature
and characteristics of the types of cases being pursued
by whistleblowers in the healthcare arena. For example,
15 of the recently unsealed cases involve both state
and federal claims. While nine cases alleged unlawful
kickbacks, five involve allegations of Stark Law violations
indicating that the anti-self-referral provisions continued
in Stark continue are a continuing problem. Finally,
while nearly two-thirds of the unsealed cases (20 of 31)
involved current or former employees of the defendant,
six cases (approximately 20%) included claims for relief
under state or federal anti-whistleblower retaliation
provisions.84
Also, some of the unsealed cases reveal additional
insights on the breadth FCA claims can take. For example,
United States ex rel. Florida Society of Anesthesiologists
v. Choudhry et al., No.8:13-cv-02603 (M.D. Fla. Oct. 9,
2013) (unsealed on March 24, 2016) involving alleged
federal and state FCA provisions, represents the first time
that a medical society has filed a qui tam action against
physicians and their related entities, showing “that qui
tam relators can come from any part of the health care
landscape.”85
United States of America ex rel. Henson v. Midwest Family
Practice, PLC, and Dr. Hussein Awada, C.A. No. 2:13-
cv-14579 (E.D. Mich.) (unsealed on March 18, 2016),
involved alleged false claims because certain services
were not provided at all or that physician services and
diagnostic tests, as well as prescriptions for controlled
substances were not medically necessary is significant
“because the FCA allegations rely on the alleged lack of
medical necessity for certain prescriptions, services, and
tests [consistent with the] ongoing stream of cases based
on the purported lack of medical necessity.86
Finally, United States of America ex rel. Duncan v. Nexus
Lab, Inc., Nexus Lab, LLC, PremierTox 2.0, Inc. et al.,
Case No. 1:14-cv-00089 (W.D. Kent.) (unsealed March
9, 2016), a combine FCA and anti-kickback statute case,
is significant because the relator alleged a “worthless
service” theory given the inconsistency and unreliability
of the oral specimen results. Many circuits, including the
Sixth Circuit, accept and have addressed the worthless
services theory.87
Conclusion
In terms of overall FCPA and FCA enforcement impact,
2016 is poised to be a historical year by all regulatory
accounts, not only in the sheer number of FCPA
enforcement actions that are now projected to exceed
2015, but where there is strong evidence to strongly
suggest that FCA enforcement continues at a substantial,
although less rapid, pace. However, the significance of
the newly unsealed qui tam actions illustrates the breadth
that FCA claims have taken on.
81 While the cause for the enforcement decline is unclear, one theory
is that recent Government losses in off-label cases have put a
dampening effect on whether to pursue potentially marginal off-label
cases.
82 See Mintz Levin infra.
83 Id.
84 Id.
85 Id.
86 Id.
87 See e.g. Chesbrough v. VPA, P.C., 655 F.3d 461, 468 (6th Cir. 2011)
(holding that “a test known to be of no medical value would constitute
a claim for ‘worthless services,’ because the test is so deficient that for
all practical purposes it is the equivalent of no performance at all”).
4
812
3
Qui Tam Complaints
2012 2013 2014 2015

Contents 17
Retaliation, Pre-taliation,
and Whistleblower
Hotlines:
How Compliance Officers Can Fight the
Biggest Challenge They Face
By Matt Kelly, Editor & CEO at Radical Compliance88
Abstract: Handling whistleblowers is one of the biggest
challenges facing most compliance officers. Furthermore, recent
actions taken by the SEC are de facto policy pronouncements
expanding the range of whistleblower risks compliance officers
face. This article will review the three primary concerns that
compliance officers have about whistleblowers: how to stop
retaliation; how to avoid pre-taliation; and how to design
whistleblower hotlines.
If any single concept has risen to the front of regulatory
enforcement lately, it’s this: protect the freedom of
whistleblowers to raise the alarm about misconduct.
Certainly, we’ve seen that in the United States, where
the Securities and Exchange Commission (“SEC”) has
given one example after another of how much it wants
to protect and reward whistleblowers. Since the SEC
established its Office of the Whistleblower in 2011,
the agency has awarded more than $100 million to
whistleblowers whose tips led to successful enforcement
actions.89
Two of the largest awards (for $22 million and
$17 million) were doled out this summer alone.
For compliance officers, however, the real news is in
the enforcement actions the SEC has taken about
whistleblowers—actions that are de facto policy
pronouncements, that every company should take
seriously.
For example, we’ve seen the SEC move against so-called
“pre-taliation clauses,” where companies try to prohibit
employees from disclosing confidential information
to regulators. We’ve seen large fines imposed for
retaliation against whistleblowers. We’ve seen rewards
go to whistleblowers because they can no longer find
jobs in their industry after speaking out—which means,
in a practical sense, that companies are being fined for
retaliatory activity whistleblowers might receive from
other businesses.
And all that activity is in the United States alone. Other
countries are stepping up their whistleblower protections
as well, even if those protections aren’t as extensive as
what we see in the U.S. France is about to adopt a new anti-
corruption law that requires whistleblower protections.
Canada and the United Kingdom have already done so.
The ISO 37001 standard for anti-corruption compliance
programs requires whistleblower protections.90
This article will review the three primary concerns that
compliance officers have about whistleblowers: how to
stop retaliation; how to avoid pre-taliation; and how to
design whistleblower hotlines—one of the most important
tools in the chief compliance officer’s toolbox—so they
give you the best, most useful information possible.
Retaliation
Policing against whistleblower retaliation is probably
the most frustrating challenge compliance officers have.
The SEC and other government agencies (the Labor
Department chief among them) talk about the need to
protect whistleblowers all the time. Anti-retaliation
themes are all over the compliance training materials
that corporations use.
And yet, complaints about retaliation happen all the time.
Yes, some of those complaints are fabricated, so an
unhappy employee has more bargaining power with the
company; and some are misunderstandings of legitimate
actions an employee perceives as retaliation. But plenty
of complaints are legitimate.91
For better or worse,
compliance officers must build a program that entertains
them all.
88 Matt Kelly is the founder of Radical Compliance, which provides
consulting and commentary on corporate compliance, audit,
governance, and risk management. Radical Compliance also serves at
the personal blog for Mr. Kelly, the long-time (and now former) editor
of Compliance Week.
Million, (Aug 30, 2016) available at https://www.sec.gov/news/
pressrelease/2016-173.html.
90 See ISO 37001, Anti-bribery management systems -- Requirements
with guidance for use (2016) available at http://www.iso.org/iso/
catalogue_detail?csnumber=65034.
91 NAVEX Global 2016 Ethics & Compliance Benchmark Report at http://
www.navexglobal.com/en-us/resources/benchmarking-reports/
navex-globals-2016-ethics-compliance-hotline-benchmark-report
Substantiation rates for calls to companies’ whistleblower hotlines
rose from 30 percent in 2010 to 41 percent in 2015, an all-time high.

Contents 18
We should start by remembering a simple fact: ultimately
retaliation is an action, which one person takes against
another. Somebody within the company must decide to
retaliate against the complaining employee and then
actually do so. To design an effective anti-retaliation
program, compliance officers need to take that basic truth
and ask a basic question: what preventive and detective
controls can we put in place for this problem?
Compliance officers will face a blizzard of advice trying to
answer that question. Much of it will be good—and much
of it also won’t apply to your specific business. An early-
stage biotech firm has different anti-retaliation needs
than a major pharmaceutical company; a healthcare
provider fields different complaints than a healthcare
payer. The compliance program that works best for your
business is something you will need to find yourself.
We can, however, identify a few basic processes that all
compliance programs must execute well if they want an
anti-retaliation effort that’s effective.
First, remember that an investigations process must be
clear and communicative, more than it needs to be fast.
Above all, employees raising retaliation complaints
want to feel that they’ve been heard. They want a sense
of justice from an organization that’s larger and more
powerful than they are as individuals. People define
justice in many ways, but they do not define it as arbitrary.
Justice implies that a framework for adjudicating disputes,
and that implies that people who are asking for justice
already have a sense of what outcomes might happen.
All that translates into some specific investigation
protocols you should have. For example, do all retaliation
complaints get an immediate response, even if the
response is simply, “We heard you and will follow up
soon”? Do you have pre-existing policies to see whether
any immediate steps are necessary, such as re-assigning
a co-worker or supervisor away from a complainant?
Do you have a schedule of follow-up responses to the
complainant, so the person knows the case has not been
shelved? Do you have a case management system that
will allow people to raise concerns about additional
retaliation, and those new concerns are tied back to the
original complaint?
That systematic outreach back to whistleblowers is all
the more important because today’s complaints take, on
average, more time to resolve.92
Whistleblowers also have
more temptation to go directly to regulatory agencies
that might offer rewards, because more agencies now do
offer rewards. Whistleblowers need to feel that they have
been heard and that the compliance program handling
their complaint is taking them seriously.
Beyond investigation protocols, senior leaders have
a duty as well, to fight any corporate culture (or sub-
culture) that lets employees believe retaliation is
possible. To borrow a term from COSO and its framework
for internal controls, you need to ensure that your control
environment addresses a retaliation culture successfully.
Three of COSO’s principles for an effective control
environment are especially relevant to retaliation:
• Demonstrate commitment to integrity and ethical
values;
• Demonstrate commitment to a competent workforce;
• Hold people accountable.
As you consider anti-retaliation training, and communi-
cations from senior leadership about how retaliation will
be handled, keep these principles in mind. How can dis-
cipline against retaliators be discussed, to demonstrate
your company’s commitment to ethics? How can you
tie compensation to ethical conduct, in some way that
encourages mid-level managers to stamp out retaliation?
Ultimately, retaliation complaints suggest flaws in
your corporate culture. That means you will need to
strengthen your culture to fight it. Some of that will be
“soft tools,” such as the tone from senior leaders. Some
will be “hard tools,” such as clear investigation protocols
and policies. And brace yourself—fighting this battle will
never be easy.
Pre-taliation
Pre-taliation is a fundamentally different problem. Where
retaliation is an action that one person takes against
another, pre-taliation is a condition that a company
creates.
92 See NAVEX Global 2016 Ethics & Compliance Benchmark Report at
http://www.navexglobal.com/en-us/resources/benchmarking-reports/
navex-globals-2016-ethics-compliance-hotline-benchmark-report.
Median case closure time has increased from 32 days in 2011 to 46
days in 2015.

Contents 19
Thankfully, that difference also means that your concern
about pre-taliation—and given SEC and Justice
Department enforcement actions lately, that concern is
well-founded—all boils down to a simple question.
Do your employment contracts impede people from
reporting misconduct?
That’s it. If the answer is “yes” then you have a problem
that needs to be fixed. And as we’ve seen in several recent
cases, if you don’t fix the problem, regulators will fix it
for you.
One example is BlueLinx Corp., a distributor of building
products based in Atlanta with about 1,700 employees.
The SEC fined BlueLinx $265,000 in August for language
in its employee severance contracts that violated the
spirit of Section 21F of the Exchange Act.93
That rule that
says nobody can impede someone from communicating
with the SEC about possible violations of federal
securities law.94
What contract language landed BlueLinx in such hot
water? According to the SEC complaint, the separation
clauses said: “Employee has not and in the future
will not use or disclose to any third party confidential
information, unless compelled by law and after notice
to BlueLinx.”
“Compelled” is the crucial word. An employee could not
approach the SEC (or any other regulator) on his or her
initiative to raise alarms about possible misconduct. You
could only speak after a court order allowed you to do
so, which by definition means that someone else had to
disclose the misconduct first and bring it to the court’s
attention.
By 2013, BlueLinx tried to circumvent Section 21F by
amending its contract language to confirm that, yes, an
employee could volunteer confidential information to
regulators “if applicable law requires that employees be
permitted to do so”—but any employee who takes that
route waives the right to collect any whistleblower reward
the employee might get for offering the tip.
Tying severance pay to silence clauses can impede
someone’s ability to report misconduct. Asking someone
to waive whistleblower rewards can impede that person’s
ability to report misconduct. People need money to
survive. If a company threatens to withhold money
because an employee wants to tell regulators of possible
misconduct, that’s an impediment. If a company offers
extra money so an employee will not speak to regulators—
that’s the same outcome, constructed in a different way.
It’s an impediment.
We have a related example from AB InBev, which paid $6
million in fines in September to settle Foreign Corrupt
Practices Act charges.95
In that case, part of AB InBev’s
misconduct was to forge a separation agreement with an
employee in its India subsidiary who had already begun
raising concerns to the SEC. The agreement called for the
employee not to disclose confidential information, under
threat of a $250,000 penalty he would need to pay.
Again, the company sought to impede a whistleblower’s
ability to disclose misconduct. That is the very definition
of pre-taliation.
In these instances, compliance officers need to take
a more nuts-and-bolts approach, reviewing company
policies and agreements to see whether they contain pre-
taliation clauses. It isn’t a matter of corporate culture;
it’s a matter of contract management. That means the
compliance officer needs clear authority to work with
the HR and legal department to review contracts, and
ideally, the enterprise should have a standard process
for employment contracts so individual managers can’t
introduce their own pre-taliation clauses.
Hotlines
Whistleblower hotlines are the indispensable tool for
compliance officers looking to root out misconduct,
and specifically retaliation. The question is how to put
real insight into “calls to the hotline” so that metric
is actually useful, rather than just something easy to
quantify and present to the board. Veteran compliance
Company Paying Penalty for Violating Key Whistleblower
Protection Rule (Aug 10, 2016) at https://www.sec.gov/news/
(15 U.S.C. § 78u-6) (“Rule 21F-6”).
95 See U.S. Securities and Exchange Commission, Press Release, SEC
Charges Anheuser-Busch InBev With Violating FCPA and Whistleblower
Protection Laws (Sep 28 2016) at https://www.sec.gov/news/

Contents 20
officers know the conundrum: plenty of calls to your
whistleblower hotline is not necessarily a bad thing; it
can indicate a strong speak-up culture, which is what you
want. Conversely, no calls to your hotline might suggest
the (really bad) possibility that employees are terrified to
report misconduct.
To get to useful indicators of effectiveness, you need
information about the reports themselves. Foremost,
track hotline complaints that are specifically about
retaliation: the number of retaliation complaints you
get in absolute terms, the percentage relative to total
complaints, the year over year change, the number of
managers against whom retaliation complaints are filed,
and so forth.
Metrics about retaliation get you closer to answering the
question, “How is our culture? Does it respect ethics &
compliance?” That is a question worth chief compliance
officers’ time—because if your firm ever does run into
regulatory trouble, questions about its corporate culture
will be in the regulators’ agenda.
On a practical level, the challenge is to ensure that
your compliance program can actually track metrics
like the ones mentioned above. Maybe your hotline
doesn’t collect data at that granular a level, and it can’t
be reported to you. Maybe your hotline does, but your
HR department does not. Maybe both do, but you lack a
control to be sure the same bad manager isn’t counted
twice because an employee complained via two channels.
So even when you do have a solid grasp of the hotline
metrics you want, you still have lots of homework on
policies and procedures to ensure you collect that data
smartly.
Conclusion
Whistleblower and anti-retaliation risks are a multi-
headed challenge to compliance officers. They require a
mix of clear controls and policies, and cultural messaging.
No single solution will work for any organization. That
said, the SEC is clear in what it wants from compliance
programs regarding whistleblowers: clear, unimpeded
ability for those persons to raise concerns about
misconduct. That goal won’t be easy to achieve—but at
least it’s simple and clear.
The Dilemma of Co-Pay
Charities and Patient
Access to Medication
By Lenna M. Babigian, M.H.S.,
Paralegal, LCSU Staff Writer
Abstract: Increasingly creative methods are being used by big
pharma to increase sales. Drug manufacturers are donating
billions of dollars to not-for-profit organizations that fund
co-pay assistance programs for patients. Pharmaceutical
company profits are through the roof, and these not-for-profit
organizations are growing at incredible rates. Even though
patients are receiving much-needed financial help, there is an
abundance of legal and ethical concerns.
Google the topic of “Co-Pay Charities” and the search
engine returns information that could not be farther
apart. The first result is a revealing article about the real
reasons behind the assistance that big pharma is providing
to patients, Medicare patients in particular.96
The second
result is a guide for Medicare patients that provides
information on how to access that same support and
financial assistance for prescription medications. This is
an apt snapshot of the breadth of issues and questions
that surround the increasing presence of co-pay charities
that provide financial assistance to particular groups of
health care consumers, and pharmaceutical companies.
The cost of big pharma name brand medication is
rising at unprecedented rates.97
At the same time,
pharmaceutical companies are donating large sums of
money to not-for-profit organizations that support those
who have the illnesses that the drugs treat. While this
is certainly an admirable, altruistic gesture, Joel Hay, a
professor at the University of Southern California and
founding chairperson of the University’s Department of
Pharmaceutical Economics and Policy, contends “[d]rug
companies aren’t contributing hundreds of millions of
dollars for altruistic reasons.”98
96 Benjamin Elgin, Robert Langreth. How Big Pharma Uses Charity
Programs to Cover for Drug Price Hikes, BLOOMBERG (May 19, 2016)
at http://bloomberg.com/news/articles/2016-05-19/the-real-reason-
big-pharma-wants-to-help-pay-for-your-prescription,.
97 Id.
98 Id.

Contents 21
As the cost of pharmaceuticals continues to rise so
too does the amount of money those companies are
donating to various not-for-profit organizations. With
the Government’s increasing emphasis on anti-kickback
violations, these donations raise the concern that the
charities are being used as inappropriate proxies.
A Bit of Back Story
The challenge to afford the escalating prices of
prescription medications is not a new one. In April of
2009, a brief article was published on POZ, a website for
anyone living with or affected by AIDS and HIV.99
Under
the heading of “Treatment News,” POZ published an
article on whether big pharma is stifling AIDS research.100
The authors reported that doctors and advocates, the
very people who they felt “should” have been standing
up for HIV patient rights, were becoming dependent
on pharmaceutical funding. Therefore, those who were
once innovators and watchdogs were thought no longer
to be objective. The dependence provided an inherent
inhibition for physicians and others who presumably had
patients’ best interests at heart to advocate for better
treatments due to the influence of the pharmaceutical
companies.101
It is a contention that is at the center of
the Physician Payments Sunshine Act or Open Payments.
Likewise, prescription-assistance coupon programs have
been in existence for many years now, giving discounted
or free medicine to patients. Chris Lillis, MD, an internal
medicine physician practicing in Fredericksburg, Virginia,
highlighted this in 2011 noting drug manufacturers
send their sales representatives out to offer coupons for
their new medications to physicians for distribution to
patients.102
According to Dr. Lillis, free samples of an
expensive new medication along with coupons that cover
a patient’s co-pay can override the need to prescribe the
generic alternative preferred by the insurance company.103
The coupons do have a downside (at least for the
pharmaceutical companies), public insurance, Medicare
Part D and Medical Assistance (Medicaid), do not accept
coupons, thus creating a gap in the drug market. Also
as we have seen recently, the OIG is extremely skeptical
about coupons and co-pay reimbursements.104
The Next Generation of Assistance
Charitable organizations seem to be the next generation
of assistance. Pharmaceutical companies have begun
donating millions of dollars to patient-assistance
charitable organizations, or co-pay charities. These
organizations provide support to government-funded
Medicare drug programs. Patients who meet the income
guidelines qualify for aid with their out-of-pocket drug
costs.105
There are 7 top non-profit patient assistance
charities. Each of these has more than doubled in size
between 2010 and 2014.106
99 Treatment News, Is Big Pharma Stifling AIDS Research?, POZ.
COM (Apr. 14, 2009) at https://www.poz.com/article/hiv-activism-
barr-16457-3989.
100 Id
101 Id
102 Chris Lillis, MD, The Tragic Irony of Pharmaceutical Coupons,
KEVINMD.COM (Jun. 24, 2011) at www.kevinmd.com/blog/2011/06/
tragic-irony-pharmaceutical-coupons.html.
103 Ibid.
104 See R. Wilkey and S. Whitelaw, Helping the Patient - Co-Pay
Reimbursement Can Be Okay in Certain Circumstances, 2.10 Life
Science Compliance Update 21 (Oct. 2016).
105 See Benjamin Elgin, Robert Langreth. How Big Pharma Uses Charity
Programs to Cover for Drug Price Hikes, Bloomberg (May 19, 2016)
available at http://bloomberg.com/news/articles/2016-05-19/the-
real-reason-big-pharma-wants-to-help-pay-for-your-prescription.
106 See Ben Elgin, Robert Langreth. “Celgene Accused of Using Charities
‘Scheme’ to Gain Billions.” Bloomberg (Aug. 1, 2016) at http://www.
bloomberg.com/news/articles/2016-08-01/celgene-accused-of-using-
charities-in-scheme-to-gain-billions.

Contents 22
Most drugs under Medicare Part D have a large initial
prescription co-pay followed by smaller ongoing costs.
Many Medicare patients are on fixed incomes, and co-
pay charities make a personal difference. For example,
Steve Ashbrook, a retired optician from Cincinnati was
featured in recent a Bloomberg article.107
In 2009, Mr.
Ashbrook was diagnosed with chronic myeloid leukemia.
His doctor prescribed Gleevec, which is manufactured
by Novartis. The dose prescribed cost $6,000 per month.
Mr. Ashbrook’s initial outlay for the medication under
his Medicare Part D plan was over $2,000 followed by
ongoing payments of $300 per month.
However, Mr. Ashbrook lives on a fixed income of $1,600
per month. As the authors reported, Novartis gave
Ashbrook free medicine at first. Mr. Ashbrook’s doctor
referred him to Patient Services, Inc. (PSI), a co-pay
charity, where he qualified for help. PSI covered his
out-of-pocket costs, and Medicare paid the rest.108
For
Mr. Ashbrook and others like him, it does not matter
where the PSI got the money to help him afford his life-
saving medication: “I’d be dead without PSI.”109
Not Without Risk
The recent developments suggest that supporting co-pay
charities is not without legal compliance risk. In fact, it
is the subject of a $40B False Claims Act case in U.S., ex
rel., Brown v. Celgene Corp.110
At issue in Brown, is thalidomide. Thalidomide was used
to treat morning sickness in pregnant women in the 1950s
and 1960s. The drug caused severe birth defects, and
only 50% of the infants survived.111
In the 1990s Celgene
received FDA approval to use thalidomide to treat a
skin disease called erythema nodosum leprosum (ENL).
Beverly Brown, a former sales representative for Celgene,
contends that Celgene received and dismissed numerous
warnings from the FDA regarding the reclassification of
thalidomide.112
Brown also contends that as part of its efforts to market
thalidomide off-label, Celgene set up co-pay funds
for people with specific diseases; specific conditions
for which Celgene Corp. happens to manufacturer
medications.113
She claims, among other things, that
Celgene coordinated with the charities to ensure that
their donations went to patients who used the company’s
medications.114
107 Id.
108 Id.
109 Id.
110 See U.S., ex rel., Brown v. Celgene Corp., Case No. 10-cv-03165 GHK
(C.D. Cal 2016).
111 Whistle Blower News Review, Thalidomide, Really? Again?!
Whistleblower Documents Unsealed – Celgene Corp in Hotseat,
(Aug 30, 2016) at http://www.whistleblowergov.org/healthcare-
and-pharma.php?article=Celgene-Thalidomide-Whistleblower-
Documents-Unsealed_82.
112 See U.S., ex rel., Brown v. Celgene Corp., Case No. 10-cv-03165 GHK
(C.D. Cal 2016).
113 Id.
114 Id.
115 See OIG Advisory Opinion No. 16-67, U.S. Department of Health
and Human Services, Office of Inspector General, June 27, 2016,
available at https://oig.hhs.gov/fraud/docs/advisoryopinions/2016/
AdvOpn16-07.pdf; see also  R. Wilkey and S. Whitelaw, Helping
the Patient - Co-Pay Reimbursement Can Be Okay in Certain
Circumstances, 2.10 Life Science Compliance Update 21 (Oct. 2016).
The Horizon Is Unclear
Patient-assistance charities are growing. Patients win,
charities win, and big pharma wins. The outstanding
question is whether the American taxpayer wins.
One argument would be that more expensive drugs are
being covered thanks to the co-pay programs for patients
with Medicare Part D and Medical Assistance, ultimately
inflating the taxpayers’ bill. On the other hand, patients
need help paying for medications that can and, in many
cases, will save their lives.
Medicare and Medicaid are taxpayer-funded, highly
regulated government programs. Every renewal year
insurance companies “tweak” their plans. Today we have
multiple tiers of deductibles and continuously changing
formularies. What was covered last year may not be this
year. Monthly premiums will likely increase with next
year’s plan. Since the massive shift in the United States to
health care for all, health insurance plans have changed
each year and so have the price tags.
All of this gives rise to the question of whether manufacturer
support for co-pay charities creates anti-kickback or
false claim liability. For that, the recent OIG advisory
opinion on coupons may be instructive.115
Provided that a
manufacturer can show that the risk of abuse is minimal,
it seems likely that the OIG will allow it. Of course, much
of this is dependent on how the Brown case turns out.
For now, compliance officers should monitor this space
carefully and begin examining company marketing pro-

Contents 23
grams that involve support for co-pay charities. Similar
to patient advocacy groups, this review should include an
examination of how much of the foundation’s support is
derived from the company.
The tides are turning, and the awareness that changes
must be made is increasing. What is clear is that for now,
co-pay charities are here to stay. As with other pricing
matters, this is an opportunity for compliance officers to
be proactive.
Are We Seeing the
End of OPDP?
By Kaitlin Fallon Wildoner, Esq.,
Abstract: The FDA OPDP issued enforcement letters have been
on a steep decline since 2010. This article examines the numbers
of OPDP letters issued, they were issued for, and what it may
mean for the compliance industry.
Tom Abrams, FDA’s Director of the Office of Prescription
Drug Promotion (“OPDP”), has long been a featured
speaker at major industry compliance conferences and
meetings. Every year he outlines the efforts of OPDP to
keep the pharmaceutical industry compliant with FDA’s
advertising and promotion rules. However, in conjunction
with recent setbacks with off-label promotion and
commercial free speech litigation, Agency watchers
have noticed a precipitous decline in enforcement letters
issued by OPDP. In fact, for 2016, OPDP has issued only
4 letters, of which 1 is a Warning Letter.116
This is down
from 9 letters in 2015 and an all-time high of 52 in 2010.
While the reason for this decline is not clear, we believe
it could involve the confluence of three factors:
1. A shift of focus by OPDP from enforcement to
developing guidance (e.g., social media and
off-label),
2. Recent off-label litigation setbacks making
off-label enforcement a lesser litigation priority
for DOJ attorneys,117
and
3. Fewer egregious cases.
Others have suggested that the volume submissions and
complexity of the issues could be to blame. OPDP receives
approximately 90,000 pre-launch promotional pieces for
review each year, with a goal of reviewing companies’
core launch materials within forty-five days of receipt.
According to Thomas Abrams, director of OPDP, “We had
been meeting that goal,” but recent submissions to the
agency “have presented more complex issues requiring
a deeper level of review and more consultation with our
colleagues in different offices.”118
0 10 20 30 40 50 60
2009
2010
2011
2012
2013
2014
2015
2016
OPDP Enforcement Le7ers
Enforcement Le7ers Per Year
116 OPDP issues warning letters and untitled
letters to companies for drug marketing that
does not meet the truthful, balanced, and
non-misleading promotional standard. An
untitled letter cites violations that do not meet
the threshold of regulatory significance for
a Warning Letter, according to the Agency’s
Regulatory Procedures Manual. Such letters
are often used for drug promotion violations.
117 See Kelly N. Reeves and Gillian M. Russell, A
Historic Low for Drug Promotion Warning
Letters, LAW 360 (March 17, 2016) at http://
www.law360.com/articles/770500/a-historic-
low-for-drug-promotion-warning-letters
(“Given the current landscape, it would not
be surprising if the FDA were more careful
and deliberate in determining which letters to
issue, as well as requiring multiple layers of
review for each enforcement letter.”).
118 See Dana Elfin, FDA Acknowledges
Decrease in Rx Promotion Violation Letters,
BLOOMBERG BNA (September 29, 2016) at
http://www.bna.com/fda-acknowledges-
decrease-n57982077770/

Contents 24
In any event, despite the reduced number of enforcement
letters and the fact that the letters involved lesser known
companies, we can see that OPDP’s focus remains fairly
consistent year-on-year. For example, in 2015, omission
and/or minimization of risk information was the most
commonly cited violation.119
119 See Michael Mezher, FDA Promotional Enforcement Actions Hit
Record Low in 2015, REGULATORY AFFAIRS PROFESSIONALS SOCIETY
(January 19, 2016) at http://www.raps.org/Regulatory-Focus/
News/2016/01/19/23927/FDA-Promotional-Enforcement-Actions-Hit-
Record-Low-in-2015/
120 See Letter from OPDP to Hospira, (January 14,
2016) at http://www.fda.gov/downloads/Drugs/
GuidanceComplianceRegulatoryInformation/
EnforcementActivitiesbyFDA/
WarningLettersandNoticeofViolationLetterstoPharmaceuticalCompanies/
UCM482464.pdf
121 See Beth Snyder Bulik, FDA slaps Pfizer’s Hospira unit for ‘misleading’
YouTube ad, FIERCEPHARMA (January 21, 2016) at http://www.
fiercepharma.com/pharma/fda-slaps-pfizer-s-hospira-unit-for-
misleading-youtube-ad.
122 Id.
Violation
Number of
Letters
Minimization/Omission of Risk
Information
4
Omission of Material Fact 3
Unsubstantiated Claim/Superiority 3
Lack of Adequate Directions for Use 2
Misleading Claims 2
Promotion of an Investigational New
Drug
1
Inadequate Communication of
Indication
1
2015 Violations Cited in
OPDP Enforcement Letters
Although few, the trends continue with the 2016 letters.
Since they are so few, we will examine the 2016 letters
in detail.
2016 Enforcement Letters
Hospira
OPDP sent an untitled letter dated January 14, 2016, to
Hospira, now owned by Pfizer, alleging that a YouTube
video published by the company “omits risks and material
facts” about its sedative drug, Precedex.120
OPDP also
chastised the company for publishing the promotional
video without first submitting it to OPDP for review.121
OPDP requested Hospira “cease violating the FD&C Act,
as described” and respond to the untitled letter with a
plan for “discontinuing use of such violative materials.”122
According to a Pfizer spokeswoman, while the YouTube
video was taken down in September 2015, it was not
directly accessible before that, as “the Precedex video was
not intended to be viewed outside the Precedex website,
The FDA’s regulations require applicants submit
labeling or advertising pieces to the FDA before
the date of first commercial use:
(3) Other reporting—(i) Advertisements and
promotional labeling. The applicant shall
submit specimens of mailing pieces and
any other labeling or advertising devised
for promotion of the drug product at the
time of initial dissemination of the labeling
and at the time of initial publication of
the advertisement for a prescription drug
product. Mailing pieces and labeling that
are designed to contain samples of a drug
product are required to be complete,
except the sample of the drug product may
be omitted. Each submission is required
to be accompanied by a completed
transmittal Form FDA–2253 (Transmittal of
Advertisements and Promotional Labeling
for Drugs for Human Use) and is required
to include a copy of the product’s current
professional labeling. Form FDA–2253 is
available on the Internet at http:// www.fda.
gov/opacom/morechoices/ fdaforms/cder.
html. See 21 C.F.R. § 314.81(b)(3)(i) (2015).
PRIOR SUBMISSION OF
LABELING & ADVERTISING
TO OPDP IS REQUIRED

Contents 25
which contained the important safety information.”123
In
essence, Pfizer’s response was that no violations occurred
despite OPDP’s contention to the contrary.
Shionogi, Inc.
On March 29, 2016, OPDP sent its only Warning Letter
to Shionogi, Inc., about its co-pay assistance program.
According to OPDP, the drug maker had omitted risk
information about Ulesfia, a head lice treatment.124
Shionogi was allegedly marketing a co-pay assistance
voucher that claimed the drug is the number-one
prescribed branded treatment for head lice. However,
Shionogi failed to provide any risk information about the
formulation of the drug, nor did it provide information on
the products’ limitations or the fact that it was approved
only for certain class of patients.125
In its response, Shionogi countered that it provides links
to sites that published full prescribing information,
including the omitted information raised by OPDP,
focused on. However, OPDP was not persuaded
concluding that “by omitting the risks associated with
Ulesfia, the voucher fails to provide material information
about the consequences that may result from the use of
the drug and creates a misleading impression about the
drug’s safety.”126
Celator Pharmaceuticals, Inc.
On August 25, 2015, OPDP sent an untitled letter toCelator
Pharmaceuticals, Inc., taking issue with a conference
panel for an unapproved cancer treatment.127
According
to OPDP, the panel, displayed at the June 2016 American
Society for Clinical Oncology (ASCO) annual meeting
for Celator’s investigational product CPX-351 Liposome
Injection, “suggests, in a promotional context,” that the
investigational drug is “safe and effective for the purposes
for which it is being investigated or otherwise promotes
the drug.”128
Therefore, Celator’s investigational new
drug, designed to treat acute myeloid leukemia, was
misbranded because drug sponsors are not permitted to
make promotional claims or assert the safety and efficacy
of the investigational drug. OPDP also cited Celator for
using the proprietary name of the investigational drug,
VYXEOS, without clearly identifying its investigational
drug status.129
Reviewing the recent OPDP letter to Celator, Coalition
for Healthcare Communication Executive Director John
Kamp noted, “[t]his letter is a clear warning that FDA
intends to vigorously defend its marketing limits while
a drug approval is pending. The letter is not a surprise
to those who have followed this area closely, and should
be considered a clear warning to all companies with new
drugs pending approval at FDA.”130
It also is a reminder
that the limits of when a company’s discussions about
an investigational drug become unapproved promotion
are often in the eye of the beholder, or in this case OPDP.
DURECT Corp. and Pain Therapeutics Inc.
Finally, rounding out the four 2016 letters, on September
8, 2016, OPDP sent a letter to both DURECT Corporation
and Pain Therapeutics, Inc., regarding Remoxy ER, which
is an investigational opioid drug. According to the letter,
the activity at issue was the fact that the two companies
published website presentations suggesting the drug, “is
safe and effective for the purposes for which it is being
investigated.”131
OPDP, however, pointed out “conclusory
statements regarding safety and effectiveness of a drug,
made while an application for the product is under
review, suggest an effort to shape public impressions
of the drug in the lead-up to its launch, before FDA’s
evaluation of the product is complete and reflected in
approved drug labeling.”132
OPDP went on to note that
statements about Remoxy ER on the DURECT homepage,
such as “long-lasting” and “tamper-resistant,” are
123 Id.
124 See Letter from OPDP to Shionogi, Inc. (March 29, 2016) at
http://www.fda.gov/downloads/Drugs/GuidanceCompliance
RegulatoryInformation/EnforcementActivitiesbyFDA/WarningLetters
andNoticeofViolationLetterstoPharmaceuticalCompanies/
UCM493790.pdf
125 Id.
126 Id.
127 See Letter from OPDP to Celator Pharmaceuticals, Inc. (August 25,
2016) at http://www.cohealthcom.org/wp-content/uploads/2016/09/
CPX-351-Letter.pdf
128 Id.
129 Id.
130 See Coalition for Healthcare Communication, OPDP Sends
Enforcement Letter for Promotion of Investigational Drug (September
8, 2016) at http://www.cohealthcom.org/2016/09/08/opdp-sends-
enforcement-letter-for-promotion-of-investigational-drug/
131 See Letter from OPDP to DURECT Corp. and Pain Therapeutics, Inc.
(September 8, 2016) at http://www.cohealthcom.org/wp-content/
uploads/2016/09/Remoxy-Untitled-Letter.pdf
132 Id.

Contents 26
Briefly Noteworthy
133 Id.
134 See Dana Elfin, FDA Issuing Fewer Rx Promotion Violation Letters,
BLOOMBERG BNA (October 3, 2016) at http://www.bna.com/fda-
issuing-fewer-b57982077877/
135 Id
136 Id.
137 See Dana Elfin, FDA Acknowledges Decrease in Rx Promotion
Violation Letters, BLOOMBERG BNA (September 29, 2016) at http://
www.bna.com/fda-acknowledges-decrease-n57982077770/
138 Id.
139 See Daniel Ghinn, What doctors say about EpiPen pricing,
pharmaphorum (Oct 6, 2016) at http://pharmaphorum.com/views-
and-analysis/doctors-say-epipen-pricing
140 Id.
“phrased as established facts,” which suggest that the
product is “safe and effective with the characteristics
described or otherwise promote the drug.”133
Apparently,
similar language was found on the Pain Therapeutics, Inc.
website. Therefore, the companies were attempting to
promote the drug pre-approval.
Does the Slowdown Signal the End of OPDP?
The short answer is no. As Abrams has repeatedly
stated, Warning Letters and untitled letters are “just
one component of our multifaceted approach to achieve
the objective of having non-misleading, truthful and
balanced promotion.”134
For OPDP, the other components
of the “multifaceted approach” include developing
guidance documents, reviewing draft product labeling,
and reviewing core launch materials.135
Abrams continues to note that OPDP will “work on
issuing guidances on promotional issues,” with the goal
of achieving voluntary compliance, thereby continuing
to lower the amount of enforcement letters sent out.136
The challenge for OPDP is that it takes a long time to
issuance guidance, and some observers are skeptical that
OPDP can ever publish enough timely guidance to meet
Abrams’ goal.
Abrams also routinely advises that companies should
stay in close communication with OPDP about their
submissions, “talk to us about time frames” and “let
your reviewer know that launch materials are coming.”137
He also noted that companies should identify the most
important materials in the submission to the reviewer
so that the agency can work on those first. Finally, it
is imperative that companies ensure their submissions
are complete, as Abrams stated, “what we have seen
sometimes are incomplete submissions including product
claims without references or references that aren’t
annotated.”138
Such unsupported claims clearly hinder
the review process.
Therefore, while OPDP’s enforcement efforts have
clearly diminished over time, there remains a need for
companies and compliance officers to remain vigilant
about advertising and promotional details, or they
just might find themselves on the receiving end of an
increasingly rare OPDP enforcement letter.
Briefly Noteworthy
What HCPs Really Think
It is not often in the compliance world that we truly get
an idea of what healthcare professionals think. However,
in a recent pharmaphorum article, Daniel Ghinn, the CEO
of Creation, examined almost 14,000 social media posts
by healthcare professionals mentioning EpiPen from
August to September 2016.139
The results are depicted
here in this word cloud graphic.
Drilling deeper, Ghinn observed that several themes
emerged. These included:
1. Fury over perceived price gouging,
2. Concern over the impact to patients,
3. Frustration that Mylan executives did not seem to
appreciate the outrage, and
4. A call for tougher laws and penalties to prevent
companies from raising prices so precipitously.
In the end, Ghinn notes that all this activity “points to a
crisis of confidence among healthcare professionals about
the pharmaceutical industry’s motives.”140

Contents 27
141 See William Alderman, No Longer a Mirage: FCPA Compliance and
Cooperation Has Its Benefits, JD SUPRA BUSINESS ADVISOR (Sep. 29,
2016) at http://www.jdsupra.com/legalnews/no-longer-a-mirage-
fcpa-compliance-and-96022/; see also Richard Deutsch, et. al,
DOJ and SEC Find Advance Due Diligence and Robust Compliance
Program Shield Purchasing Company in FCPA-Stained Transaction,
THE NATIONAL LAW REVIEW (Oct. 3, 2016) at http://www.
natlawreview.com/article/doj-and-sec-find-advance-due-diligence-
and-robust-compliance-program-shield.
142 See Nate Raymond, Ex-Insys sales manager arrested in U.S. fentanyl-
kickback case, REUTERS (September 29, 2016) at http://www.reuters.
com/article/us-insys-court-idUSKCN11Z2I4
143 Id.
144 Id.
145 See Nick Paul Taylor, Ex-Puma exec charged with insider trading,
hit with criminal charges, FIERCEBIOTECH (September 30, 2016)
at http://www.fiercebiotech.com/biotech/ex-puma-exec-charged-
insider-trading-hit-criminal-charges
146 Id.
Oh Look, Compliance Programs Are Valuable
For years, compliance professionals struggled to show the
ROI of having an effective compliance program. Now in
the recent case of Harris Corporation comes evidence that
compliance programs are indeed a valuable asset.
During the acquisition of Hunan CareFx Information
Technology (CareFx) by Harris, Harris uncovered
significant FCPA violations including the fact that
CareFx’s chairman and CEO, Jun Ping Zhang had
authorized and facilitated a practice of giving gifts
(between $200,000 and $1 million) to officials at state-
owned hospitals in China that resulted in awarding $9.6
million in contracts to CareFx.141
The gifts were provided
through the use of fake expense reports that were booked
as legitimate expenses. Although Harris faced potentially
significant penalties for the bribes and failing to keep
proper books and records, both the DOJ and SEC refused
to prosecute Harris.
Harris’s robust due diligence program during the
acquisition of CareFx, as well as it is ongoing efforts to
root out corruption apparently carried the day. Added
to the picture was the fact that once discovered, Harris
self-reported the matter and cooperated fully with the
authorities. So it seems at long last, we can show senior
management that good compliance pays dividends.
Yates Individual Accountability Update
The Yates Memo and the DOJ have made explicitly clear
that in an attempt to reduce the amount of kickbacks
and fraud in the healthcare industry, individuals will
be held accountable. We have seen this at work in the
cases of Warner Chilcott and W. Carl Reichel (though
he was found to be not guilty) and continue to see the
DOJ and SEC attempting to work together and prosecute
individuals responsible for AKS and fraud violations.
Below are two recent examples of this continued focus
on personal responsibility.
Insys Therapeutics Inc.
The fallout from the Insys case continues. Most recently,
Jeffrey Pearlman, a former Insys Therapeutics Inc. district
sales manager, was arrested on September 29, 2016, on
charges that he participated in a scheme to pay kickbacks
to doctors to prescribe a drug containing fentanyl,
Subsys.142
Pearlman is the third former staffer to be
charged in the alleged kickback scheme, which involves
paying physicians, nurses, and physicians’ assistants
to speak at hundreds of sham educational events in the
hopes they would prescribe Insys drugs. According to
prosecutors, speaker fees ranged from one thousand
dollars to several thousand dollars, with one Connecticut
health care provider earning $83,000 in kickbacks to
prescribe Subsys.143
Pearlman has pled not guilty in a
Connecticut federal court.144
Puma Biotechnology
Federal prosecutors have arrested a former California
biotech executive, and financial regulators have charged
him with insider trading in September 2016. Robert
Gadimian, former senior director of regulatory affairs
at Puma Biotechnology, allegedly profited roughly $1.1
million by making a series of trades informed by non-
public knowledge on the status of trials of Puma’s breast
cancer candidate, neratinib.145
According to the SEC, Gadimian bought $261,530
worth of Puma stock in August and September 2013
(during a blackout period, without permission) after he
learned neratinib was performing well in the I-SPY 2
trial. Gadimian sold his stock the following day, netting
$95,000 in profits. In 2014, Gadimian was in for an even
bigger payday: he bought $215,880 of Puma stock and
placed a $34,500 bet that the company’s share price
would rise shortly. When Gadimian sold, he realized
profits of $1.1 million.146
Disclosing Compassionate Use Policies
It seems that the topic of expanded access and
compassionate use is once again making headlines.
Recently Endpoints News did a series of articles on

Contents
CONTACT
Visit www.lifescicompliance.com
28
Editorial Board
Terry Chang, MD, JD
Associate General Counsel and Director
Legal & Medical Affairs
AdvaMed
Ian Clark
Director Corporate Training
BioMarin
David Davidovic
President Path Forward
Former VP and Global Head Commercial Services
Roche and Genentech
Marc Eigner
Senior Partner
Polaris
Nicodemo (Nico) Fiorentino, JD
Senior Advisor, Research & Compliance
G&M Health, LLC
Abraham Gitterman, JD
FDA/Healthcare Associate
Arnold and Porter
Toby Ann Holetz
Compliance Officer
Biogen
Maureen J. Lloyd
Director, Life Sciences Governance,
Risk Management, and Compliance
PwC
John Kamp, JD, PhD
Executive Director
Coalition for Healthcare Communications
Meryl Katz, JD
ACA Auditor
Independence Blue Cross
Kari K. Loeser, JD
Senior Director & Senior Compliance Counsel
Jazz Pharmaceuticals
Chad A. Morin
Director Compliance
ARIAD Pharmaceuticals
John A. Murphy, JD
Assistant General Counsel
PhRMA
John Patrick Oroho, JD
Partner
Porzio
Kristin Rand, JD, MA
Vice President and Compliance Officer
Seattle Genetics, Inc.
Marc J. Scheineson, Esq.
Partner, Life Sciences
Alston & Bird LLP
Paul Silver
Managing Director & Practice Leader
Huron Life Sciences
David Vulcano, LCSW, MBA, CIP, RAC
AVP & Responsible Executive for Clinical Research
Hospital Corporation of America
Bert Weinstein, JD
Vice President, Ethics & Compliance,
Purdue Pharma LP
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147 See John Carroll, Say what? Compassionate use program? What compassionate use program?,
ENDPOINTS NEWS (Oct 12, 2016) at http://endpts.com/say-what-compassionate-use-program-what-
compassionate-use-program
148 See Brenda Huneycutt, Nina Mermelstein, and Gillian Woollett, Current State of Transparency of
Manufacturer’s Compassionate Use Policies, Avalere Health (Oct. 2016) at http://go.avalere.com/
acton/attachment
149 Id.
150 See John Carroll, The compassionate use poll: A lopsided vote favors posting policies, with plenty
of fretting, ENDPOINTS NEWS (Oct 13, 2016) at http://endpts.com/the-compassionate-use-poll-a-
lopsided-vote-favors-posting-policies-with-plenty-of-fretting/.
the topic.147
Citing a recent
Avalere Health report,
Endpoints noted that in
large measure disclosure of
compassionate use policies
depended on the size of the
company (see Figure 2).148
However overall, the number
of companies disclosing
compassionate use policies
was relatively small (19 out
of 100).149
Endpoints followed this thread and in a snap poll asked its readers whether they
thought posting compassionate use policies on the company website was good
idea. Not surprisingly, 70% of those polled (n=149) believed it was a good idea.150
However, Endpoints noted there continues to be concern, and rightful so, that
expanding compassionate use programs too quickly could undermine patient
recruitment for trials needed to secure market authorizations. This is a long
standing industry concern and only time will tell if it is well-founded. But for,
now the transparency wave has yet to fully crest.
Figure 2: Percent of Companies That Post
Compassionate Use Policies on Their Websites

Life Science Compliance Update November 2016

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