Preparing for Healthcare Professional Transparency

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

Introduction
WEBINAR MODERATORS AND SPEAKERS

Moderated by Ben Comer, Senior Editor, Pharmaceutical Executive, the following leaders from
Huron Consulting Group and King & Spalding will serve as today’s webinar speakers:
Paul Silver
Managing Director
Huron Consulting Group

Manny Tzavlakis
Managing Director

Nikki Reeves
Partner
FDA & Life Sciences Practice
King & Spalding LLP

Seth Lundy
Partner
King & Spalding LLP


1

Introduction
WHY ARE WE HERE TODAY?

After this webinar, you will gain
additional insight into:
 How various entities (e.g., regulators,
competitors, customers, etc.) could interpret
Open Payments data and the associated
risks to your company
 The potential for personal liability with
regards to wrongful reporting
 Ways to utilize this information to add
greater business value


2

Introduction & Review of the
External Landscape

Introduction
RECENT INDUSTRY HEADLINES


4

Introduction
DISCLOSURE, LITIGATION & THE FUTURE

$30.2
billion

Payments the pharmaceutical
and medical device industry has
paid for civil and criminal
penalties to the US and state
governments- the industry
continues to face more
allegations of wrongdoing on a
global scale (i.e., China).1

What will be the total
number disclosed to CMS
in 2014 by industry?
1.
2.

$?
billion

$2.1
billion

Approximate amount of HCP
payments publicly disclosed as
of 2013 by 15 pharmaceutical
and medical device
companies– under Corporate
Integrity Agreements or
voluntarily. 2

How will this
impact/influence future
litigation, media and public
opinion?

Source: Kelton, Erica. Is Big Pharma Addicted To Fraud. Forbes. July 2013.
Source: www.ProPublica.com. November 2013.


5

Introduction
MEDIA PLAYS A ROLE IN TELLING THE STORY

How will the

media
interpret
open payments
disclosure data
to grab attention,
to tell a story…
Will your company have the facts and be
prepared to respond?
1.

Source: Clips sourced on www.youtube.com


6

Making Sense of the Publicly
Available Data

Publicly Available Data
THE AFTERMATH OF DISCLOSING DATA

 All payments and transfers of value exceeding
$10 must be reported and tracked against the
individual HCP who received it by the
company. The report is due March 31, 2014.
 HCPs will have access to the total reported
information prior to public posting.
 HCPs will have the right to dispute and/or
question the expenditures with the company.
 Once this information is publicly posted, it is
available to regulators, newspapers,
customers, patients, competitors, and the
general public .

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

8

Publicly Available Data
CURRENT PUBLIC DISCLOSURE

 Awareness is driven by mainstream media as well as by alternative media, such as
ProPublica, which has published detailed information about physician compensation
from Life Sciences companies.
The table below in as example of the data available from ProPublica:
Name / Payee

City

Year

Category

Amount

Jane Physician

Worcester

2012

Research

$2,762

Jane Physician

Jamaica Plain

2012

Meals

$281

Joe Roberts

Holyoke

2011

Items, Gifts

$251

Joe Roberts
John Smith

Boston

2011

Consulting

$2,400

Worcester

2010

Speaking

$65,890

John Smith

Worcester

2011

Speaking

$17,400

John Smith

Worcester

2011

Travel

$5,073

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

9

Mitigating Risk:
The Changing Market Landscape

Mitigating Risk
CHANGING MARKET LANDSCAPE

Publicly disclosing payment information
and the increased scrutiny from
industry-related entities are causing
changes in the market landscape.
Companies are being forced to
adapt by:
 Assessing their internal and
external strategies
 Strengthening processes and
controls
 Increasing collaboration across
Compliance, Commercial and
Clinical Development to mitigate
risk and become more efficient

Product
Commercialization

Clinical
Development


Compliance

Healthcare
Professional
Engagement

11

Mitigating Risk
MEDIA / INQUIRY PREPARATION

 The media, customers, patients, and others may review this data for:
• Spend outliers within company peer groups
• Relationships between companies and HCPs – particularly those under or
related to an investigation(s)
• Since primary specialty will be posted, engagements with healthcare
professionals that may be off-label in nature
• Research related information such as which researchers are working for
competitors


12

Mitigating Risk
KEY RISK: LOSS OF KEY OPINION LEADERS

Loss of KOLs
Risk
• Changes in the business and
transparency landscape may
change the willingness of
HCPs to engage with
pharmaceutical and medical
device companies
Strategic
relationships
will be even
more critical in
the future.


13

Mitigating Risk
KEY RISK: LOSS OF KEY OPINION LEADERS

Potential Outcome
• Because even small
transactions will typically be
posted under Open Payments,
HCPs may no longer accept
sales rep “lunch-n-learns”,
educational items, or even
samples (which must also be
disclosed separately from the
Open Payments report)
• Potentially more significantly,
HCPs may no longer wish to
serve as Key Opinion Leaders
(KOLs) for clinical trials, speaker
programs, consulting, or for
other engagements


Strategic
relationships
will be even
more critical in
the future.

14

Mitigating Risk
PLAN: PROACTIVELY MANAGE KEY OPINION LEADERS

Proactively prepare
responses for
relationships that are likely
to be highlighted in the
media or in other outlets.

Consider “Pre-Disclosing”
transactions to key KOLs
to ensure their awareness
of what will be posted prior
to actual public posting.


Handle inquiries and
disputes promptly,
accurately, and
consistently per
established policies &
SOPs.

15

Mitigating Risk
KEY RISK: INACCURATELY REPORTING PAYMENT DATA
:

Potential Risk
A disorganized,
insufficient or lack of data
gathering & data
reporting processes,
capabilities, and systems.


16

Mitigating Risk
KEY RISK: INACCURATELY REPORTING PAYMENT DATA
:

Potential Outcome

May result in inaccurately
reported payment data,
which can damage
reputation and the
relationship between the
companies and HCPs.


17

Mitigating Risk
DEVELOP RISK REMEDIATION FOR REPORTING

Specific Risks Associated with Data

•

Remediation Steps

Key Account Management (KAM)
systematic
for
 Manual data entry into the systems RISK may is• a Targeted trainingFOR REPORTING
PLAN: DEVELOP of record REMEDIATION toprocessemployees
ensure that

managing incorrectly.
be carried out interactions and relationships with your mostcomplete and
understand the importance of valuable
accurate data capture.
customers.

•

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

•

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

•

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

•

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

•

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

•

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


18

Impacts To You &
Personal Liability

Types of Potential Impact and Liability

 Business and reputational risk
 Corporate legal liabilities
 Individual legal liabilities


20

Calendar the Key Dates

 Jan. 1, 2014 – end of CY 2013 reports; begin tracking
for CY 2014
 March 31, 2014 – CY 2013 reports due
 May – June 2014 – 60-day dispute resolution period
begins
 September 30, 2014 – CMS publication date for CY
2013 data


21

Effects of Increased Transparency

IOM
Industry Groups

Press

Industry/HCP
Relationships
Regulatory and
Enforcement
Agencies

Medical Institutions

State Legislatures

U.S. Congress


Physician Groups
22

Business and Reputational Risks
 There is little doubt that transparency of these relationships will
further increase scrutiny of industry/health care professional
relationships
 Publication, communication and misunderstanding of these
reports may affect:
– Customer purchasing
– Ability to successfully contract
– Patient perception
– Public perception
– Government agency perception
– Peer relationships


23

Corporate Legal Liabilities
Penalties For Failure to Report

(42 C.F.R.§403.912)

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

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

24

Anti-Kickback Statute – 42 U.S.C. §1320a-7a(b)
 The Anti-Kickback Statute makes it a criminal offense to knowingly
and willfully to offer, pay, solicit, or receive any remuneration to
induce or reward referrals of items or services reimbursable by a
federal health care program.
 Penalties:
• Felony charge, punishable by maximum of $25,000 fine and up to
five years imprisonment, or both for each offense.
• Automatic exclusion from federal health care programs.
• Administrative proceedings to impose
• Civil money penalties
• Exclude party from federal health care programs. See Section 1128(a)(7) and
Section 1128(b)(7) of Social Security Act.


25

False Claims Act (qui tam) 31 U.S.C. § 3729
• “Any person who:
– (2) knowingly makes, uses, or causes to be made or used, a false record or
statement to get a false or fraudulent claim paid or approved by the
Government;
– (3) conspires to defraud the Government by getting a false or fraudulent claim
paid or approved by the Government;. . . or
– (7) knowingly makes, uses, or causes to be made or used, a false record or
statement to conceal, avoid, or decrease an obligation to pay or transmit
money or property to the Government,
– allows whistleblowers to bring a suit on behalf of the government against
individual or company responsible for the alleged fraud.” 31 U.S.C. § 3729.
– “Knowing” or “knowingly” means:
“(1) has actual knowledge of the information;
(2) acts in deliberate ignorance of the truth or falsity of the information; or
(3) acts in reckless disregard of the truth or falsity of the information, and no proof of
specific intent to defraud is required.” 31 U.S.C. § 3729.

26

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

 No actual knowledge required
– Person who acts in reckless disregard or in deliberate ignorance
of truth or falsity of information can be found liable under the Act.
31. U.S.C. § 3729(b).


27

Federal Food Drug & Cosmetic Act (FDCA)
 Section 303(a) of FDCA imposes criminal sanctions against any person who
committed a prohibited act or caused such acts to be committed. 21 U.S.C. § 333.
– Fines and prison sentences determined by Federal Sentencing Guidelines.
 Criminal Charges: Section 303 discusses the penalties for a violation of Section
301.
– A violation of 21 USC § 331, a second violation, or the intent to defraud or
mislead results in the following consequences.
• “(1) Any person who violates a provision of section 301 shall be imprisoned
for not more than one year or fined not more than $1,000, or both.
• (2) Notwithstanding the provisions of paragraph (1) of this section, if any
person commits such a violation after a conviction of him under this section
has become final, or commits such a violation with the intent to defraud or
mislead, such person shall be imprisoned for not more than three years or
fined not more than $10,000 or both.” 21 U.S.C. § 333.
– Felony if action done with intent to defraud or mislead, or a second offense
without intent
– Misdemeanor if no showing of intent

28

State Transparency/Aggregate Spend Disclosure Laws and
Compliance Program Laws
 California Compliance Program Law, (Cal. Health & Safety Code §§ 119400119402)
 Connecticut Compliance Program Law, (CT S.B. 428)
 Nevada Marketing Code of Conduct and Compliance Program Law (Nev. Rev. Stat.
§ 639.570)
 Massachusetts Code of Conduct and Practitioner Payment Reporting (MA SB 2863)
 Washington, DC Marketing Disclosure Laws - D.C. Code §§ 48-833.01-.09
 Minnesota Gift Prohibition and Payments to Practitioners Reporting Laws (Minn. Stat.
§§ 151.461; 151.47)
 Vermont Prescribed Products Law
 West Virginia Marketing Costs Disclosure Law (W.Va. Code § 16-29H-1)


29

Individual Legal Liabilities

PARK DOCTRINE
What is the Park Doctrine?
• Permits misdemeanor convictions against company executives for
violations of the FDCA, even if the executive had no knowledge or
involvement in the offense, so long as the person is a “responsible
corporate officer.”
– Personal knowledge is not required, but only a factor that “may be relevant” in
deciding whether to bring criminal charges.

• Strict liability crime - can be convicted of federal crime based solely
on position in company.


30

History of the Park Doctrine
 United States v. Park, 421 U.S. 658 (1975)
– Defendant Park was the president of a large national food store and was convicted of
causing adulterated food to enter interstate commerce. Id. at 658.
– The Court of Appeals reversed, reasoning based on Dotterweich, that an individual had
to have some knowledge of wrongdoing. Id. The Supreme Court overruled this, and held
that knowledge of wrongdoing was not a requirement. Id.
– “The Act imposes upon persons exercising authority and supervisory responsibility
reposed in them by a business organization not only a positive duty to seek out and
remedy violations but also, and primarily, a duty to implement measures that will insure
that violations will not occur.” Id. at 658-59.
– “The defendant had, by reason of his position in the corporation, responsibility and
authority either to prevent in the first instance, or promptly to correct, the violation
complained of, and that he failed to do so. The failure thus to fulfill the duty imposed by
the interaction of the corporate agent's authority and the statute furnishes a sufficient
causal link.” Id. at 674.
– Supreme Court held that individuals who have the authority to prevent violations can be
held vicariously liable for the illegal acts of subordinates. Id.
• Responsible corporate officers have an affirmative duty to seek out and remedy
violations, and implement measures to prevent those violations. Id.
• Delegation to subordinates does not negate liability. Id.

31

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

 Anyone with authority to prevent or correct violations
 Decisions regarding who is the “responsible corporate
officer” are left to “the good sense of prosecutors, the wise
guidance of trial judges, and the ultimate judgment of
juries.” United States v. Dotterweich, 320 U.S. 277, 285.
 Typically:
– Highest ranking corporate officer (CEO)
– Executive with direct authority to implement corrective actions (i.e.
compliance officer)
– Examples - CEO, President, Chief Compliance Officer, Vice
President

32

Beyond the Park Doctrine

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


33

Disclosure Under CIAs
 Most CIAs implemented since 2008 have required disclosure of
payments to HCPs and HCIs
“[T]he requirement of public disclosure of these
payments will help the Government, as well as
the health care industry and the public, to
monitor relationships and should have a sentinel
effect to deter kickbacks and other inappropriate
payment relationships.”
Gregory E. Demske, Chief Counsel
Office of Inspector General of the Department of Health and Human Services Testimony to
the U.S. Senate Special Committee on Aging Roundtable (Sept. 12, 2012)

34

Recent Trends in CIA: Accountability

 Certain senior management identified as “Certifying Employees” are
required to monitor their areas of authority and annually certify compliance
with federal health care program requirements, FDA requirements, and the
CIA.
–

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


35

Attestations: (42 C.F.R. § 403.908(h))
Each report, including any subsequent corrections to a filed report,
must include a certification by the CEO, CFO, Chief Compliance
Officer, or other Officer of the applicable manufacturer that the
information submitted is true, correct, and complete to the best of
his or her knowledge and belief.
If filing a consolidated report, the attestation applies to all
applicable manufacturers covered by the consolidate report.

If an applicable manufacturer submits updated data to resolve
disputes, the applicable manufacturer must re-attest to the
timeliness, accuracy, and completeness of the data, as required
during the original data submission. (78 Fed. Reg. 9502)

36

Protect Against Potential Liabilities
 Budget appropriately (dollars and personnel)
– Quick changes and responses may be required

 Benchmark carefully

 Consider some or all of the following proactive steps:
– Internal audits of payment data for accuracy and overall compliance (e.g., kickbacks,
industry codes and state gift bans)
– Policy/procedure reviews to ensure that reported payments are consistent with the
company’s internal requirements
– Tax reviews/opinions
– PR and crisis management planning for possible media reports
– Continue training efforts
– Coordinate with industry on uniform messaging


37

Turning Risk & Liability into
Corporate Value:
Benefits of Disclosing Data

Turning Risk & Liability into Corporate Value
BENEFITS OF OPEN PAYMENT REGULATIONS

 After the disclosure data has been analyzed and the trends
have been identified, a company can react to operational
changes by:
Altering sales and other go-to market strategies
Developing robust data gathering & reporting
processes and systems

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

39

ANALYZE SPEND FOR BETTER BUSINESS INSIGHTS

Spend Analysis
Example of how to view and
show company spend on
individual HCPs by specialty area
and allows the ability to break
down the data by specialty area,
payment nature, and time frame.
Results may include analysis that
shows company spend on HCPs
by specialty area in order to help
identify which specialty area(s)
and HCPs are receiving the most
payments.


40

BETTER UNDERSTANDING OF KEY OPINION LEADERS

With detailed disclosure data available in the near future, compliance-based influence
networks can be created to help understand therapeutic markets and how to market more
effectively in a compliant manner.

For illustrative purposes only.

41

HELP MAKE BETTER ORGANIZATIONAL DECISIONS

Companies that adopt a comprehensive enterprise approach to
influence mapping can
drive competitive advantage in their respective markets.

Disciplined

influence intelligence
better informs
organizational decision making,
leading to improved outcomes
in product development and
commercialization.

42

Questions To Consider
 How concerned is your organization that Open Payments disclosure will impact your
relationships with KOLs?
 What is your most significant concern about Open Payments disclosure in 2014?
 What topics related to disclosure, transparency and data would you like to know more
about for future webinars?

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


43

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

Paul Silver
Managing Director
678-672-6160
psilver@huronconsultinggroup.com

Manny Tzavlakis
Managing Director
646-520-0247
mtzavlakis@huronconsultinggroup.com

Nikki Reeves
Partner
King & Spalding LLP
202-661-7850
nreeves@kslaw.com

Seth Lundy
Partner
King & Spalding LLP
202-626-2924
slundy@kslaw.com


44

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