Presenting a live 90-minute webinar with interactive Q&A Medical Technology Compliance: FDA, AKS, FCA and Other Regulatory Requirements Mitigating Medical Device and Healthcare Technology Risks WEDNESDAY, SEPTEMBER 6, 2017 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Jana Gerken, J.D., Co-Founder and Chief Legal Strategist, Kinetic Compliance Solutions , Milwaukee Ethan E. Rii, Shareholder, Vedder Price , Chicago The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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MEDICAL TECHNOLOGY COMPLIANCE: MITIGATING MEDICAL DEVICE AND HEALTHCARE TECHNOLOGY RISK Jana Gerken, Esq. Ethan E. Rii, Esq. janagerken@kineticcompliance.com erii@vedderprice.com
AGENDA • Unique Risk Profile • Key Enforcers • Key Regulations • Case Study - Olympus • Key Elements - Effective Compliance Program • External Investigations / Remediation 6
UNIQUE RISK PROFILE • Constantly Evolving Regulatory Landscape • Multiple enforcement agencies and layers of regulatory requirements • Continuous need to evolve tech-wise • Vigorous competition from many sides (cheaper, faster, better) 7
KEY ENFORCERS HHS-OIG DOJ Medical Tech Company FTC FBI States Whistleblower Courts Competitors 8
KEY REGULATIONS • False Claims Act • Anti-Kickback Statute • Food, Drug and Cosmetic Act • Federal Trade Commission Act • Physician Payments Sunshine Act • Health Insurance Portability and Accountability Act (HIPAA) • Civil Monetary Penalties Statute • State Statutes 9
FALSE CLAIMS ACT • Civil War-era statute to combat military contractor fraud • Prohibits anyone from knowingly submitting or causing to be submitted a false claim for payment to the Government (note: need not be fraudulent) • Whistle-Blower Actions: Under Qui Tam provisions, private individuals (relators) may file enforcement actions on behalf of Government; entitled to 15% - 30% of successful recovery • 2016: $4.7 billion + recovered in settlements and judgments by DOJ; $2.5 billion of that from health care industry Penalties: • Civil: Treble Government’s damages plus $10,781.40 and $21,562.80 per claim • Other: Potential program suspension, debarment and exclusion 10
ANTI-KICKBACK STATUTE • Criminal statute that prohibits transactions intended to induce or reward referrals for (i) items or services reimbursed by federal health care programs or (ii) the purchase of goods or services paid for directly or indirectly, in whole or in part, by federal health care programs • Anti-corruption statute designed to protect federal health care program beneficiaries from the influence of money on referral decisions and as such is intended to guard against over utilization, increased cost, and poor quality services 11
ANTI-KICKBACK STATUTE – CONT. Standard: “Knowingly and willfully” - If one purpose of a payment or arrangement is to induce a referral (even if not the primary purpose), then the knowledge requirement has been met (“One Purpose Rule” adopted by most US Courts of Appeal) Safe Harbors: • Original AKS scope very broad and encompassed well-accepted and even beneficial business practices – safe harbors subsequently added • No AKS liability if practice fits squarely into safe harbor • If it does not squarely fit - not per se illegal but do case-by-case analysis • 26 safe harbors to date 12
ANTI-KICKBACK STATUTE – CONT. Safe Harbors – Key Examples: • Personal Services : Must be in writing with a term of no less than 1 year; aggregate compensation consistent with FMV in arms-length transactions and not determined in a manner that takes into account the volume or value of any referrals or business otherwise generated between the parties; aggregate services cannot exceed those reasonably necessary • Discounts: Reduction in price based on arms-length transaction; seller must disclose discount on invoice; buyer responsible for cost reporting to Government • Warranties: Seller must disclose the amount of the price reduction obtained as part of the warranty on the invoice; buyer responsible for cost reporting to Government 13
ANTI-KICKBACK STATUTE – CONT. Penalties: • Civil: Treble damages (up to 3x each kickback) plus $50K per violation • Criminal: Up to 5-year prison term plus up to $25K per violation • Conviction results in mandatory exclusion from participation in federal health care programs • Absent conviction, individuals who violate AKS may still face exclusion from federal health care programs at the discretion of the Secretary of HHS • No private right of action under AKS – but FCA provides vehicle for individuals to bring whistleblower action for alleged AKS violations 14
RESEARCH – SEPARATION OF DUTIES OIG-HHS Guidance: • Prudent manufacturers should develop contracting procedures that clearly separate the awarding of research contracts from marketing • Research contracts that originate through the sales or marketing functions – or that are offered to purchasers in connection with sales contacts – are particularly suspect (note: not per se illegal) • To reduce risk, manufacturers should insulate research grant making from sales and marketing influences • Guidance aimed at pharma industry but expressly applies to medical device manufacturers • Guidance intended to help industry understand how HHS will evaluate conduct outside of AKS Safe Harbors 15
RESEARCH – SEPARATION OF DUTIES – CONT. • AKS: Failure to segregate research may result in actions that would in turn violate AKS when research arrangements are used to help close a sale rather than for their independent value • Objectivity in Medical Decisions: No illegal remuneration to HCPs that can taint clinical decision • Integrity in Product Approval / Research Process: Public and Government not misled into thinking product is safer than it actually is 16
INDIVIDUAL ACCOUNTABILITY – YATES MEMO • Memo issued September 2015 by Sally Yates, Deputy Attorney General of the United States • Response to criticism against Government for perceived failure to hold individuals accountable for the 2008 financial crisis • Individuals will be held personally liable for corporate misconduct • Builds on Park Doctrine (United States v Park, 1975), which applies to the FDA-regulated industry and allows the DOJ to prosecute a responsible corporate officer for a felony “without proof that the corporate official acted with intent or even negligence, and even if such corporate official did not have any actual knowledge of, or participation in, the specific offense” - strict liability standard 17
INDIVIDUAL ACCOUNTABILITY – YATES MEMO – CONT. Six Key Principles: 1. Companies will not receive credit for cooperating with the Government unless that cooperation includes producing facts relating to the individuals involved in the alleged misconduct • Open Questions : What does “cooperation” mean – refusal to waive Attorney-Client Privilege = non-cooperative? Does company have to tell Government when individuals located ex-US will be back in US / provide travel itinerary (FBI greet them on tarmac)? 2. Government will focus on individual liability from inception of investigation • Open Questions : Should implicated individuals each obtain separate counsel? Impact on company’s own internal investigation? 18
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