Federal prosecutors appearing at the American Conference Institute’s 16th Annual Forum on Fraud and Abuse in the Sales and Marketing of Medical Devices earlier this month outlined recent enforcement trends that should catch the attention of the health care industry. Companies that ignore the warnings and lessons stemming from these public comments do so at their own peril, especially with regard to the False Claims Act. While touching on several themes, the DOJ attorneys on March 9, 2016 gave an inside look at new priorities that include requiring companies to admit specific conduct when settling fraud cases and investigating novel kickback schemes. They also highlighted the difficulties with off-label promotion cases, the benefits of cooperating at the outset of an investigation, and gave lessons stemming from a cautionary tale about the failure to raise a timely defense.

Pressure for Admissions in Settlements

While drug and device makers will continue to be able to resolve investigations without admitting liability or wrongdoing, the government will more often require the admission of certain facts regarding the specific conduct at issue. Attorneys for both state and federal agencies emphasized their increasing desire to require such admissions in future settlement agreements, and cited examples of recent cases where companies have admitted conduct making up at least pieces of the alleged kickback schemes at issue. One attorney noted that “at least so far, the admissions that have been sought and given have been to very specific conduct, as opposed to blanket liability.” Drug and device makers can expect to see an increase in government demands for these types of admissions at both the state and federal levels.

Government Will Strenuously Assert Objections to Untimely Defenses

Discussing a recent settlement with Wyeth Pharmaceuticals for allegations that the company offered discounts for a particular drug to hospitals, but did not offer the same discounts to Medicaid. DOJ attorneys cautioned companies to raise all defenses early on in litigation, or else face a strenuous objection from the government and a potentially adverse ruling from the court. Prior to the settlement, Wyeth attempted to waive attorney-client privilege and invoke an advice-of-counsel defense, arguing that it reasonably relied on counsel’s advice when not disclosing the discounts it gave to hospitals, but not to Medicaid programs. According to the DOJ attorneys, at the time Wyeth raised the defense, the case had been going on for years and Wyeth had relied on attorney-client privilege as a shield throughout the litigation. The government objected to allowing Wyeth to waive the privilege and rely on a new defense so late in the litigation. A federal judge agreed with the government and held that Wyeth could not raise the advice-of-counsel defense at such a late stage. The lesson then, according to the government lawyers, is not to wait to raise such a seemingly strong defense.

DOJ Focusing on Novel Kickback Schemes and Encouraging Cooperation

The event also included discussions regarding DOJ’s focus on novel and more discreet kickback schemes, the ability for corporations to get credit for cooperating with investigations, and developments in off-label enforcement cases. The speakers made the following points on these issues:

  • On novel kickback schemes, the attorneys acknowledged an emphasis on discovering new schemes and noted an example where a company allegedly provided free loans of equipment and paid for the use of products, among other infractions. Enforcement agencies are increasing the focus on less traditional kickback schemes such as these.
  • On cooperation, the attorneys discussed the “Yates memo,” which provides guidance to DOJ investigators on how companies can gain “cooperation credit” when cooperating fully with investigators and when doing so in a timely manner. Early cooperation can be beneficial to corporations under investigation. 
  • On off-label enforcement, the attorneys acknowledged that off-label enforcement cases are becoming more difficult for them. A recent decision in Amarin Pharma Inc. v. FDA held that truthful and non-misleading speech promoting off-label use of an FDA-approved drug cannot provide support for a misbranding charge. The attorneys did note that there is still room for government action when claims are misleading or untruthful.

Heeding the DOJ’s Warnings

The DOJ’s candor is invaluable to the healthcare sector because it provides an inside look at what government lawyers are prioritizing and what they see as developing trends. With an ever shifting regulatory landscape and administrative enforcement apparatus, drug and device makers, along with others in the healthcare industry, can use this information to help guide their actions should they find themselves in the midst of a government investigation. The overarching theme coming out of the American Conference Institute event is that, in many cases, companies under investigation should act quickly and decisively to respond; likewise, in litigation, charting a clear and complete strategy early in the process is vital to success.