On October 29, 2015, the U.S. Department of Justice (DOJ) announced a global settlement with Warner Chilcott U.S. Sales LLC, a subsidiary of pharmaceutical manufacturer Warner Chilcott, based on conduct in violation of criminal healthcare fraud statutes and the civil False Claims Act. Press coverage of the matter largely has focused on the indictment of the company’s former president – seemingly a fulfillment of DOJ’s promise to hold more individuals responsible for corporate wrongs. Based on the allegations in the information filed against the company, the case indeed highlights the critical role executives play in setting a tone of compliance, and the potential for devastating impact when the right tone is not set. 
The case also suggests two additional points. First, it demonstrates the risks inherent in seeking to compete by offering business courtesies and entering speaker/consultant relationships that do not comply with the PhRMA Code on Interactions with Healthcare Professionals (PhRMA Code). Second, it underscores the fact that manufacturers seeking to provide reimbursement support services must structure these programs within reasonable limits and effectively monitor how they are provided. Less clear is what the government views as the appropriate nature or scope of such services.
The Basics: Criminal and Civil Settlement for the Company, Criminal Indictment for the President

As part of a global settlement with the United States, the company will plead guilty to a felony charge of healthcare fraud, pay a criminal fine of $22.94 million, and be excluded from participation in federal healthcare programs. The company will pay an additional $102.06 million to the federal government and certain states to resolve civil claims under the False Claims Act. The company’s current parent, Allergan PLC, was not implicated in the government’s allegations or in the settlement. 
The global settlement with the company follows guilty pleas by and charges of various individuals, including former company sales managers and a physician. Simultaneously with the announcement of the company’s resolution, DOJ announced it has indicted the company’s former president with conspiring to violate the anti-kickback statute by paying kickbacks to physicians.
The Government’s Case
An Incomplete Compliance Program
DOJ’s allegations paint a picture of a company with fundamental gaps in its compliance program generally and in its compliance with healthcare fraud and abuse laws specifically. The government made a point in the charging documents of emphasizing that the company elected not to follow the PhRMA Code – a fact that company managers described as a competitive advantage. DOJ also noted that the company devoted minimal resources to compliance prior to DOJ’s investigation, and, until 2012, offered little to no training to its employees on healthcare laws and regulations. Company sales representatives were inexperienced in the industry, and the company screened candidates to ensure they would be adequately aggressive. Those identified as rule-followers were derided. Once hired, sales representatives had virtually unlimited expense accounts. When employees ran afoul of healthcare laws, the company failed to discipline them or their managers.
Rewards for Good Customers 
Much of the conduct described in the court filings falls outside current industry practice norms. DOJ particularly took issue with what it described as lavish meals and sham speaking engagements to reward good prescribers, including:

  • providing physicians with dinners at expensive restaurants with no substantive educational discussion, invitations to spouses, wine and meals to go, and gift cards to restaurants;
  • speaker programs where speakers were paid even if no attendees showed up;
  • invitations to dinner or to serve as speaker based on high volume of prescriptions; and
  • return on investment analyses for attendees and speakers.

Reimbursement Support 
DOJ’s allegations regarding reimbursement support, particularly in the criminal complaint against the company, similarly involve conduct that would not be contemplated by most manufacturer reimbursement support programs. For example, DOJ alleges that company sales representatives:

  • completed insurance prior authorization forms using false, vague, and/or canned clinical information provided by company management;
  • took patient files from physician offices and completed PA forms at home;
  • forged physicians’ signatures on PA forms; and
  • falsely represented themselves to insurance companies as physicians or employees of a physician.

In the civil settlement, however, the government’s description of the misconduct is more general:  “Warner Chilcott assisted healthcare professionals with prior authorization requests, non-formulary exception requests, coverage determination requests, and appeals documentation throughout the United States in order to ensure coverage and reimbursement of the drug Altevia and to overcome formulary restrictions that favored less expensive oral bisphosphonate drugs.” 1 Of course, a broad description of covered conduct supports a broad release, which is desired by most companies entering settlement agreements. DOJ’s press release also fails to distinguish between the specific troublesome conduct in this case and reimbursement support that may include assistance with pre-authorization. It includes the following quote from the chief prosecutor – the U.S. Attorney for the District of Massachusetts: “Pharmaceutical company executives and employees should not be involved with treatment decisions or submission to a patient’s insurance company.”2
What is the Takeaway?   
With respect to business courtesies and speaker and consultant relationships, the message is clear: Although not legally binding, the PhRMA Code serves as an industry standard against which manufacturer conduct will be measured. Some deviations may be defensible, but not sales programs designed to compete on the basis of non-compliance with the Code.
The message on reimbursement support programs is harder to decipher. The Office of Inspector General (OIG) has recognized certain programs are permissible – those provided in connection with the manufacturer’s own product that focus on providing information and not services and that do not have independent value to the physician.3 Risks rise when a manufacturer goes beyond serving as a “clearinghouse of information” about coverage and reimbursement for its products. One clear takeaway from the Warner-Chilcott case is that only healthcare providers, and not any employee or agent of a manufacturer, should determine and complete the medical/clinical portions of prior authorization or appeal forms. Additional considerations that emerge include:

  • which company personnel may furnish reimbursement support services, and in particular whether the commercial team generally and sales specifically may play any role;
  • how the company will evaluate and compensate the individuals performing the reimbursement support services, and whether those metrics and incentives create risk for noncompliance with established controls;
  • how the program will ensure transparency with payors; and
  • what the marketplace for the product looks like, and in particular whether the purpose to assist with coverage of a new product, or a product in a category where prior authorization is the norm, or, at the other extreme, to overcome formulary preference for less expensive generic alternatives?

Since 2010, when Allergan settled allegations regarding reimbursement support services, it has been clear that the government views these programs as inherently promotional in nature. Since then, we have seenScios and, now, Warner Chilcott settle allegations related to such programs. It is tempting to evaluate the facts of each case and distinguish them as outliers. A better approach may be to view these settlements as reminders that it is crucial for any manufacturer providing reimbursement support services to carefully structure and closely monitor the programs they put in place.