Health Care Lawyer Blog

The law firm of Frank, Haron, Weiner and Navarro, in collaboration with the United States Attorney’s Office for the District of Massachusetts and the firm of Phillips & Cohen LLP, has reached a settlement with two Johnson & Johnson subsidiaries to pay more than $81 million to resolve criminal and civil liability arising from the off-label marketing of the epilepsy drug Topamax.

The settlement arose from two whistleblower cases filed under federal and state False Claims Acts, alleging that Otho-McNeil Pharmaceutical LLC and Ortho-McNeil-Janssen Pharmaceuticals, Inc., improperly marketed Topamax for psychiatric uses, when it was only FDA-approved to treat epilepsy. Federal laws prohibit drugmakers from marketing drugs for uses other than those specified in drug applications and approved by the FDA.

The complaint alleged that Ortho-McNeil promoted off-label uses of Topamax by hiring physicians to speak at meetings and dinners about prescribing for unapproved uses, and rewarded such physicians with lavish “honorariums”, trips, and tickets to entertainment events.

Under the settlement, the federal government will receive over $50 million and an additional $24 million will be allocated for the state Medicaid share. Additionally, Ortho-McNeil has agreed to plead guilty to a misdemeanor and pay a $6.14 million criminal fine.

The two cases, both filed in the District of Massachusetts are United States ex rel. Maher, et al. v. Ortho-McNeil Pharmaceutical, Civil Action No. 03-11445-WGY, and United States ex rel. Spivack v. Johnson & Johnson and Ortho-McNeil Pharmaceutical, Inc., Civil Action No. 04-11886-WGY. As part of the settlement, the relators will receive a combined $9 million relator’s share.

FHWN attorneys David L. Haron and Monica P. Navarro represented relators Maher and Savka. Phillips and Cohen represented relator Spivack.

To read the settlement agreement, click here.

Drugmaker AstraZeneca has agreed to pay $520 million to settle charges that it illegally marketed its anti-psychotic drug Seroquel, the Department of Justice announced today.

The settlement, which arose from allegations in a civil False Claims Act lawsuit that the company marketed its anti-psychotic drug Seroquel for purposes not approved by the Food and Drug Administration, was the largest ever by a company in a civil-only settlement of off-label marketing claims. However, $520 million (without knowing the details on how the damages were calculated) seems a paltry sum considering that Seroquel sales ranged as high as four billion per year.

The complaint alleged that from January 2001 to September of 2006, AstraZeneca marketed Seroquel to psychiatrists and other physicians to treat aggression, Alzheimer’s disease, anxiety, ADHD, and a slew of other illnesses for which Seroquel was not FDA-approved to treat. The marketing efforts failed to disclose the side effects from such off-label uses, which included extreme weight gain.

As a condition of the settlement, AstraZeneca also entered into a five-year Corporate Integrity Agreement (CIA) with the Department of Health and Human Services Office of Inspector general. CIAs are generally designed to implement a series of administrative hoops that ensure compliance with government mandates. Among other provisions, the AstraZeneca CIA provides that a board of directors committee and certain managers must annually review the company’s compliance program and approve its effectiveness. However, the CIA terms essentially places monitoring responsibilities in the hands of the original wrongdoers. Additionally, the CIA does not require the company to take any actions to correct the misinformation given to physicians about the drug.

A new prescription drug rebate formula found in the health reform bill (the Patient Protection and Affordable Care Act, or "PPACA") is designed to lower the costs of drugs sold to state Medicaid programs - unfortunately, instead of saving the states money, the provision may actually strip additional funds from several states' already cash-strapped coffers.

Specifically, the health law contains a provision designed to raise $38 billion over the next ten years by requiring drugmakers who sell to Medicaid to further discount their prices. While such "rebates" were previously divided between the states and the federal government, under PPACA a significant portion of the rebates will now go solely to the feds.

While some states may be able to offset these losses, PPACA may spell trouble for others - for example, according to California's deputy Medicaid director, the state may lose $50 million next year because of the revisions. Indiana's secretary of the Family and Social Services Administration estimated that losses for her state may amount for $400 million over 10 years.

Currently, drug firms must offer Medicaid programs a 15.1 percent rebate for most brand-name medications. Under PPACA however, the rebate is increased to 23.1 percent, and now includes certain generics. The changes are slated to take effect October 1 of this year.

The U.S. House of Representatives voted 289-112 this morning to approve H.R. 4851, the Continuing Extension Act of 2010. The bill, which was approved by the Senate yesterday and sent back to the House for a final vote on amendments, will delay the proposed 21 percent cut in Medicare Physician rates, as set out in the 2010 Medicare Physician Fee Schedule (MPFS). President Obama is expected to sign the bill later today.

The House vote represents the third delay in implementing the 2010 MPFS, and it is suspected that doctors might never actually experience the effects of the cuts. Earlier this month, the Senate recessed without voting on H.R. 4851 and in order to avoid having the cuts take immediate effect, the Centers for Medicare and Medicaid Services instructed contractors to avoid proceesing Medicare claims for 10 business days. The last-minute Senate voted spared physicians from seeing reductions to processed claims.

By: Louis C. Szura

The new PPACA legislation includes a version of the previously proposed Physician Payment Sunshine Act, which requires drug, medical device, biological or medical supply manufacturers to disclose direct payments or transfers to physicians and teaching hospitals that are $10 or more (or total over $100 in a calendar year). It also requires those manufacturers to disclose any non-public ownership or investment interests of physicians and their immediate family members in the manufacturers. Those reporting requirements do not take effect until March 31, 2013 and the information will be available online to the public.

However, there are some significant limitations on these reporting requirements. First, there is no requirement to report payments made through third parties where the manufacturer does not known the identity of the physician. This means that typical survey and marketing research will not be covered. Second, certain transfers are not covered, including the loan of medical devices for under 90 days, product samples intended for patient use, discounts (including rebates) and other items. Third, in the case of payments made pursuant to product research or development of a new drug, technology or device in connection with a clinical investigation, the manufacture can delay reporting the payment for either four years or until the drug, device or technology is approved by the FDA. Overall, even with these limitations, the relationships between manufacturers and physicians will be clearer to the public. For additional information about these regulations, please contact Louis Szura.

The recently enacted Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, (together, the “Healthcare Reform Law”), imposes a new requirement on physicians who provide in-office ancillary services to their own patients. Previously, physicians providing certain in-office services to their patients had to satisfy the three Stark Law requirements relating to the supervision of those services, their location and billing procedures in order to lawfully provide those services.

The Healthcare Reform Law now imposes another requirement on those physicians. Namely, the physician must also inform the patient, in writing, that the patient may obtain those services from other suppliers, and the physician must provide a written list of such suppliers in the area where the patient resides. This new requirement is immediately effective as of January 1, 2010.

For additional information about these regulations, please contact Louis Szura.

As if health care fraud wasn’t already a problem, this week the Department of Health and Human Services sent letters to State Insurance Commissioners and Attorney Generals asking them to be on the lookout for – and prosecute – con artists attempting to cash in on PPACA. Specifically, some swindlers have taken to setting up 1-800 numbers and going door-to-door trying to sell fraudulent insurance policies that they claim are approved by PPACA. The fraudsters claim that consumers can obtain coverage in a non-existent “limited enrollment” period made possible by the new legislation.

While PPACA will gradually introduce a slew of new health insurance options into the market, consumers should carefully review who they are buying “insurance” from, and what the policies cover. For example, many companies falsely advertise health care savings cards – where consumers receive discounts from medical services offered by participating providers – as “health insurance.” Consumers should take note that savings programs are not the same as insurance, and usage is generally limited to a small pool of services and providers.

Expansion of the Recovery Audit Contractor (RAC) program, increased penalties under federal sentencing guidelines and heightened program integrity measures are just a few of the new anti-fraud provisions found in the Patient Protection and Affordable Care Act (PPACA).

This week Lew Morris, counsel for the Department of Health and Human Services-Office of the Inspector General, released a chart outlining the fraud and abuse/program integrity provisions in the PPACA, many of which took effect on the date of enactment (i.e. March 23, 2010) and require prompt compliance attention.

Some of the new provisions merely confirm long standing legal positions - for example, the PPACA amends the federal Anti-Kickback statute (AKS) to define a "false claim" under the federal False Claims Act as any claim that includes items or services resulting from a violation of the AKS. However, federal courts had long adhered to this position when deciding FCA cases.

However, other new changes should be carefully noted by providers - for instance, one of the amendments which may have the greatest impact on the health care industry is the relaxed "specific intent" requirement under the AKS. Importantly, the amendment provides that an AKS violation may be established without showing that an individual kew of the statute's provisions and intended to violate the statute. Previously, conviction for an AKS violation required proof of intent.

As another example, the PPACA requires that Medicare overpayments must be reported and returned within 60 days of identification or the date a corresponding cost report is due, whichever is later. Any overpayment retained after the 60-day deadline is considered an obligation for purposes of the FCA.

Providers are well-advised to carefully review the fraud and abuse summary, and contact an attorney to update compliance plans and manuals.