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Home » Medical device enforcement is getting more serious—particularly in Northeast

Medical device enforcement is getting more serious—particularly in Northeast

February 21, 2017 By Chris Newmarker

There has been aggressive momentum on the side of federal medical device anti-corruption enforcers, in particular in the Northeast.

Maureen Ruane and Scott McBride, Lowenstein Sandler

Northeast U.S. medtech enforcement
[Image by Grayshi, Roke, Maher-shalal-hashbaz – Own work, File:BlankMap-USA-states.PNG, CC BY-SA 3.0]
There are more questions than answers on what a new and unconventional administration in the White House will do in 2017 in many areas, no less so in medical device enforcement. One thing is certain: whatever the course, it will need to contend with aggressive momentum on the side of federal anti-corruption enforcers, in particular in the Northeast. Federal investigations and prosecutions for violations of the federal Anti- Kickback Statute (AKS), the Foreign Corrupt Practices Act (FCPA), and other anti-bribery statutes have been energetic as the U.S. Justice Dept. added resources to these efforts in recent years and enjoyed a measure of success. In international markets, device makers are compelled to contend with third-party intermediaries; supervising and controlling those entities will perpetually be a challenge. Also, as the health care industry evolves from a fee-for-service model into a more outcomes-based model, creative arrangements among providers will increase anti-bribery scrutiny. Corruption enforcement is likely to remain robust.

On the other hand, it remains to be seen whether a series of setbacks for the government in its off-label enforcement efforts—with both the courts and juries—could spell a less aggressive posture on this front in the future. At the least, companies in the government’s crosshairs have demonstrated that they are more emboldened than ever by these developments to fight allegations of illicit off-label marketing.

Anti-corruption enforcement

The Justice Dept. added resources to combat commercial corruption, which has and may inevitably continue to have an impact on the medical device industry. In November 2015, the agency announced it was increasing the size of its Fraud Section’s FCPA Unit by 50%. The FBI in turn established three new squads devoted to FCPA enforcement. Shortly thereafter, on April 5, 2016, the Justice Dept. announced a new FCPA Pilot Program, “designed to motivate companies to voluntarily self-disclose FCPA-related misconduct, fully cooperate with the Fraud Section, and, where appropriate, remediate flaws in their controls and compliance programs.” The Pilot Program allows self-disclosing companies to avoid prosecution altogether. In cases which the department determines warrant criminal prosecution of a self-disclosingg company, it will grant a fine reduction of up to 50% of the bottom of the applicable range under U.S. sentencing guidelines, and will further decline imposition of a monitor. Taken as a whole, these initiatives are plainly intended to dramatically increase the volume of FCPA matters.

Enforcement of the federal AKS will also likely remain a priority. The federal government has viewed its efforts to combat healthcare fraud as a tremendous return on investment – indeed, the Justice Dept. and the U.S. Health & Human Services Dept. have boasted publicly that for every dollar they spend on healthcare fraud investigations, they recover nearly $8 for taxpayers – and its AKS and other anti-bribery investigations should continue unabated as a result. The investigators pursuing these cases have also benefited from the Affordable Care Act, which relaxed the criminal intent standard to make AKS cases easier to prosecute. It also created the Sunshine Act, which requires healthcare companies to disclose most of their payments to physicians. The Sunshine Act has resulted in negative publicity for the industry and enabled the federal government to use the payment data to investigate corruption more effectively.

Get the full story on our sister site, Medical Design & Outsourcing.

Filed Under: Legal News, Regulatory/Compliance Tagged With: Anti- Kickback Statute, Foreign Corrupt Practices Act, Lowenstein Sandler, MedTech, U.S. Justice Dept. (DOJ)

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