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by Vince Farhat and Lena Streisand
The PhRMA Code on Interactions with Health Care Professionals (PhRMA Code or Code) is a voluntary code of ethics covering pharmaceutical company dealings with health care professionals (HCPs). Signatory companies submit annual certifications attesting that they have policies and procedures in place to foster compliance with the Code.
First published in 2002, the PhRMA Code was updated in 2009 and 2019 to ensure that company interactions with HCPs comply with high ethical standards. Earlier this year, PhRMA announced updates to certain provisions of the Code applying to company-sponsored speaker programs, which will take effect on January 1, 2022. These updates follow fraud enforcement issues raised by the U.S. Department of Health and Human Services Office of Inspector General (OIG) in a Special Fraud Alert published late last year.[1]
Drug and device companies and HCPs should review their current ethics and compliance programs, and consider updating them in light of updated PhRMA Code provisions and current trends in federal healthcare fraud enforcement.
OIG Special Fraud Alert
OIG and the U.S. Department of Justice (DOJ) have investigated numerous cases involving allegations that payment offered in connection with pharmaceutical company speaker programs violated the federal anti-kickback statute (AKS). The AKS makes it a criminal offense to knowingly and willfully solicit, receive, offer, or pay any remuneration to induce or reward referrals for, or orders of, items or services reimbursable by a federal health care program such as Medicare.[2]
The AKS has broad implications. It defines remuneration to “include the transfer of anything of value, directly or indirectly, overtly or covertly, in cash or in kind” and “has been interpreted to cover any arrangement where one purpose of the remuneration was to obtain money for . . . referrals.”[3] AKS violations also can give rise to potential violations of the civil False Claims Act (FCA), which authorizes up to treble damages and statutory penalties for false claims submitted to federal health care programs.[4]
Federal investigators have pursued civil and criminal cases against companies and individual HCPs involving speaker programs. The OIG Special Fraud Alert published in November 2020 highlights “the fraud and abuse risks associated with the offer, payment, solicitation, or receipt of remuneration relating to speaker programs by pharmaceutical and medical device companies.”[5] OIG declared in the Fraud Alert that it is skeptical of the educational value of pharmaceutical company speaker programs: “Our investigations have revealed that, often, HCPs receive generous compensation to speak at programs offered under circumstances that are not conducive to learning or to speak to audience members who have no legitimate reason to attend. Such cases strongly suggest that one purpose of the remuneration to the HCP speaker and attendees is to induce or reward referrals.”[6]
The OIG Special Fraud Alert describes nine different characteristics, which, taken separately or together, indicate that a speaker program could potentially violate the AKS:
- Little or no substantive information is actually presented at the program
- Alcohol is available, or a meal exceeding modest value is provided to the attendees of the program (free alcohol heightens concern)
- The program is held at a location that is not conducive to the exchange of educational information, such as restaurants or entertainment or sports venues
- The company sponsors a large number of programs on the same, or substantially the same topic or product, especially where there is no recent substantive change in relevant information
- There has been a significant period of time with no new medical or scientific information, nor a new FDA-approved or cleared indication for the product
- HCPs attend programs on the same or substantially the same topics more than once (as either a repeat attendee or as an attendee after being a speaker on the same topic)
- Attendees include individuals who do not have a legitimate business reason to attend the program, including, friends, significant others, or family members of the speaker or HCP attendee, employees or medical professionals who are members of the speaker’s own medical practice, staff of facilities for which the speaker is a medical director, and other individuals with no use for the information
- The company’s sales or marketing business units influence the selection of speakers or the company selects HCP speakers or attendees based on past or expected revenue that the speakers or attendees have or will generate by prescribing or ordering the company’s products (such as using an ROI analysis to identify participants)
- The company pays HCP speakers more than fair market value for the speaking service or pays compensation that takes into account the volume or value of past or future business generated by the HCPs.[7]
Although OIG says it does not want to “discourage meaningful HCP training and education,” the Special Fraud Alert makes it clear that federal enforcers will continue to emphasize the risks of payment for speaker programs, and urges drug and device companies and HCPs to be aware of them when offering to pay for or participate in a speaker program.[8] OIG also believes that risks associated with speaker programs will increase as we emerge from the COVID-19 pandemic and companies resume in-person speaker programs or increase speaker program-related remuneration to HCPs.[9]
PhRMA Code Revisions
The PhRMA Code’s updated guidance on speaker programs provides that the purpose of those programs “should be to present substantive educational information designed to help address a bona fide educational need among attendees.”[10] Company-sponsored HCP speaker programs should take into account “recent substantive changes in relevant information (e.g., new medical or scientific information or a new FDA-approved indication for the product) or the importance of the availability of such educational programming.”[11] Moreover, invitations to speaker programs should be limited to those who have a demonstrated need for the information presented at the program.[12]
The new PhRMA Code speaker program provisions give guidance to companies concerning how speaker programs should be structured, with the aim of mitigating the fraud compliance risks identified in OIG’s Special Fraud Alert. Previous PhRMA guidance stated that meals offered at programs “should be modest as judged by local standards;” the new guidance adds that companies should not pay for or make alcohol available during the program.[13] They also clarify that upscale restaurants or similar venues are not appropriate for these events.[14]
The updated PhRMA Code also clarifies best practices concerning attendance at speaker programs. The PhRMA Code now states that “repeat attendance at a speaker program on the same or substantially the same topic where a meal is provided to the attendee is generally not appropriate, unless the attendee has a bona fide educational need to receive the information presented.”[15] The Code also clarifies that speakers should not attend programs again as participants if the topic is substantially similar.
Additionally, PhRMA notes that the Code “has long stated that spouses or other guests should not attend company-sponsored informational presentations unless these individuals are health care professionals for whom the informational presentation is appropriate.”[16] The new guidance adds that attendance by friends, significant others, family members, and other guests of a speaker or invited attendee is not appropriate, unless they have a demonstrable need to attend.[17]
Companies and HCPs Should Review Their Ethics and Compliance Programs
These new speaker program changes will take effect on January 1, 2022. Although the PhRMA Code is industry guidance, OIG has long recommended that companies consider adopting it, elevating the Code’s relative importance in health care compliance and risk management.[18] Some states have effectively incorporated aspects of the PhRMA Code into their respective compliance laws.[19] Companies and HCPs should review their current ethics and compliance programs and consider updating them in light of these new provisions.
Recent OIG and DOJ scrutiny of HCP speaker programs provide a vivid example of the importance of maintaining current compliance programs. The founder of pharmaceutical company Insys Therapeutics was sentenced to 66 months in prison in 2020 for using speaker programs as “a vehicle to pay bribes and kickbacks to targeted practitioners in exchange for increased . . . prescriptions and increased dosage.”[20] Later, in September 2020, another Insys employee was indicted on “allegations [that] she paid an Ohio doctor kickbacks to prescribe the fentanyl spray Subsys and helped him secure $1.7 million in fraudulent reimbursements.” [21] She pled guilty on September 29, 2021.[22]
In addition to criminal charges, using speaker programs to improperly compensate HCPs can result in significant fines and other repercussions. The DOJ and pharmaceutical company Novartis AG reached a settlement in June 2020 regarding Novartis’ alleged “sponsor[ship of] numerous events that purported to be educational but clearly were intended to entertain doctors as incentives to write more prescriptions of Novartis drugs.”[23] In addition to paying a $642 million settlement, making a public apology, and accepting responsibility, Novartis had to enter into a restrictive Corporate Integrity Agreement with OIG.[24] The agreement requires that Novartis “significantly reduce the number of paid speaker programs and the amounts spent on such programs.”[25] Additionally, it provides that speaker programs “may only occur under limited circumstances and in a virtual format.”[26] The agreement also subjects Novartis to “multi-faceted monitoring of [its] operations” and requires executives and Board members to certify compliance.[27]
Companies that sponsor HCP speaker programs should familiarize themselves with the Novartis and other recent integrity agreements to “benchmark their [own] programs and determine whether additional controls are advisable given the high-risk nature of speaker programs.”[28] A list of all OIG CIAs is available here.
There is no single factor listed in the Special Fraud Alert that is, by itself, determinative of an AKS violation. Companies should continue to assess their speaker programs, given OIG’s ongoing enforcement focus, and strive to adopt best practices to minimize the risk of violating fraud and abuse laws. Companies should run speaker programs with an eye toward showing their intention to educate the medical community and not to incentivize prescriptions by HCPs.
In addition, the Special Fraud alert notes that the OIG Advisory Opinion process is available for companies and HCPs who have questions about specific speaker program arrangements involving remuneration to potential referral sources.[29]
JMBM’s White Collar Defense & Investigations Group is keenly focused on our clients’ business objectives and is committed to minimizing the disruption, anxiety, and public scrutiny that can arise from criminal and civil investigations and litigation. We are leaders in the representation of companies, boards of directors, management, and individuals in connection with a broad range of government investigations, enforcement actions, remediation and compliance, administrative proceedings, internal investigations and white collar criminal investigations and prosecutions.
[1] See OIG Special Fraud Alert: Speaker Programs, November 16, 2020 (available at www.oig.hhs.gov/fraud/docs/alertsandbulletins/2020/SpecialFraudAlertSpeakerPrograms) (hereinafter “Special Fraud Alert”).
[2] 42 U.S.C. § 1320a-7b(b).
[3] OIG Advisory Opinion No. 12-05, Apr. 24, 2012, at 3-4 (available at https://oig.hhs.gov/documents/advisory-opinions/641/AO-12-05.pdf).
[4] The AKS clarifies that “a claim that includes items or services resulting from a violation of this section constitutes a false or fraudulent claim for purposes of [the FCA.]” Violations under the FCA authorizes up to treble damages and statutory penalties. 31 U.S.C. § 3729(a)(1)(G).
[5] Id.
[6] Id., p. 3.
[7] Id., pp. 5-6.
[8] Id., p. 6.
[9] Id.
[10] Pharmaceutical Research and Manufacturers of America, Statement on Revisions to the PhRMA Code, August 6, 2021, (available at www.phrma.org/resource-center/Pages/Statement-on-Revisions-to-the-PhRMA-Code-on-Interactions-with-Health-Care-Professionals) (hereinafter “PhRMA Statement on Revisions”); see also PhRMA Code on Interactions with Health Care Professionals (hereinafter “PhRMA Code”), p. 11 (available at https://www.phrma.org/-/media/Project/PhRMA/PhRMA-Org/PhRMA-Org/PDF/P-R/PhRMA-Code—Final.pdf).
[11] PhRMA Code, p. 12.
[12] Id., p. 12.
[13] Id., p. 23–24.
[14] PhRMA Statement on Revisions; see also PhRMA Code, p. 11.
[15] PhRMA Statement on Revisions; see also PhRMA Code, p. 12.
[16] PhRMA Statement on Revisions.
[17] PhRMA Code, p. 12.
[18] See OIG Compliance Program Guidance for Pharmaceutical Manufacturers, 71 Fed. Reg. 23737 (May 5, 2003) (stating that PhRMA Code provides useful and practical advice for structuring relationships between companies and HCPs) (available at Federal Register :: OIG Compliance Program Guidance for Pharmaceutical Manufacturers).
[19] See, e.g., California Health and Safety Code § 119402 (“Every pharmaceutical company shall include in its Comprehensive Compliance Program policies for compliance with the Pharmaceutical Research and Manufacturers of America (PhRMA) ‘Code on Interactions with Health Care Professionals,’ dated July 1, 2002. The pharmaceutical company shall make conforming changes to its Comprehensive Compliance Program within six months of any update or revision of the ‘Code on Interactions with Health Care Professionals.’”)
[20] DOJ Office of the Attorney General—Massachusetts, Founder and Former Chairman of the Board of Insys Therapeutics Sentenced to 66 Months in Prison, Jan. 23, 2020 (available at https://www.justice.gov/usao-ma/pr/founder-and-former-chairman-board-insys-therapeutics-sentenced-66-months-prison).
[21] Rachel Scharf, Ex-Insys Sales Rep Admits Guilt on Day 4 of Kickbacks Trial, Law360, Sept. 29, 2021 (available at https://www.law360.com/health/articles/1426472/ex-insys-sales-rep-admits-guilt-on-day-4-of-kickbacks-trial?copied=1).
[22] See id.
[23] Dave Simpson, Novartis To Pay $729M To End 2 FCA Kickback Accusations, Law360, Jul. 1, 2020 (available at https://www.law360.com/articles/1288802/novartis-to-pay-729m-to-end-2-fca-kickback-accusations); John Bentivoglio, et al., Lessons From Novartis’ $678M Speaker Program Settlement, Law360, Aug. 5, 2020 (available at https://www.law360.com/articles/1298546?scroll=1&related=1).
[24] See Simpson, supra note 10.
[25] DOJ Office of Public Affairs, Novartis Pays Over $642 Million to Settle Allegations of Improper Payments to Patients and Physicians, Jul. 1, 2020 (available at https://www.justice.gov/opa/pr/novartis-pays-over-642-million-settle-allegations-improper-payments-patients-and-physicians).
[26] Id.
[27] Id.
[28] Bentivoglio, et al., supra note 10; Stipulation and Order of Settlement and Dismissal, United States ex. rel. Bilotta v. Novartis Pharmaceuticals Corp., S.D.N.Y. Case No. 1:11-cv-00071, Jun. 29, 2020 (available at https://www.law360.com/articles/1288802/attachments/1).
[29] See Special Fraud Alert, p. 7.
