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Thank you for your interest in the FCA Update Blog. We’ve relocated to McDermott’s Health & Life Sciences News blog. Visit us at healthlifesciencenews.com for future posts on for future posts on enforcement and compliance issues impacting the healthcare industry, False Claims Act litigation and more. For additional healthcare and white collar alerts, reports and webinar invitations from McDermott Will & Emery, please subscribe to our mailing lists.

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Healthcare Enforcement Quarterly Roundup – Q2 2019

In this second installment of the Healthcare Enforcement Quarterly Roundup for 2019, we cover several topics that have persisted over the past few years and identify new issues that will shape the scope of enforcement efforts for the remainder of this year and beyond. In this Quarterly Roundup, we discuss DOJ’s guidance on compliance programs and cooperation credit, new US Department of Health and Human Services (HHS) rules and enforcement activity on provider religious/conscience opt-out rights, enforcement activity against home health agencies and telemedicine providers, continued federal action to combat the opioid crisis, and resolution of ambiguity in the False Claims Act (FCA) statute of limitations. Click here to read the full issue of the Healthcare Enforcement Quarterly Roundup. Click here to download a PDF of the issue.  

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First of Its Kind: Drug Wholesaler Accepts DPA and Two Executives Face Criminal Charges in SDNY For Illegal Distribution of Opioids

On April 23, 2019, the US Department of Justice (DOJ) announced it has entered into a deferred prosecution agreement with Rochester Drug Co-Operative, Inc. (RDC), one of the 10 largest wholesale distributors of pharmaceutical products in the US, and filed felony criminal charges against two of RDC’s former senior executives for unlawful distribution of controlled substances (oxycodone and fentanyl) and conspiring to defraud the US Drug Enforcement Agency (DEA). During the relevant time period (2012-2016), RDC’s sales of oxycodone increased by approximately 800 percent (from 4.7 million to 42.2 million tablets) and fentanyl increased by approximately 2,000 percent (from 63,000 to over 1.3 million dosages). The two charged executives are RDC’s former chief executive officer, Laurence F. Doud III, and the company’s former chief compliance officer, William Pietruszewski. Geoffrey S. Berman, the US Attorney for the Southern District of New York, noted in a press...

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Health Care Enforcement Quarterly Roundup – Q1 2019

In this first installment of the Health Care Enforcement Quarterly Roundup for 2019, we continue to monitor trends we identified in 2018 and introduce new enforcement efforts that are expected to persist in the coming year. In this Roundup, we focus on increased enforcement activity against electronic health record (EHR) companies, enforcement against individuals (with an acute focus on the telemedicine industry), lower court interpretations of the landmark Escobar ruling, developments related to the Granston Memo and dismissal of False Claims Act (FCA) cases, potential changes to the FCA statute of limitations, and the current state of affairs in opioid litigations around the country. Click here to read the full issue of the Health Care Enforcement Quarterly Roundup. Click here to download a PDF of the issue.  

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DOJ Expands New Enforcement Tactic – Obtains TRO to Prevent Pharmacy From Dispensing Opioids

On February 8, 2019, the Department of Justice (DOJ) announced that it obtained a temporary restraining order (TRO) in the Middle District of Tennessee against two pharmacies, their owner and three pharmacists from dispensing controlled substances, including opioids. The DOJ simultaneously unsealed a complaint alleging violations of the False Claims Act and Controlled Substances Act against the same parties. DOJ’s press release is available here. The DOJ described this action as part of a coordinated effort by the Prescription Interdiction & Litigation (PIL) Task Force to deploy its criminal, civil and regulatory tools to address the opioid epidemic in the United States. The complaint alleges that the pharmacies and pharmacists filled numerous prescriptions for controlled substances outside the usual course of professional practice and in violation of the pharmacists’ corresponding responsibility to ensure that prescriptions were written for a legitimate...

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HHS Proposes to Revise Discount Safe Harbor Protections for Drug Rebates

On January 31, 2019, the Department of Health and Human Services (HHS) released a notice of proposed rulemaking (the Proposed Rule) as part of ongoing administration drug pricing reform efforts. The Proposed Rule would modify a regulatory provision that had previously protected certain pharmaceutical manufacturer rebates from criminal prosecution and financial penalties under the federal Anti-Kickback Statute. Specifically, the Proposed Rule would exclude from “safe harbor” protection rebates and other discounts on prescription pharmaceutical products offered by pharmaceutical manufacturers to Medicare Part D plan sponsors or Medicaid Managed Care Organizations (MCOs), unless the price reduction is required by law (such as rebates required under the Medicaid Drug Rebate Program). The proposed exclusion would apply to rebates offered directly to Part D plan sponsors and Medicaid MCOs, as well as those negotiated by or paid through a pharmacy benefit manager...

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OIG Dusts off the Old Rule Book to Say No to Free Expensive Drugs to Hospitals

The Office of Inspector General, Department of Health and Human Services posted an unusual negative Advisory Opinion (AO 18-14) on a drug company’s proposal to provide free drugs to hospitals for use with pediatric patients suffering from a form of epilepsy. Of particular interest is OIG’s reliance on a longstanding, but rarely used, authority to justify finding and relying on public information about the drug at issue, including pricing information, to support its unfavorable conclusion. This advisory opinion might counsel future opinion requestors to withdraw their opinion request once OIG indicates the opinion will be unfavorable. Click here to read the full post.

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Insys Announces Settlement-in-Principle with DOJ Over Alleged Subsys Kickback Scheme

Last month, Insys Therapeutics, Inc. announced that it reached a settlement-in-principle with the U.S. Department of Justice (DOJ) to settle claims that it knowingly offered and paid kickbacks to induce physicians and nurse practitioners to prescribe the drug Subsys and that it knowingly caused Medicare and other federal health care programs to pay for non-covered uses of the drug. The drugmaker agreed to pay at least $150 million and up to $75 million more based on “contingent events.” According to a status report filed by DOJ, the tentative agreement is subject to further approval and resolution of related issues. The settlement does not resolve state civil fraud and consumer protection claims against the company. The consolidated lawsuits subject to the settlement allege that Insys violated the False Claims Act and Anti-Kickback Statute in connection with its marketing of Subsys, a sub-lingual spray form of the powerful opioid fentanyl. The Food and Drug...

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Massachusetts Lawsuit Against Long-Term Pharmacy Care Provider Fails to Clear the Legacy FCA Public Disclosure Bar

On April 30, 2018, the U.S. District Court for the District of Massachusetts dismissed the last remaining state False Claims Act (FCA) claims against long-term care pharmacy provider PharMerica, Inc. on the grounds that neither relator qualified as an “original source” under the applicable pre-2010 version of the FCA, thereby precluding their claims under the public disclosure bar. Critically, neither relator had firsthand, “direct” knowledge of the alleged fraud scheme. In 2007, two relators (employees of a pharmaceutical company) filed suit alleging that their employer had offered financial incentives to two long-term care pharmacy providers (LTCPs) in exchange for the pharmacy providers’ promotion of prescriptions of a specific antidepressant. Specifically, the relators alleged that their employer offered significant discounts and rebates to LTCP customers in exchange for increased promotion of the antidepressant, and that market-tier discounts were...

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The Third Circuit Rejects the Anti-Kickback Statute “Tainted Claims” Theory

A key area of dispute in False Claims Act (FCA) cases based on Anti-Kickback Statute (AKS) violations is what degree of connection plaintiffs must allege between alleged kickbacks and “false claims.” The AKS states 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].” The government and relators typically argue that the mere fact that claims were submitted during the period of alleged kickbacks is sufficient. Defendants argue that the law requires plaintiffs to specifically identify claims “resulting from” an alleged kickback – i.e., that there is proof that the alleged kickback caused the referral or recommendation of the item or service contained in the claim. The Third Circuit’s recent decision in United States ex rel. Greenfield v. Medco Health Systems, Inc. articulated a middle of the road approach.  In affirming summary judgment for the defendants, the...

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