PharmExec Blog

Government Crackdown on the C-Suite

Over the past decade, the drug industry has paid tens of billions of dollars to settle state and federal lawsuits involving the False Claims Act—defrauding Medicare and Medicaid, promoting drugs for unapproved uses, paying kickbacks to doctors and pharmacies, and the like. Stories about off-label promotion of drugs with serious adverse effects and no proven efficacy to society’s most vulnerable—children, the elderly, prisoners, and the mentally ill—have sparked an “Off with their heads!” demand for justice. That’s why the Obama Administration has announced that it is rolling out a new enforcement strategy that will take full advantage of the False Claims Act’s provisions. Drugmakers will be forced to sell drugs and relinquish product exclusivity. Even more interesting, the executives under whose watch serious violations occur will be banned from doing business with the government—in effect, getting booted out of the industry.

Sound harsh? Lewis Morris, a 29-year veteran of the Office of the Inspector General and its top lawyer, was more than happy to make the “responsible corporate official” case to Pharm Exec.

Pharm Exec: Can you begin by explaining what you do as the counsel to the Office of the Inspector General?

Lewis Morris: Over the last decade, the Department of Justice and the Inspector General’s Office have been pursuing a significant number of cases involving the pharmaceutical industry, as well as device manufacturers, hospitals, and doctor. Under the civil False Claims Act, a company can be liable either for promoting the off-label use of a drug, for misrepresenting the pricing of a drug to Medicaid or Medicare, and other fraudulent conduct. In addition, a pharmaceutical manufacturer can be liable under our criminal authorities for submission of fraudulent claims, paying kickbacks to doctors, and other activities. After a case has been thoroughly investigated by our agents and other partners in law enforcement, the question becomes how to structure a global settlement that puts the matter to rest in the best interests of the American people—and that’s where our Office of Counsel comes in.

The OIG has a unique authority to exclude from Medicare and Medicaid any individual or entity that has been convicted of healthcare fraud, abuse, or related offenses. If a company has engaged in, say, a $100 million fraud—that’s a pretty modest sum these days—we have to make a decision whether to seek to throw them out of the Medicare and Medicaid programs. If they’ve been convicted of Medicare fraud, a criminal conviction, their exclusion is mandatory. More likely than not, that would be a deal breaker for any company [because most of its profits come from sales to the federal government]. It’s not going to voluntarily commit suicide by pleading to a criminal charge. So they’re likely to have brought their high-priced lawyers into the act, negotiated a settlement, which gives them at least the option of staying in business.

Pharm Exec: There’s been talk in the media that you’re going to start going after individual executives at drug companies responsible for committing healthcare fraud. Is that true?

Morris: Yes. Part of our strategy is to say to companies, “it’s not business as usual anymore.” And the reason is that the first time around, we give everybody the benefit of the doubt. Everybody was entitled to have one mistake in the integrity of their company. And, particularly, in light of the importance of pharmaceuticals and the needs of our beneficiaries, that is a good policy.

Pharm Exec: Do you prioritize your array of tools—selling meds, relinquishing exclusivity, holding individual executives accountable—in terms of severity?

Morris: We are going to look at the facts and the circumstances of a particular case and decide which of our many tools will do the best job of protecting our beneficiaries and our program. But ultimately the Inspector General’s Office is not here to mete out punishment. We are here to protect the integrity of the Medicare and Medicaid programs, to promote their efficiency and their effectiveness, and Congress has given us a mandate to remove from the program those who have abused our patients and demonstrated that they’re not trustworthy.

Read the whole Q&A in the June issue of Pharm Exec.

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