Last Friday, we wrote to HHS Inspector General Levinson in response to the Department of Health and Human Services’ Request for Information Regarding the Anti-Kickback Statute and Beneficiary Inducements Civil Monetary Penalty (RFI).
Many of the FCA whistleblower cases that TAF members have brought to the attention of the DOJ and successfully litigated have involved illegal kickbacks between healthcare providers and suppliers, including pharmaceutical manufacturers, hospitals, pharmacies, clinical diagnostic laboratories, nursing homes, drug wholesalers, health plans and physicians. In 2010, recognizing the prevalence of fraud in the healthcare system, Congress amended the Anti-Kickback Statute to expressly provide that a claim to the government that includes items or services resulting from a violation of the Anti-Kickback Statute (AKS) “constitutes a false or fraudulent claim” for purposes of the FCA. 42 U.S.C. § 1320a-7b(g). Consequently, TAF members have a strong interest in ensuring that any changes to the Anti-Kickback Statute protect, rather than undermine, the interests of honest patients and providers, and those of taxpayers generally.
Below is a quick summary of our recommendations to HHS (read our full letter here):
1) Ensure that “Care Coordination” and “Value-Based Care” Do Not Open the Door to More Healthcare Fraud and Abuse More
Unfortunately, as the healthcare system has grown larger and more complex, fraud and abuse, and specifically the problem of illegal inducements, have not diminished but have increased commensurably. The size and complexity of the healthcare system appears to be matched only by the ingenuity of those who create schemes to profit from federal and state programs at patient and taxpayer expense.
Similarly, with the rise of managed care, new fraud schemes have arisen that target Medicare Advantage, Medicare Part D, and comparable state Medicaid programs. These schemes are still evolving but include:
1) Long-term care pharmacies paying kickbacks to nursing homes in the form of discounts on the Medicare Part A per diem rate for their residents in order to induce the referral of the nursing homes’ Medicare Part D and Medicaid prescription business.
3) Pharmacy benefit managers paying kickbacks to health plans for favorable treatment under Medicare Advantage contracts, and soliciting and receiving kickbacks from drug companies to switch patients’ prescriptions to their drugs
Many of these recent schemes have involved euphemistic jargon employed by the wrongdoers in an attempt to legitimize their misconduct. For example, pharmaceutical companies will compensating pharmacies based on their success in persuading patients to order refills of so-called “specialty drugs,” a euphemistic term that the industry uses for the most expensive medications in the marketplace – drugs that often cost hundreds of thousands of dollars per patient each year. The industry cloaks this scheme in the mantle of “adherence programs,” i.e., programs designed to help patients by keeping them on their prescribed medications, when in reality the schemes are all about profits and not about patients.
If HHS OIG carves out of the kickback statute the so-called value-based payment systems that meet the broad and ambiguous criteria in the American Hospital Association’s proposed safe harbor, it is virtually guaranteed that a host of new schemes will arise within those systems that violate the central goals of the AKS: leveling the playing field for free competition; preserving the independence and objectivity of clinical decision making; and preventing over-utilization of health care billed to the taxpayers.
2) Anticipate the Unintended Consequences of Any Changes to the Safe Harbors and Proceed with Utmost CautionMore
TAF’s concerns about the unintended consequences of ostensibly well-meaning safe harbors are not theoretical. These concerns have already played out in cases where defendants argued that safe harbors applied to their fraudulent schemes, but that have resulted in FCA liability nonetheless. For instance, in United States ex rel. Lisitza v. Johnson & Johnson, 765 F. Supp. 2d 112 (D. Mass. 2011), the defendants’ motion to dismiss was denied and the defendants ultimately settled claims that pharmaceutical manufacturers entered into an unlawful kickback scheme with Omnicare, the nation’s largest supplier of drugs to nursing homes, to promote the defendants’ branded drugs over less costly alternatives, and caused claims for payment to be submitted to government healthcare plans in violation of the FCA.
These issues are also arising increasingly in connection with patient assistance programs, where drug companies engage nominally “non-profit” foundations and organizations to defray the cost of patients’ co-payments or cover other expenses. Helping needy patients get access to the information and medications that they need is undoubtedly a worthy cause, but these relationships are often exploitive and can result in patient harm. For instance, in United States ex rel. Clarke, et al. v. Aegerion Pharmaceuticals, Inc., et al., No. 13-CV-11785 (D. Mass.), the government and relator alleged that the drug manufacturer Aegerion defrayed patients’ copayment obligations for its drug Juxtapid by funneling funds through Patient Services Inc., an entity claiming to be a non-profit patient assistance program. The defendant settled claims that it used the patient assistance program to induce patients to use its product by defraying copayments for uses of Juxtapid outside of the medically accepted indications for the drug, a very dangerous medication that came with a “black box” warning that it may cause liver toxicity and gastrointestinal adverse reaction.
This year, pharmaceutical manufacturer Pfizer settled similar claims that it used a foundation as a conduit to underwrite the copayments of Medicare patients taking three Pfizer drugs. The government alleged that, in order to generate revenue, Pfizer transitioned certain patients to a third-party non-profit foundation, and the foundation then covered the patients’ Medicare copayments. In turn, Pfizer allegedly made donations to the foundation to enable it to cover the cost of these copayments. The drug company United Therapeutics Corporation settled similar claims last year for $210 million. These are new and innovative fraud schemes that involve conduct that appears on the surface to help patients but actually lines the pockets of pharmaceutical companies. The same kinds of exploitation would be rampant under the second safe harbor proposed by the American Hospital Association.
Based on decades of experience monitoring and supporting whistleblower cases involving alleged violations of the AKS, TAF perceives a significant risk that enactment of the AHA-proposed safe harbors likewise will bring about many of the evils that the AKS is intended to mitigate. First, the AHA’s proposed language is so broad and replete with undefined terms that industry players wishing to violate the spirit of the AKS would have free rein to take advantage of the new safe harbors. Second, the AHA and other commenters supporting the AHA’s proposals have for the most part failed to provide specific examples of the types of arrangements they aim to protect and, to the extent they have done so, the examples on their face create enormous risk of nefarious activities detrimental to the goals of the AKS.
For example, several of the AHA-aligned commenters reference a need to protect arrangements in which hospitals donate electronic health record systems to medical groups to allow for better coordination of care. While at first blush this goal appears laudable, a closer analysis reveals the serious risks that these arrangements pose to the goals underlying the AKS. Hospitals would have to create eligibility criteria lest they be on the hook to purchase electronic records systems for every medical group in the country. The most likely eligibility criteria that hospitals would adopt, such as a medical practice’s volume of referrals to the hospital, or geographic location, would skew medical decision making and restrain free competition. Thus, to “earn” these electronic systems, doctors would be incentivized to refer more patients to the hospital offering the gift, or move their offices closer to the hospital, from which a higher volume of referrals to the hospital logically would follow, regardless of whether that hospital was best for the needs of the patient in question. In addition, once a medical group had accepted the gift, in order to optimize communication about health information it would be limited in its future referrals to those hospitals with compatible electronic records software – which likely would be the hospitals owned by the chain that had made the gift. A far better solution, consistent with the goal of preventing fraud and abuse, would be for AHA members collectively to fund a program, operated by a neutral party subject to HHS oversight, which would underwrite the costs of establishing a nationwide health records electronic system aimed at ensuring secure and efficient communications among all health care providers.
3) Dismiss the AHA’s Proposed Safe HarborsMore
The AHA also proposes a safe harbor for “items and services offered to beneficiaries to promote better care or reduce overall costs,” and TAF opposes the adoption of this safe harbor as well. As the whistleblowers and counsel in our membership have often seen, but for the fact that patients have “skin in the game” through co-payments, deductibles and other cost sharing obligations, many of the fraud and abuse schemes successfully investigated by the DOJ and HHS-OIG would have gone undetected. For example, in 2011 DOJ and HHS OIG recovered approximately $150 health services provider that was billing nationwide for home health visits it simply did not perform.
This blatant, egregious fraud scheme had gone undetected by regulators and auditors and unreported by those within the company who witnessed the fraud. It was a single patient who carefully scrutinized his explanation of benefits statements and brought the matter forward. Moreover, eliminating patients’ financial stake in the cost of their health care is an open invitation to over-utilization. While the government may have assumed this risk for the truly indigent individuals who qualify for Medicaid, it is unreasonable to assume the risk for those patients who have the resources to contribute towards their own health care. Moreover, there are viable alternatives to lighten the financial impact on non-Medicaid patients without the risk of steering patients to particular drugs, hospitals or other health care providers, such as disease-specific patient assistance funds, insulated from manufacturer involvement, that help patients with the costs of drugs used for approved purposes.
The move to value-based and coordinated care does not eliminate the fundamental concern at the core of the AKS – limiting the role that profit plays in healthcare decisions affecting individual patients and subsidized in large part by the taxpayers. Before proposals to amend the law are seriously considered, we recommend that the Department carefully examine the claimed barriers to modernization and whether mechanisms do not already exist to address them. In addition, the Department should carefully consider whether the proposed “fixes,” which involve exempting providers, suppliers and manufacturers and various unspecified arrangements from a critical anti-fraud law, would allow conflicts of interest to improperly affect medical decision-making. Years of deliberate evaluation have produced substantial gains in reducing the role of financial self-interest in delivering patient care funded by the government, and the Department should not rush to take steps that could undermine that progress.
As the Department of Justice has stated, its enforcement of the AKS illustrates the importance that the government places on ensuring that healthcare decisions are based upon patient interest and not the financial interests of providers. These were not matters involving technical violations or mistakes. Due of the importance of the AKS to the government’s fraud-fighting efforts, we hope that HHS will not inadvertently open the door to new fraud schemes as part of its “Regulatory Sprint to Coordinated Care.”