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March 26, 2013

26 March 2013

Office of Inspector General Issues Updated Guidelines for State False Claims Acts

The Office of Inspector General of the Department of Health and Human Services (OIG) has issued updated guidelines for determining whether a state false claims act satisfies the requirements of section 1909(b) of the Social Security Act. Where the Inspector General determines that a state act satisfies the requirements of section 1909(b), the state is entitled to an increased share of recovery in false claims cases brought under that state act. Effective March 15, 2013, the new guidelines replace previous guidelines issued on August 21, 2006 and reflect amendments to the Federal False Claims Act (FCA) that have gone into effect since issuance of the previous guidelines.

As part of the revisions, OIG modified the guidelines for determining whether the state act appropriately establishes liability for false or fraudulent claims with respect to state Medicaid expenditures. These revised guidelines reflect amendments to the FCA that expanded liability to include false statements “material” to a false or fraudulent claim. OIG also expanded the guidelines with respect to provisions that reward and facilitate qui tam actions. Among these revisions, OIG restricted state law limits on actions resulting from public disclosures and modified the minimum percentages of recovery that a relator must receive under the state act. With respect to the civil penalty provisions, OIG revised the guidelines to provide minimum civil penalty amounts of at least $5,500 to $11,000, which amounts reflect adjustments per the Federal Civil Penalties Inflation Adjustment Act.

To qualify for the incentive provided by section 1909 of the Social Security Act, a state false claims act must fulfill the requirements of section 1909(b) as amended at the time of OIG’s review. OIG provided a two-year grace period during which states with false claims acts that had been approved before the amendments to the FCA became effective would continue to qualify for the incentive. After expiration of the grace period, a state must amend and resubmit its false claims act to OIG for review and either have its act approved or be under OIG review in order to qualify for the incentive.

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26 March 2013

Par Pharmaceuticals Settles Off-Label Allegations for $45 million

Posted by Kristin KoehlerLauren Roth and Elizabeth Kolbe

On March 5, 2013, Par Pharmaceuticals (“Par”) became the latest pharmaceutical company to settle allegations of off-label promotion. Specifically, Par resolved criminal misbranding allegations by pleading guilty to a one-count misdemeanor violation of the Federal Food, Drug, and Cosmetic Act. The company also settled related civil allegations that its conduct violated the False Claims Act. In total, the company agreed to pay $45 million in criminal fines, forfeiture, and civil penalties.

The government alleged that Par promoted the use of Megace ES—an appetite stimulant approved for the treatment of patients with significant weight loss as a result of AIDS—for non-AIDS-related geriatric wasting. The government’s alleged evidence of misbranding included actions such as: (i) setting sales goals that exceeded the current sales trends for on-label use, (ii) creating call plans that included long-term care facilities and practitioners who treated geriatric patients, and (iii) adopting a strategy to convert physicians to Megace ES without regard for whether the physicians had been prescribing the competitor product for on- or off-label purposes. As part of this effort, Par’s marketing allegedly failed to acknowledge risks unique to elderly patients and made inaccurate or misleading comparative effectiveness claims between Megace ES and the competitor product, such as suggesting that practitioners “upgrade” their patients to Megace ES and falsely claiming that Megace ES worked faster than the competitor product.

As part of the global resolution of these claims, Par executed a Corporate Integrity Agreement (“CIA”) with the Office of the Inspector General of the Department of Health and Human Services (“OIG”) and the company accepted compliance-related obligations in its plea agreement with the Department of Justice. Among notable aspects of its CIA, Par must adopt restrictions on how incentive compensation is calculated for Megace ES sales professionals and it must institute a clawback mechanism for compensation previously paid to senior executives—two provisions that first appeared in the GlaxoSmithKline CIA (June 2012), but have not been required by OIG since then. Pharmaceutical executives, compliance professionals, and industry advisors had been waiting to see whether these requirements would be unique to GSK (which, to-date, remains the largest single settlement in history), or whether OIG would seek to impose them under other circumstances as well. Interestingly, although intervening settlements with Boehringer Ingelheim (October 2012) and Amgen Inc. (December 2012) were resolved for far higher dollar amounts than Par’s case, related CIAs had not included the incentive compensation provisions. Thus, going-forward, although it is now clear that OIG will seek to extend these provisions to other companies, predicting when it will do so remains a challenge.

The Par settlement concludes three qui tam suits filed in the District of New Jersey: U.S. ex rel. McKeen and Combs v. Par Pharmaceutical, et al., U.S. ex rel. Thompson v. Par Pharmaceutical, et al., and U.S. ex rel. Elliott & Lundstrom v. Bristol-Myers Squibb, Par Pharmaceutical, et al.

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