New OIG Pharmaceutical Compliance Guidance Raises Questions About Financial Relationships

Profession:McDermott Will & Emery

On April 28, 2003, the Office of the Inspector General (OIG) of the U.S. Department of Health and Human Services released its Compliance Program Guidance for Pharmaceutical Manufacturers (the Guidance), the latest in a recent series of OIG compliance guidances directed to a specific sector of the health care industry. The Guidance outlines steps to assist pharmaceutical manufacturers in promoting compliance with applicable health care laws and regulations, particularly the U.S. Anti-Kickback Statute, False Claims Act and Medicaid Drug Rebate Act (also known as the Medicaid Best Price Act). Generally, the Guidance reaffirms positions advanced by the OIG in an initial draft released in October of 2002 (Draft OIG Compliance Program Guidance for Pharmaceutical Manufacturers, 67 Fed. Reg. 62057 (October 3, 2002)). However, the final Guidance revises the OIG's position on several issues, including consulting arrangements with physicians and educational and research grants.

The release of the Guidance reflects the OIG's heightened scrutiny of financial relationships between drug manufacturers, drug purchasers and prescribers. Although the OIG states that the Guidance creates no new law and that compliance is voluntary, the Guidance calls into question certain common industry practices. Accordingly, drug manufacturers, purchasers and prescribers should evaluate their business relationships to assess compliance with the principles set forth in the Guidance and determine what, if any, changes may be advisable to current business practices.

Implementation of Compliance Program

The Guidance recommends that drug manufacturers implement a comprehensive compliance program and outlines the elements that the OIG believes are necessary for an effective program. The recommended program elements are derived from the U.S. Federal Sentencing Guidelines, which allow for reduction in an offender's sentence when a crime occurs despite "an effective program to prevent and detect violations of law." The elements of an effective compliance program include a designated compliance officer, the development and distribution of a written code of conduct, attention to employee education programs, enhanced communication among employees and policies for investigating and remediating violations of the internal compliance guidelines. Most pharmaceutical companies already have general corporate compliance programs that include these elements.

Suspect Arrangements

The Guidance addresses business practices that, in the OIG's opinion, pose a significant risk of liability under the federal health care laws mentioned above. The Guidance is not meant to summarize all "potential risk areas for pharmaceutical manufacturers" and limits discussion to three areas that are "currently of concern to the law enforcement community." The identification of a particular business practice in the Guidance does not mean that the practice is necessarily illegal. However, business practices that fall within the three described areas should be assessed because they may be viewed as suspect by the OIG.

Integrity of Data and Government Reimbursement

The Guidance warns pharmaceutical companies against directly or indirectly manipulating sales and price data. The Guidance suggests that pharmaceutical manufacturers may be held responsible for the average wholesale prices (AWP)...

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