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Drug-firm executives under new scrutiny in Medicare fraud

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By Anna Edney
Tuesday, November 9, 2010

Federal inspectors want to prevent drug-company executives from doing business with the U.S. government when their companies are convicted of Medicare fraud.

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Under guidelines from the Department of Health and Human Services' Office of Inspector General, executives can be barred from contracting with federal health programs when they knew, or if the inspector general concludes they should have known, about fraud at their firms. The guidelines were posted Oct. 20 on the office's Web site.

Authorities have been spurred by large settlements, said Robert DeConti, chief of the administrative and civil remedies branch in the inspector general's Office of Counsel.

GlaxoSmithKline was ordered to pay $750 million on Oct. 26 for sale of defective drugs, and Pfizer agreed to pay $2.3 billion in September 2009 for fraudulent marketing of medicine. A company that employs someone barred from doing business with the government cannot receive federal payments.

"That is definitely a renewed emphasis, maybe a new emphasis, on holding individuals accountable," DeConti said in an interview last month.

Certain crimes, such as patient abuse or a felony conviction of health-care fraud, require automatic exclusion by law, according to the inspector general's Web site.

The inspector general has the discretion to bar a person in other cases, such as a misdemeanor conviction.

Company executives might also be sanctioned if their employers are convicted of misconduct or they may be blocked from doing business with federal agencies. The inspector general has used this option 31 times since 1996. Most cases involved smaller, closely held companies such as those that make durable medical equipment, DeConti said. Twenty-eight people have been barred, he said.

Federal inspectors are targeting "complex cases that might involve global pharmaceutical manufacturers that are settling larger cases," he said. "We have cases under development right now against individuals in that kind of company."

In 2008, the inspector general barred three executives at Purdue Pharma. The officials at the drugmaker, based in Stamford, Conn., pleaded guilty to a misdemeanor for misbranding the painkiller OxyContin.

They were excluded from doing business with the government for 15 years. Purdue paid $634 million to settle criminal and civil claims that it misled patients and doctors about the addictiveness of OxyContin.

"An exclusion for 15 years is basically a career-ender," said Cory Andrews, senior litigation counsel at the Washington Legal Foundation, who has criticized the Food and Drug Administration for what he calls excessive enforcement.

Pfizer has "invested substantial resources" to create a compliance program under which every employee gets mandatory training, said Christopher Loder, a spokesman for the New York-based drugmaker. He declined to comment on whether Pfizer executives might be targeted with exclusion.

Mary Anne Rhyne, a spokeswoman for London-based Glaxo, also declined to comment.

Tens of thousands of people and companies are excluded, including nurses, physicians, dentists, pharmacies and durable medical equipment suppliers.

"The current administration is feeling that they want to increase enforcement in this area, and they're of the belief that monetary settlements aren't sufficient, and they need to charge individuals to deter the conduct," Jeffrey Senger, a lawyer at Sidley Austin LLP in Washington and former acting chief counsel with the FDA, said in a telephone interview.

Kirk Ogrosky, a former federal prosecutor and partner at the law firm Arnold & Porter in Washington, said he expects letters to go out to companies that have resolved cases with the Justice Department.

"I wouldn't be surprised if letters went out to executives in short order and said, 'Congratulations, we're considering you for permissive exclusion,' " Ogrosky said, referring to the inspector general's discretionary power.

DeConti said his office will discuss excluding executives when the government holds settlement talks with companies.

The FDA, which is part of HHS, has also warned drug companies that it will hold executives accountable for corporate wrongdoing.

Eric Blumberg, the FDA's deputy chief for litigation, told a group of drug lawyers in Washington last month that the agency might target for misdemeanor prosecutions executives whose companies promote unauthorized uses of their medicines.

The FDA can ban executives charged with misdemeanors from working in the pharmaceutical industry.

- Bloomberg News


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