Pharmaceuticals continue to top list of fraud initiatives

Physicians and hospitals are not immune from scrutiny, warns federal prosecutor

Government health care fraud investigators continue to maintain a high level of interest in issues related to pharmaceuticals, experts say. Indeed, according to qui tam attorney Marc Raspanti of Miller Alfano in Philadelphia, many complex schemes involving physicians and pharmaceutical companies that still are under seal will begin to surface later this year.

Margaret Hutchinson, assistant U.S. attorney in Philadelphia, says one overriding concern of the government’s is that physician judgment may be compromised by the approach pharmaceutical companies use to push a particular drug. Many of those concerns will be spelled out in significant detail when the Department of Health and Human Services’ Office of Inspector General (OIG) releases its draft guidance for the pharmaceutical industry later this year.

In the meantime, Hutchinson says many of the issues that hospitals should be wary of are spelled out in the TAP Pharmaceuticals corporate integrity agreement (CIA) with the OIG, announced in October 2001 and posted on the agency’s web site.

Here are some of the specific questions that Hutchinson says compliance officers should pose regarding the purchase of drugs:

  • Who is in charge of that decision?
  • What went into that decision making?
  • What went into the contract negotiations to put the drug on the formulary?
  • Did that induce the person to possibly compromise what otherwise would have been a different medical choice in terms of the prescribed drug?

According to Hutchinson, these questions were central to the investigation that led to TAP’s $875-million settlement with the government last year. "They are very interesting issues that are not put to rest with just the TAP case," she warns.

Former state prosecutor Carolyn McElroy argues that the TAP model plays out differently in the hospital setting because drugs are not reimbursed separately. "Hospital reimbursement for drugs is based on DRGs with a handful of exceptions," says McElroy, who helped shape the pharmaceutical-fraud initiative before leaving for private practice. "That gives hospitals an incentive to buy the cheapest overall effective product."

McElroy, now with Mintz Levin in Washington, DC, also contends that it will be difficult for the government to argue that hospitals cannot legally consider the cost of a product or prosecute a cost-based decision as if it were an "inducement." After all, state and federal government purchasers consider cost when buying pharmaceuticals, she points out.

McElroy says proving intent by a hospital gets even more complicated because hospitals typically use buying groups for pharmaceutical purchases, and those buying groups actually make the decisions on what drugs are available for the hospital to buy. She argues that it will be difficult for the government to hold the hospital responsible for decisions on which a drug is purchased when it had no real knowledge about why a certain brand or drug was chosen, and its choices may have been limited by the buying group’s offerings.

Research in the hospital setting is another compelling issue right now, especially where teaching hospitals are concerned, says Hutchinson. Numerous issues related to research can spell trouble for hospitals, she says. Three of those issues include quality of care, merging of patient populations, and whether the researcher who receives a government grant is actually the one doing the research, she says.