2021 Outlook: The Changing Legislative, Regulatory, and Enforcement Landscape

2021 Outlook: The Changing Legislative, Regulatory, and Enforcement Landscape

Spring 2021

WELCOME

InfoCenter Updates For over 15 years, Porzio Life Sciences has been your companion in compliance. Our people have developed industry-leading solutions to help life sciences companies navigate, manage, and simplify all stages of life sciences compliance. Our products, solutions, and services are backed by the market’s only comprehensive legal database and on-call regulatory experts. Together, our products allow in-house teams to be informed, efficient, and effective in assessing and reporting on all aspects of compliance, U.S. and global transparency, high-risk engagements, licensing and product distribution, privacy and overall compliance programs.

Federal, State and Global Compliance at Your Fingertips About Porzio Compliance Digest Porzio Compliance Digest is the go-to source for compliance professionals looking for regulatory analysis of global, federal and state life sciences laws related to the marketing and sales of pharmaceuticals and medical devices.

Databases within Porzio Compliance Digest are updated daily in the system and also distributed via email to allow Porzio Life Sciences customers to stay up to date on the continually evolving aspects of regulatory compliance.

In the following pages, we have provided a curated bundle of InfoCenter updates that provide important information on: • • •

Legislative updates and enforcement developments Critical information on new requirements and upcoming deadlines The latest government guidance and best practices for federal, state, and global compliance

John Patrick Oroho, JD

Executive Vice President & Chief Strategy Officer Porzio Life Sciences T: 973.889.4302 E: oroho@PorzioLS.com

Sara R. Simon, JD Compliance Associate Porzio Life Sciences T: 973.889.4080 E: simon@porziols.com

Martin J. Healy, JD

Principal Porzio Bromberg & Newman P.C. T: 973.889.4291 E: mjhealy@pbnlaw.com

Keren F. Bisnauth, JD

Director of Compliance Services Porzio Life Sciences T: 973.889.4218 E: bisnauth@porziols.com

Looking for more? Visit https://discover.porziolifesciences.com/porzio-compliancedigest-free-trial to receive a free trial of Porzio Compliance Digest.

Table of Contents OPDP Issues Untitled Letter For Kardashian DTC Video (March 11, 2021)

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International Transparency Disclosure Deadlines – March (February 12, 2021)

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Belgian Decree Imposes Filing Fees in 2021 (February 5, 2021)

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Upcoming o-US Transparency Disclosure Deadlines (January 15, 2021)

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Update on French Reports Due March 1, 2021 (December 23, 2020)

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Updated Swiss Pharma Cooperation Code to Take Effect on January 1, 2021 (December 4, 2020)

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French Decree Implements New Pre-Notification and Pre-Authorization Requirements as of October 1, 2020 (October 16, 2020)

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OPDP Issues First „Bad Ad” Letter of 2015 For Kim Kardashian Social Media Post (August 13, 2015)

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The US Department of Justice Updates Guidance on How It Evaluates Corporate Compliance Programs (June 12, 2020)

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HHS-OIG Focuses on Speaker Programs with Special Fraud Alert (November 23, 2020)

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Device Company Settles Open Payment Program Reporting Violation, Agrees to Pay Over $9.2 Million (November 3, 2020)

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Insys Settles False Claims Act Charges for Promotion of Opioid and Agrees to pay $225 Million (June 14, 2019)

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Washington Senate Introduces Legislation That Would Allow Assessment of Penalties for Unsupported Drug Price Increases (February 16, 2021)

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California Quarterly Wholesale Acquisition Cost Increase Report is Due by April 30, 2021 (February 22, 2021)

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New Mexico Introduces Legislation That Would Establish a Prescription Drug Affordability Board (February 25, 2021)

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Both Houses of Maryland General Assembly Have Voted to Override Governor Hogan’s Veto Regarding Funding For Prescription Drug Board (February 17, 2021)

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Utah Has Enacted Legislation to Establish January 1, 2022 as Start Date for Prescription Drug Price Data Collection (September 08, 2020)

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Texas Introduces Legislation To Amend Current Drug Cost Transparency Law (March 11, 2021)

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West Virginia Drug Manufacturer Registration and Wholesale Acquisition Cost Report Due January 15, 2021 (January 08, 2021)

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Rhode Island Has Introduced Drug Price Transparency Legislation (March 04, 2021)

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InfoCenter Updates

OPDP Issues Untitled Letter For Kardashian DTC Video Porzio Life Sciences InfoCenter Publication Date: March 11, 2021

The Office of Prescription Drug Promotion (“OPDP”) of the U.S. Food and Drug Administration (“FDA”) issued a Warning Letter to Duchesnay, Inc. on August 7, 2015, regarding a social media post by Kim Kardashian for DICLEGIS (doxylamine succinate and pyridoxine hydrochloride) delayed-release tablets, for oral use. The social media post was submitted as a complaint to the OPDP Bad Ad Program.

OPDP has now issued an Untitled Letter to Biohaven Pharmaceuticals for a violative direct-to-consumer video. The video features Khloé Kardashian, identified as a paid Biohaven Pharmaceuticals spokesperson (Spokesperson), talking about Nurtec™ ODT (rimegepant) which is indicated for the acute treatment of migraine with or without aura in adults. The video originally appeared on ABC’s The View on July 15, 2020 and was also accessible on YouTube. The video was also submitted as a complaint to the OPDP Bad Ad Program.

The video includes claims by the Spokesperson, such as, “. . . something that works in about 15-30 minutes . . .” and “It literally works within, for me, 15 minutes…”. According to the Untitled Letter, these claims misleadingly suggest that patients treated with Nurtec ODT will experience “relief ” within 15 to 30 minutes of taking the drug. The CLINICAL STUDIES section of the PI, states that the coprimary endpoints (freedom from pain and most bothersome symptoms) were measured beginning at 2 hours after dosing with Nurtec ODT and placebo. Therefore, OPDP explains, claims that the drug provides relief in 15-30 minutes are not supported by the clinical trial data, as there were no pre-specified endpoints that evaluated the efficacy of the drug at 15 or 30 minutes after dosing. Notably, the letter also includes reference to a super “AS EVERYONE EXPERIENCES MIGRAINE DIFFERENTLY. TREATMENT RESULTS MAY VARY” however, OPDP also states how this does not mitigate the misleading impression.

The video also includes comparative claims that are misleading, according to OPDP, “because they suggest that Nurtec ODT is clinically superior to or more effective than other prescription and over-the-counter (OTC) products, when this has not been demonstrated.” OPDP also notes, among other things, that the word “gamechanger” is used in the video, which misleadingly suggests that Nurtec ODT is a significant advance over other currently available products, a claim that has not been demonstrated.

Additionally, OPDP cites that the video failed to adequately communicate the full FDA approved indication and limitations of use and failed to present other risk information in a manner that included “prominence and readability reasonably comparable with the presentation of information relating to the benefits of Nurtec ODT.” OPDP requests in the letter, that Biohaven Pharmaceuticals cease any violations of the FD&C Act.

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International Transparency Disclosure Deadlines March Porzio Life Sciences InfoCenter Publication Date: February 12, 2021 In

a previous InfoCenter Update, we alerted you to upcoming transparency reporting deadlines in January and February. We are following up with transparency disclosure deadlines in March. Several countries have created laws and/or regulations that require pharmaceutical and medical device companies to report transfers of value to certain covered recipients. Additionally, industry associations in many countries have also implemented similar reporting requirements. Covered recipients may include healthcare professionals, healthcare organizations, and patient organizations (among other types of recipients). Disclosure deadlines and requirements vary by country and/or industry group.

Below please find a list of upcoming disclosure dates in March, covering those countries or industry groups that require reporting on a semi-annual or annual basis: • March 1 • France - Under the French Sunshine Act, the deadline for reporting agreements, amounts paid pursuant to agreements, and benefits is March 1, covering the second half of the preceding calendar year. Accordingly, pharmaceutical and medical device companies must submit data from the July 1, 2020 - December 31, 2020 time period to the French portal by March 1, 2021.

• Israel - In accordance with the National Health Insurance Law, pharmaceutical and medical device manufacturers, among others, must annually disclose donations to physicians, pharmacists, and investigators in the field of medicine or health taking place in the previous calendar year online to the Ministry of Health disclosure platform by March 1.

• March 31 • Colombia - Similar to the French reporting requirements, pharmaceutical and medical device companies must submit disclosure reports semi-annually to the Colombian authorities. As such, companies must report on transactions to healthcare professionals and certain entities covering the second half of the preceding calendar year by March 31 on the Ministry of Healths central platform.

• Romania - Romanian law requires pharmaceutical and medical device manufacturers, among others, to report to the Romanian government annually by March 31 on sponsorships made in the preceding calendar year to covered recipients, including healthcare professionals, healthcare entities, and patient organizations.

• United Kingdom – Members of the Association of the British Pharmaceutical Industry (“ABPI”) and of the European Federation of Pharmaceutical Industries and Associations (“EFPIA”) (and their affiliate/member associations) must disclose annually transfers of value made in the preceding calendar year to healthcare professionals and healthcare organizations who have a physical address in the U.K. to the ABPI database by March 31.

• United States – The U.S. Sunshine Act requires that applicable manufacturers and applicable group purchasing organizations report transfers of value made to physicians and teaching hospitals during the previous calendar year to the Centers for Medicare and Medicaid Services via the Open Payments portal. Reports are due annually by March 31.

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Belgian Decree Imposes Filing Fees in 2021

Porzio Life Sciences InfoCenter Publication Date: February 5, 2021 On January 7, 2021, a royal decree was issued in Belgium, implementing certain articles of the law of December 18, 2016 (the “Belgian Sunshine Act”). The decree, which came into force on January 14, 2021 and will be in effect until December 31, 2021, announces the imposition of a fee that will be due when filing new or revised transparency reports in Belgium.

The purpose of the fee is to support Mdeon, the non-profit organization that works on behalf of the Federal Agency for Medicines and Health Products under the Belgian Sunshine Act, and which primarily derives its income from license fees related to providing visas to pharmaceutical companies who organize scientific conferences. Due to the COVID-19 pandemic and the resulting restrictions on travel, there have been very few conferences, and the organization is therefore on the edge of bankruptcy.

Under the Belgian Sunshine Act, pharmaceutical and medical device companies are required to submit their data annually to the betransparent.be platform by May 31, such data to be published by June 30. Pursuant to this decree, Companies that are required to file disclosure reports under the Belgian Sunshine Act will be charged a fee of € 250 (excluding VAT) for uploading a basic file, and € 50 (excluding VAT) for uploading a corrective file. No fee will be charged for uploading an empty file. Currently, these fees are anticipated to apply only to reports uploaded during the 2021 calendar year.

Upcoming o-US Transparency Disclosure Deadlines Porzio Life Sciences InfoCenter Publication Date: January 15, 2021

We are writing to inform you of upcoming transparency disclosure reporting deadlines outside of the United States. Across the world, several countries have implemented laws requiring the reporting of spend to healthcare professionals, healthcare organizations, and patient organizations (among other recipients) during a given reporting period. Additionally, continental and local industry associations have implemented similar (but often different) reporting requirements that apply to their member companies (e.g., manufacturers of pharmaceutical and/or medical devices).

Deadlines vary across reporting authorities – with certain reports due annually, and others due as frequently as monthly.

Below please find a list of upcoming disclosure dates in January and February, covering those authorities/jurisdictions that require reporting on a semi-annual or annual basis: • January 31 • Brazil (Minas Gerais) – full calendar year 2020 data on interactions with covered recipients • Denmark – full calendar year 2020 data on affiliations with certain covered recipients • Slovakia – second half of calendar year 2020 data on interactions with covered recipients • February 26 (since February 28 falls on a Sunday) • Australia – data on interactions with covered recipients occurring between May 1, 2020 and October 31, 2020. (Keep in mind that healthcare professionals must be provided at least 6 weeks to review/update the information the pharmaceutical manufacturer anticipates disclosing prior to publication of the company’s report.)

Update on French Reports Due March 1, 2021

Porzio Life Sciences InfoCenter Publication Date: December 23, 2020

Earlier this year, we wrote to you about Décret n° 2019-1530 du 30 décembre 2019 (the “Decree”), which amends the French Sunshine reporting rules by expanding the scope of covered recipients. Specifically, the Decree requires covered companies to report on their relevant interactions with social media influencers, who are defined by the French Public Health Code as “[t]he persons who, in the media or on social networks, present one or more health products, so as to influence the public.”

Since no arrêté was issued by the government to expedite the Decrees coming into force, it will take effect as indicated in the Decree – on January 1, 2021. As such, covered companies are required to disclose their reportable interactions with social media influencers for the first time on the March 1, 2021 reports, covering the July 1, 2020 – December 31, 2020 calendar year. These interactions must be reported in the name under which the social media influencer “exercises his influence activity.”

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Updated Swiss Pharma Cooperation Code to Take Effect on January 1, 2021 Porzio Life Sciences InfoCenter Publication Date: December 4, 2020

The Swiss member of the European Federation of Pharmaceutical Industries and Associations (“EFPIA”), Science industries, updated their Code of Conduct of the Pharmaceutical Industry in Switzerland on Cooperation with Healthcare Professional Circles and Patient Organizations (“Pharma Cooperation Code”) earlier this year. The updated Pharma Cooperation Code takes effect on January 1, 2021. Aside for a number of formal changes, such as the modification and addition of certain defined terms, there were a few substantive changes to the Pharma Cooperation Code.

First, pecuniary benefits (commonly referred to as transfers of value) are now to be published between the 20th and 30th of June annually.

Next, the thresholds for meals and drinks were updated to the following: Payment for meals (including beverages) on a reasonable and modest scale, subject to a maximum of CHF 100 per healthcare professional per meal is only permitted in the context of a technical discussion or in direct relation to an event. This amount applies only to discussions held with healthcare professionals working in Switzerland and/or representatives of healthcare organizations domiciled in Switzerland or events that are held in Switzerland. For events that are held abroad, the limits set out in the code which claims territorial validity for the host country apply to all the participants, regardless of where they have their primary practice or definitive business address or their registered office.

Additionally, the revised Pharma Cooperation Code now makes it clear that grants and donations may only be provided for certain purposes, and only to certain entities to HCOs and POs, but never to individual HCPs. In terms of changes to certain defined terms, the definitions of healthcare organizations, healthcare professional, and pecuniary benefits were all also revised minimally. Below are the updated definitions: Healthcare Professionals: physicians, dentists and pharmacists who are working in particular in a practice or hospital, together with pharmacists active in retail businesses, and persons who are authorized by Swiss law on therapeutic products, to prescribe, deliver and/or administer prescriptiononly medicinal products for humans. This definition also includes official representatives and persons with a public-law employment contract or mandate if they perform or are authorized to perform such activities. In case of doubt, the Confederation’s provisions on therapeutic products can be taken into account.

Healthcare Organizations: legal entities under private and public law as well as companies, sole proprietorships or other entities that are not specifically regulated in legal terms who employ healthcare professionals. Under this Code, these in particular include institutions, organizations, associations or other groups of healthcare professionals who provide healthcare services or consultancy or other services in healthcare (e.g. hospitals, clinics, foundations, universities or other educational establishments, scientific societies or professional associations, community practices or networks, but not patient organizations).

Pecuniary Benefits (general): in cash, as non-cash contributions, donations, grants or payments made either directly or indirectly in some other form for consultancy tasks or services, research and development, event support, advertising, sales or other purposes, always in connection with medicinal products. . . . Direct pecuniary benefits are those which a pharmaceutical company provides directly to a particular recipient. Indirect pecuniary benefits are those which a third party provides for a recipient in the name or on behalf of a pharmaceutical company, whereby the identity of the pharmaceutical company is known or recognizable to the recipient.

InfoCenter Updates

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French Decree Implements New Pre-Notification and Pre-Authorization Requirements as of October 1, 2020 Porzio Life Sciences InfoCenter Publication Date: October 16, 2020

On June 15, 2020, Décret n° 2020-730 du 15 juin 2020 (the “Decree”) was issued in France. The Decree took effect on October 1, 2020, and implements lordonnance du 19 janvier 2017 (the “Ordinance”), which amends the French Anti-Kickback regulation. By way of background, French law generally bans pharmaceutical and medical device companies (“companies”) from providing transfers of value to covered recipients, which include healthcare professionals, healthcare students, and healthcare professional associations. However, certain categories of payments are exempt from these prohibitions, as are payments that fall below a certain threshold.

The Decree requires companies that intend to provide transfers of value that are not prohibited by the law to document the transfer of value through a written agreement, and includes the specific information that must be contained in every agreement at a minimum. Notably, the Decree replaces a previous process which required companies to seek a non-binding opinion from the relevant authorities prior to providing permissible transfers of value, and imposes certain prior notification or authorization requirements on companies that intend to provide these payments depending on the value, type of spend, and type of covered recipient.

Where a company anticipates providing transfers of value that are below certain thresholds, that company will be required to pre-notify the relevant authorities (i.e., the professional Board of the healthcare professional involved or the regional health agency) at least eight days before a given transfer of value takes place. On the other hand, where a company intends to provide transfers of value that are above certain thresholds, that company will be required to seek pre-authorization from relevant authorities at least two months before a given transfer of value takes place. If authorization is refused or denied, companies will have the opportunity to modify and re-submit the agreement within fifteen days. The authority will then have fifteen additional days to decide on the amended request. The authority’s failure to respond within two months of its receipt of the complete request (containing all relevant materials) from the company, or within fifteen days from the modifications proposed by a company after a refusal, is deemed to grant authorization for the payment.

Certain expedited procedures are set forth for pre-authorization requests marked urgent, where the authority deems the urgency justified. These expedited procedures are anticipated to apply only in extraordinary circumstances.

The thresholds that distinguish whether a company must pre-notify vs. pre-authorize were set in two Ministerial Orders dated August 7, 2020 (the “Orders”). The two Orders set thresholds, as well as define benefits of “negligible value.” The thresholds for pre-authorization are broken down by type of recipient – healthcare professionals, healthcare students, and healthcare associations.

For healthcare professionals, the threshold for net remuneration, compensation and payment for research, and provision of services is €200 per hour, limited to €800 per half-day, and capped at €2000 for the entire agreement. The threshold for hospitality to healthcare professionals is €150 per night, €50 per meal, €15 per snack, and €2000 total, including travel costs. Event registration fees in the amount of €1000 may be provided in addition to the aforementioned hospitality expenses, but are also subject to pre-authorization. For educational grants to healthcare professionals, the threshold is €1000. If the transfer of value is below the thresholds listed above, the signed agreement must be notified to the relevant authority, rather than provided to the relevant authority for preauthorization.

Items of negligible value are not subject to the agreement or pre-notification requirements. The Orders define “negligible value” for certain items, including meals (€30, with the limit of two per calendar year), books and journals (€30 per item, with a total limit of €150 per calendar year), and product samples or demo products (€20, with the limit of three per calendar year).

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InfoCenter Updates

OPDP Issues First „Bad Ad” Letter of 2015 For Kim Kardashian Social Media Post Porzio Life Sciences InfoCenter Publication Date: January 15, 2021

The Office of Prescription Drug Promotion (OPDP) of the U.S. Food and Drug Administration (FDA) issued a Warning Letter on August 7, 2015 to Duchesnay, Inc. for its morning sickness drug, Diclegis (doxylamine succinate and pyridoxine hydrochloride), citing a violative social media post by Kim Kardashian. The social media post was also submitted as a complaint to the OPDP Bad Ad Program.

According to FDA, Kardashian praised the drug for treating her pregnancy-related morning sickness in various social media posts on Instagram and Facebook.

“OMG. Have you heard about this? As you guys know my #morningsickness has been pretty bad ... so I talked to my doctor,” Kardashian wrote in the photos caption. “He prescribed me #Diclegis, and I felt a lot better and most importantly, it’s been studied and there was no increased risk to the baby. I’m so excited and happy with my results that I’m partnering with Duchesnay USA to raise awareness about treating morning sickness.”

According to the Warning Letter, the social media post entirely omits all risk information, and indicating at the end of the post that more information is available at www.diclegis.com and www.

DiclegisImportantSafetyInfo.com, does not make up for the omission. OPDP also finds the social media post to be misleading because it fails to provide material information regarding Diclegis’ full approved indication, including important limitations of use, specifically, that Diclegis has not been studied in women with hyperemesis gravidarum.

The Warning Letter also refers to FDAs prior communications with Duchesnay, specifically a November 2013 untitled letter in which OPDP found the drugmakers approval announcement for Diclegis to be “false or misleading” because it left out all risk information and facts regarding Diclegis limitations. According to the Warning Letter, OPDP is concerned that Duchesnay is continuing to promote Diclegis in a similar violative manner.

OPDP requests in the letter that Duchesnay immediately cease misbranding Diclegis and/or cease introducing the misbranded drug into interstate commerce. OPDP further requests that Duchesnay submit a written response to the letter stating whether it intends to comply, and explaining its strategy for discontinuing use of such materials. The Warning Letter explains that the response should include a comprehensive plan of action to disseminate truthful, nonmisleading, and complete corrective messages about the issues discussed to the audience(s) that received the violative promotional materials.

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The US Department of Justice Updates Guidance on How It Evaluates Corporate Compliance Programs Porzio Life Sciences InfoCenter Publication Date: June 12, 2020

The US Department of Justice Updates Guidance on How It Evaluates Corporate Compliance Programs Porzio Life Sciences InfoCenter Publication Date: June 12, 2020 The US Department of Justice (DOJ) has revised its “Evaluation of Corporate Compliance Programs” guidance. The guidance was first issued in February 2017, and has been revised multiple times, including in April 2019. According to DOJ, the document is meant to help prosecutors determine the effectiveness of the corporation’s compliance program at the time of the offense and to institute the proper form of prosecution or resolution including monetary penalties and compliance obligations.

The document describes some important topics and common questions that the Criminal Division has found relevant in evaluating corporate compliance programs. The topics and questions remain unchanged in the new version but additional information is included and various sections are rephrased. The three “fundamental questions” discussed include: • Is the corporation’s compliance program well designed?; • Is the program being applied earnestly and in good faith? In other words, is the program adequately resourced and empowered to function effectively?

• Does the corporation’s compliance program work in practice?

Some of the topics include: Risk Assessment, Policies and Procedures, Training and Communications, Third Party Management, Incentives and Disciplinary Measures, Investigation of Misconduct, and Analysis and Remediation of Any Underlying Misconduct.

To determine if the compliance program is well designed, prosecutors should review how the company has defined its risk and should try to find out why the compliance program was designed in the manner it was and how it evolved over time. As in 2019, DOJ stresses the importance of determining if the compliance program is a “paper program” or if it is one “implemented, reviewed, and revised, as appropriate, in an effective manner.” Prosecutors are instructed to determine if the company has informed its employees adequately about the compliance program and if the employees are “convinced of the corporations commitment to it.”

The new document elaborates on how prosecutors should focus on evaluation of the compliance programs at the time of the offense to determine if the program was working, “how the misconduct was detected, what investigation resources were in place to investigate suspected misconduct, and the nature and thoroughness of the company’s remedial efforts.”

The document references the importance of third party risk management processes and integration of such processes into procurement and vendor management. It reiterates the importance of corporate culture, explaining that prosecutors should examine how management has demonstrated its commitment to compliance and how it has articulated and reinforced its ethical standards to its employees.

The guidance also includes questions regarding whether companies have procedures in place to integrate lessons learned from past problems or from issues experienced by other companies in the same industry.

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InfoCenter Updates

HHS-OIG Focuses on Speaker Programs with Special Fraud Alert Porzio Life Sciences InfoCenter Publication Date: November 23, 2020

The United States Department of Health and Human Services Office of Inspector General (HHS-OIG) has issued a “Special Fraud Alert: Speaker Programs.” The Fraud Alert points out potential risks associated with company sponsored events by pharmaceutical and medical device companies that hire physicians to educate healthcare professionals about the benefits and risks associated with company drugs. According to OIG, pharmaceutical and device companies have paid nearly $2 billion to healthcare professionals for speaker-related services, based on Open Payments data available through the Centers for Medicare & Medicaid Services.

In recent years, there have been numerous fraud cases and settlements with OIG and the Department of Justice (DOJ) involving allegations that pharmaceutical and device companies have violated the anti-kickback statute by paying remuneration to physicians in connection with speaker programs with the intent of inducing HCPs to prescribe company products. Such cases have demonstrated that not only companies, but HCPs may face liability under the anti-kickback statute. The Fraud Alert includes some of the allegations found within these cases. For example, such cases have involved generous compensation to speakers “under circumstances that are not conducive to learning or to speak to audience members who have no legitimate reason to attend.” OIG cites studies that point out that HCPs are more likely to prescribe a companys products when receiving remuneration from the company which may induce the prescribing of products paid for by Federal health care programs.

The Fraud Alert also states that “OIG recognizes that the lawfulness of any remunerative arrangement, including speaker program arrangements, under the anti-kickback statute depends on the facts and circumstances and intent of the parties. Such intent may be evidenced by the speaker program’s characteristics and the actual conduct of the parties involved.”

OIG provides in the Fraud Alert a list of characteristics, meant to be illustrative and not exhaustive, that could potentially be suspect under the anti-kickback statute. Below are some of the factors provided by OIG: • The company sponsors speaker programs where little or no substantive information is actually presented; • Alcohol is available or a meal exceeding modest value is provided to the attendees of the program (the concern is heightened when the alcohol is free); • The program is held at a location that is not conducive to the exchange of educational information (e.g., restaurants or entertainment or sports venues); • The company sponsors a large number of programs on the same or substantially the same topic or product; • HCPs attend programs on the same or substantially the same topics more than once (as either a repeat attendee or as an attendee after being a speaker on the same or substantially the same topic); • Attendees include individuals who don’t have a legitimate business reason to attend the program, including, for example, friends, significant others, or family members of the speaker; • The company’s sales or marketing business units influence the selection of speakers or the company selects HCP speakers or attendees based on past or expected revenue; and • The company pays HCP speakers more than fair market value for the speaking service.

It is notable that OIG is issuing this alert during the pandemic emergency, while many companies are curtailing in-person activities.

OIG points out that whenever payments are offered or paid to HCPs, the risks remain and also offers this Fraud Alert if companies resume in-person speaker programs.

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Device Company Settles Open Payment Program Reporting Violation, Agrees to Pay Over $9.2 Million Porzio Life Sciences InfoCenter Publication Date: November 3, 2020

On Thursday, October 29, 2020, the Department of Justice (DOJ) announced a settlement with medical device maker, Medtronic USA, Inc. (Medtronic). According to the Agency, the company settled False Claims Act allegations of providing illegal kickbacks to a physician along with allegations of failing to accurately report payments to the Open Payments Program. The settlement includes payment of $8.1 million to resolve False Claims Act through kickback violations and $1.1 million to resolve inaccurate reporting of payments to the Centers for Medicare & Medicaid Services (CMS).

This is the first enforcement action and settlement involving improper payments reported to CMS. The National Physician Payment Transparency Program, also known as the “Sunshine Act” or the “Open Payments Program”, a provision of the Patient Protection and Affordable Care Act, was enacted by Congress in 2010 to provide more transparency in the relationships between pharmaceutical and medical device manufacturers and healthcare providers.

Anti-Kickback allegations include payments made by Medtronic for more than one hundred and thirty social events held at a restaurant owned by South Dakota neurosurgeon, Wilson Asfora, M.D., a “targeted physician”, over a nine-year period that Dr. Asfora requested be paid for by Medtronic since their business was “slow”. The Settlement Agreement also states that such physician invited and selected the attendees for such events. The events were reported by Medtronic as business events to discuss Medtronic products, but were described in the Settlement Agreement as social gatherings that included lavish meals and alcohol.

The payments to the physician were allegedly made to induce him to use Medtronic’s SynchroMed II intrathecal infusion pumps in his surgeries.

In addition to the illegal payments, Medtronic allegedly under-reported the payments or transfers of value to or at the direction of Dr. Asfora to CMS in terms of both indirect payments to Dr. Asfora and those made by paying the restaurant that was owned by Dr. Asfora.

The Sunshine Act requires manufacturers to report payments and other “transfers of value” to physicians and U.S. teaching hospitals to CMS on an ongoing basis.

Medtronic allegedly separately reported to CMS only the value of the food and drinks for each physician rather than reporting the total amount paid to the restaurant for the event. The Settlement Agreement also notes that sales employees withheld information from the company’s compliance department that they knew Dr. Asfora owned the restaurant.

Brenna E. Jenny, HHS Deputy General Counsel and CMS Chief Legal Officer states in the News Release, “CMS’ Open Payments Program is intended to promote transparency and accountability in the healthcare system.

Manufacturers that misreport their financial relationships with healthcare providers erode the integrity of the Open Payments Program and will be held accountable. CMS looks forward to continued partnership with the Department of Justice to resolve allegations of manufacturers skirting their Open Payments obligations.”

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InfoCenter Updates

Insys Settles False Claims Act Charges for Promotion of Opioid and Agrees to pay $225 Million Porzio Life Sciences InfoCenter Publication Date: June 14, 2019

Insys Therapeutics (“Insys”) manufactures opioids. For the past few years Insys has been in the news for alleged illegal promotion of its drug, Subsys, an opioid painkiller. John Kapoor, former Insys CEO, was convicted on racketeering charges in May along with four other Insys executives. The lawsuits began in 2017 when John Kapoor and other Insys employees were charged with leading a nationwide conspiracy to profit by using bribes and fraud to cause the illegal distribution of Subsys. The Federal Government intervened in 2018 in five separate whistleblower lawsuits that were consolidated together in the Central District of California.

According to a June 5th Department of Justice News Release, Insys has agreed to settle Federal criminal and civil charges including payment of kickbacks and illegal marketing practices. Insys has agreed to pay $225 million, $195 million to settle civil allegations that it violated the False Claims Act, $2 million for five counts of criminal mail fraud, and $28 million in forfeiture. As part of the criminal resolution, Insys will enter into a deferred prosecution and as part of the civil resolution, Insys will enter into a corporate integrity agreement.

Court documents allege that the company paid speaker fees to selected physicians that were. nothing more than a way to funnel cash and other perks to doctors in exchange for writing more prescriptions and higher dosages of Subsys..

According to Christian J. Schrank, Special Agent in Charge for the Office of Inspector General of the U.S. Department of Health and Human Services “Paying bribes and providing other incentives to prescribe opioids with little regard to patient welfare surely signals a company is more concerned with profits than patients. Today’s settlement reaffirms our commitment to ensuring that companies pay a very heavy price for attacking vital government health programs.”

Washington Senate Introduces Legislation That Would Allow Assessment of Penalties for Unsupported Drug Price Increases Porzio Life Sciences InfoCenter Publication Date: February 16, 2021

Washington has introduced Senate Bill 5020 (“S.B. 5020”) that would authorize the Department of Revenue (“Department”) to assess a penalty on manufacturers of prescription drugs that took drug price increases unsupported by clinical evidence.

S.B. 5020 defines an unsupported price increase as “an increase in price for a legend drug for which there was no, or inadequate, new clinical evidence” to sustain such price increase. To make such determination, the state would rely on analyses of prescription drugs prepared annually by the Institute for Clinical and Economic Review (“ICER”) and published in the Unsupported Price Increase Report (the “Report”).

The law would provide for a penalty equal to 80% of the “difference between the revenue generated by sales within the state, either directly or indirectly, of the identified drugs and the revenue that would have been generated if the manufacturer had maintained the wholesale acquisition cost from the previous calendar year.” The penalty would be adjusted for inflation using the Consumer Price Index.

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A manufacturer would only be subject to the penalty if the identified drug is reported as a covered drug under Washington’s Prescription Drug Costs law (RCW § 43.71C), and has annual sales of at least $250,000, directly or indirectly, in the applicable calendar year within the state.

The Health Care Authority (“Authority”) would be required to notify manufacturers of identified drugs, and the Department within 60 days of the publishing of the Report. Manufacturers assessed a penalty under this law would be subject to such penalty for a period of two calendar years after being notified by the Authority of such assessment.

Identified manufacturers would be required to submit information to the Department, and pay the assessed penalty amount, in a manner and timeframe to be determined by the Department. Required information would include, but not be limited to: • • • • •

The total amount of sales within the state of the identified drug; The total number of units sold within the state of the identified drug; The WAC of the identified drug during the reporting period and any changes in the WAC during the calendar year; The WAC during the previous calendar year; and Any additional information that the Department deems necessary to accurately calculate the correct amount of the penalty owed.

A manufacturer that fails to submit the required information would be subject to an additional penalty of 10%, or $50,000, whichever is greater.

Manufacturers would be prohibited from withdrawing an identified drug from sale or distribution in Washington in order to avoid an assessed penalty, unless written notice is provided to the Authority and the Department at least 180 days in advance. The penalty for withdrawing an identified drug from sale or distribution to avoid payment of such assessment without such notice would be $500,000 per identified drug.

California Quarterly Wholesale Acquisition Cost Increase Report is Due

by April 30, 2021 Porzio Life Sciences InfoCenter Publication Date: February 22, 2021

California’s Prescription Drug Pricing for Purchasers Law requires manufacturers of prescription drugs that are purchased or reimbursed by any California state purchasers, health care service plans, health insurers, or pharmacy benefit managers, to report certain information for drugs that have qualifying wholesale acquisition cost (“WAC”) increases on a quarterly basis.

A qualifying WAC increase is one that will result in a total WAC increase of more than 16%, including the proposed increase and cumulative increases within the two previous calendar years prior to the current year, for a drug with a WAC of more than $40.

Manufacturers that make a qualifying WAC increase with an effective date between January 1, 2021, and March 31, 2021, must submit their reports to the Office of Statewide Health Planning and Development (“OSHPD”) by April 30, 2021. A manufacturer must register with the OSHPD at least five business days prior to the date its first submission is due.

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InfoCenter Updates

New Mexico Introduces Legislation That Would Establish a Prescription Drug Affordability Board Porzio Life Sciences InfoCenter Publication Date: February 25, 2021

On January 25, 2021, the New Mexico House of Representatives introduced House Bill 154 (“H.B. 154”). This bill would establish the Prescription Drug Affordability Board (“Board”), which would begin the implementation of the Prescription Drug Affordability Act, to protect stakeholders from the cost of high cost prescription drugs (the “Act”).

Effective September 30, 2021, the Board would be required to conduct a Drug Product Cost Affordability Review. To do so, the bill would initially require the Board to identify prescription drug products that are: • Brand name drugs or biologics with a launch wholesale acquisition cost (“WAC”) of $30,000 or more per year or course of treatment or an increase of $3,000 or more in any 12-month period or course of treatment; • Biosimilars with a launch WAC that is not at least 15% lower than the referenced brand biologic at the time of launch; • Generic drugs with a WAC of $100 or more for a 30-day supply that increased by 200% or more during the previous 12-month period; and • Other prescription drugs that may “create affordability challenges for the state health care system and patients.”

Upon such identification, the Board must then determine whether an affordability review for each identified prescription drug product is required, based on research and documents that the Board reviews related to the manufacturer’s decision to set the introductory price or increase the price of the drug. Based on the cost affordability review, the Board must then determine whether the drug’s continued use has or will lead to affordability challenges for the state or patients’ out of pocket costs based on several factors, including, but not limited to: • The current WAC of the drug; • The average monetary discount, rebate, or price concession the manufacturer provides to state health plans and pharmacy benefit managers compared to the drug’s WAC; • The price for therapeutic alternatives sold in the state and the average monetary discount, rebate or price concession the manufacturer provides or intends to provide third party payers and pharmacy benefit managers for such therapeutic alternatives; • The current or expected dollar value of manufacturer-supported patient access programs specific to the drug; • The average co-pay or other cost-sharing for the drug in the state; and • Any additional factors required by any rule promulgated by the Board.

Manufacturers may submit additional information to the Board to determine whether the drug may lead to affordability challenges. If it is determined that a drug creates an affordability challenge, the Board would be authorized to establish an upper payment limit which would take into consideration the cost of administering the drug, the cost of the drug’s delivery to consumers, and any other relevant administrative costs related to the drug.

This bill would also establish the Prescription Drug Affordability Fund (“Fund”). Under the Act, the Board would be allowed to assess and collect fees from manufacturers, wholesale distributors, and third-party logistics providers based upon an entity’s relative share of gross revenue from drug sales in the state. The fees would be used to fund the Board’s operations, and would not exceed $2,000 annually.

Further, this bill would require the Board to submit an annual report to the Legislative Finance Committee and the Health and Human Services Committee regarding price trends for prescription drug products, the number of prescription drug products that the Board reviewed and the results of such reviews, and any recommendations regarding additional legislation that could make prescription drug products more affordable in the state. Finally, the bill contemplates a federal generic drug market study which would be completed no later than June 30, 2022.

Any information submitted to the Board in furtherance of the Act may only be publicly disclosed in accordance with the state’s Inspection of Public Records Act.

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Both Houses of Maryland General Assembly Have Voted to Override Governor Hogan’s Veto Regarding Funding For Prescription Drug Board Porzio Life Sciences InfoCenter Publication Date: February 17, 2021

In July 2019, Maryland enacted Md. Code Ann., Health-Gen. § 21-2C (“Law”), establishing the Prescription Drug Affordability Board (“Board”) as an independent unit of State government. The Law authorized the establishment of a funding source to support the work of the Board. In March 2020, the Maryland Senate and House of Delegates passed Senate Bill 669 and House Bill 1095, respectively. Among other things, these companion bills authorized the Board to assess an annual fee on manufacturers and wholesale distributors that sell or offer for sale prescription drug products to Maryland residents. In May 2020, Maryland Governor Larry Hogan vetoed both pieces of legislation.

According to the Maryland General Assembly website, the House voted to override the Governor’s veto by a 95-38 vote on February 11, 2021. The Senate previously voted to override the veto on January 15, 2021. Article II, Section 17 of the Maryland Constitution indicates that a three-fifths vote of both the Senate and House is necessary to override a veto. According to correspondence addressed to the members of the General Assembly, the new law will take effect in March 2021.

The Board, which in December 2020 announced the selection of a new Executive Director, has not publicly announced how or when assessments will be collected from manufacturers. The law states that such assessments must be paid annually on or before October 1 of each year.

Utah Has Enacted Legislation to Establish January 1, 2022 as Start Date for Prescription Drug Price Data Collection Porzio Life Sciences InfoCenter Publication Date: September 8, 2020

Utah’s Prescription Drug Price Transparency Act became effective on May 15, 2020. Manufacturers of prescription drugs with a wholesale acquisition cost (“WAC”) of $100 or more for a 30-day supply are required to submit certain information to the Insurance Department (“Department) when either of the following occur: • A WAC increase of greater than 16% over the preceding 2 calendar years; or • A WAC increase of greater than 10% over the preceding calendar year.

On August 18, 2020, in its Sixth Special Legislative Session, the Utah House of Representatives introduced House Bill 6011 (“H.B. 6011”) to amend the Prescription Drug Price Transparency Act. H.B. 6011 establishes January 1, 2022, as the date on which data collection will commence. H.B. 6011 was signed by the Governor on August 31, 2020, and became effective upon approval.

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InfoCenter Updates

Texas Introduces Legislation To Amend Current Drug Cost Transparency Law Porzio Life Sciences InfoCenter Publication Date: March 11, 2021

The Texas House of Representatives has introduced House Bill 1033 (“H.B. 1033”), which would amend the state’s Drug Cost Transparency law [TEX. HEALTH & SAFETY CODE ANN § 441]. This law currently requires manufacturers to submit a report that includes the current wholesale acquisition cost (“WAC”) for each FDA-approved drug sold in or into Texas to the Executive Commissioner of the Department of Health and Human Services (“Commissioner”) annually by January 15th. The law also requires a separate report within 30 days of the effective date for a qualifying WAC increase. The definition of a qualifying WAC increase remains unchanged, and still applies to a prescription drug with a WAC of at least $100 for a 30-day supply that has a price increase of: • 15% or more in the previous calendar year; or • 40% or more over the previous 3 calendar years.

As introduced, this bill would require manufacturers to report WAC increase data to the Department of Health and Human Services (“Department”) for qualifying WAC increases that occurred in the previous calendar year together with the Annual Report, as opposed to within 30 days of the WAC increase effective date.

Required WAC increase data, and publication of data on the Department’s website, would remain the same as in the current law.

A manufacturer would be required to submit a fee with each report, in an amount to be determined by the Commissioner, in order to administer the provisions of the Drug Cost Transparency law.

Further, this bill proposes enforcement provisions for a drug manufacturer that fails to submit a required report or fee. The Department would be authorized to assess an administrative penalty in an amount not to exceed $1,000 per day for each violation.

West Virginia Drug Manufacturer Registration and Wholesale Acquisition Cost Report Due January 15, 2021 Porzio Life Sciences InfoCenter Publication Date: January 8, 2021

The Governor of West Virginia signed Senate Bill 689 (“S.B. 689”) in March 2020, adding Article 54 to Chapter 33 (Insurance) of the West Virginia Code, requiring drug manufacturers to annually report certain information to the State Auditor of West Virginia. S.B. 689 became effective on June 3, 2020.

The law applies to manufacturers of generic, brand name, or specialty drugs with a wholesale acquisition cost (“WAC”) of at least $100 for a 30-day supply and a WAC increase of 40% or greater over the preceding 3 calendar years or 15% or greater in the previous calendar year.

The State Auditor’s Office (“Office”) recently issued a guidance document regarding the law. A representative with the Office has advised that although the statute provides that a reporting obligation is only triggered if both criteria apply, the Office is interpreting this requirement as an “or” so that if: (i) a drug’s WAC is at least $100 for a 30-day supply, or (ii) there was a 15% increase in the previous calendar year or a 40% increase in the previous 3 calendar years, a reporting obligation will be triggered and one, or both, reports will be required.

The law also requires manufacturers to separately report specific information related to drugs that lost patent exclusivity during previous years as well as certain research and development costs.

The representative advised that the Office is requesting that all manufacturers register with the state by January 15 annually and that they update the contact information of the person responsible for compliance with the law’s requirements within 30 days of any change in such information.

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Rhode Island Has Introduced Drug Price Transparency Legislation Porzio Life Sciences InfoCenter Publication Date: March 4, 2021

The Rhode Island House of Representatives has introduced House Bill 5494 (“H.B. 5494”), which would create the Drug Cost Transparency Act (“Act”). The Act would require a pharmaceutical drug manufacturer to annually report to the Director of the Department of Business Regulation (“Director”) the current wholesale acquisition cost (“WAC”) of its FDA-approved drugs sold in or into Rhode Island by the 15th day of each calendar year.

Additionally, manufacturers of prescription drugs with a WAC of $100 or more for a 30-day supply would have to submit a report to the Director within 30 calendar days when either of the following occurs: • A WAC increase of 40% or more over the preceding 3 calendar years; or • A WAC increase of 15% or more in the preceding calendar year.

Required information would include, but not be limited to: • • • •

The name of the drug; Whether the drug is brand name or generic; Effective date of the change in WAC; Aggregate, company-level research and development costs for the most recent year for which final audit data is available; • The name(s) of the manufacturer’s drugs that have received FDA approval or have lost patent exclusivity in the preceding 3 calendar years; and • A statement regarding the factor(s) that caused the increase in WAC, and an explanation of the role that each factor had on the drug’s cost.

The quality and information and data submitted must follow the quality and information and data in the manufacturer’s annual Securities and Exchange Commission Form 10-K, or any other public disclosure.

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