Principal Deputy Assistant Attorney General Benjamin C. Mizer Delivers Remarks at the 16th Pharmaceutical Compliance Congress and Best Practices Forum

Remarks as prepared for delivery

Thank you, Mike [Loucks], for that kind introduction.  And thank you to the Pharmaceutical Compliance Congress co-chairs, Matthew D’Ambrosio, Gary DelVecchio, James Gibney and Elizabeth Jobes, for inviting me to be here this morning.

As Mike mentioned, before I joined the Civil Division, I served as the Solicitor General for the State of Ohio, then in the Department’s Office of Legal Counsel and most recently in Attorney General Holder’s office.  My parents seem to think I can’t seem to hold a steady job.  But I tell you this because, despite my varied background, I was struck when I came to the Civil Division by the enormous number and complexity of the matters our attorneys handle on a daily basis. 

I know that many of you see us in our enforcement capacity when we investigate allegations under the False Claims Act (FCA) or the federal Food Drug and Cosmetic Act (FDCA).  But our caseload expands well beyond these matters.   The Civil Division represents some 200 client agencies in approximately 50,000 different matters, both affirmative and defensive, in courts throughout the country.  Our Civil Division attorneys litigate cases involving national security and immigration policy.  And they defend federal initiatives, statutes and regulations, ranging from the Affordable Care Act to actions taken in response to the financial crisis.  Yet even among these nationally significant matters, one of the top priorities of the division remains the work we do to enforce the False Claims Act, the Food Drug and Cosmetic Act and other laws that target fraudulent, abusive or unsafe health care practices. 

I know that many of you have similarly devoted yourselves and your careers to ensuring that your clients stay on the right side of these laws, because you fully appreciate the need and importance of ensuring the public’s health and safety.  The work that many of you do in adopting and enforcing meaningful compliance measures not only diminishes the risk your organization or client may face from enforcement agencies, it also advances our common goal.  And, of course, you and your organizations and clients contribute to producing the drugs and medical devices on which the American people rely.  We may not always see eye-to-eye as we each do our respective jobs and as we on the enforcement side pursue the few bad apples that may give others in the industry a bad name.  But I can assure you that we appreciate that the pharmaceutical industry is dominated by people and companies whose tremendous effort and innovation alleviate our pain and cure our illnesses.

That’s why I appreciate the opportunity to share my thoughts on our collective efforts in the important areas of compliance with our nation’s health care laws and the Justice Department’s work in the area of health care fraud enforcement. 

With that as background, I’d like to spend my brief remarks first discussing where our enforcement efforts now stand and then offer some thoughts about recent developments in our enforcement work.

I am sure it comes as no surprise to many in this room that qui tam (or whistleblower) filings under the False Claims Act continue to provide the department with most of its leads about health care fraud, including those involving the pharmaceutical industry.  To illustrate, in Fiscal Year 2014 we were served with 469 qui tam complaints alleging some form of health care fraud.  That represented 93 percent of the health care fraud matters opened by the Civil Division that year – and slightly more than 65 percent of all whistleblower complaints filed with the department alleging fraud against any kind of government-funded program.

In fact, the numbers of health care whistleblower complaints have grown steadily in recent years, marking a 65 percent increase since 2009.  It’s worth noting that in 1987, shortly after Congress considerably strengthened the qui tam provisions, there were a total of 30 whistleblower matters filed with the department and only three of those were health care fraud cases.  The increasing popularity of the qui tam provisions of the FCA can certainly be attributed, at least in large part, to the statutory incentives Congress enacted, which allow a whistleblower to receive between 15 and 30 percent of the recovery obtained as a result of his or her action.  Since 1986, qui tam relators have been paid more than $5.7 billion as their statutory awards under the False Claims Act.  That’s 5.7 billion with a “B.”  In just the past six years, nearly $2.5 billion has been paid.  Obviously, Congress intended that the promise of these awards would enhance the number of complaints filed with the department and that goal certainly has been achieved as the numbers of complaints increase.  And we see no signs that these numbers will drop off anytime soon. 

You may have noted that an increased number of relators and their counsel are willing to litigate their cases once the department has declined to intervene.  This reflects the fact that the relators’ bar is increasingly well-funded and able to take on complex litigation, even when the government declines to take the case forward.  While these cases have historically been a small component of the overall recoveries obtained each year under the False Claims Act, this past year has seen several notable recoveries in declined cases, including a $450 million settlement with a major dialysis provider and two settlements with drug manufacturers resolving allegations that they underpaid their drug rebates.      

In addition to these qui tam matters, our Consumer Protection Branch continues to vigorously enforce the federal Food, Drug and Cosmetic Act (FDCA), pursuing both criminal and civil cases involving fraud in the pharmaceutical and medical device industries – many of which come to us from whistleblower complaints.  These cases have historically been some of our most complex and resource intensive, often involving nationwide conduct and complicated legal and factual issues.  These matters are critical because they can directly affect the health and safety of the American people.  In addition, they are vitally important because they protect the integrity of the Food and Drug Administration’s (FDA) drug and device approval process, as well as the doctor-patient relationship.

Since 2009, these False Claims Act cases alleging health care fraud, and those under the FDCA, have resulted in more than $33 billion in settlements, judgments, fines and restitution. 

By anyone’s measure, that is an extraordinary amount.

Many of these cases have implicated pharmaceutical manufacturers and they often involve the so-called “off-label marketing” of particular drugs.  A recent example of this was in 2014, a major manufacturer paid $1.39 billion to resolve its civil liability, as part of a broader $2.2 billion global resolution of allegations of illegally promoting a highly potent antipsychotic medication approved by the FDA to treat schizophrenia.  We alleged that the company marketed this drug to nursing homes and long-term care providers for a different purpose – to treat dementia – which was a use that the FDA had not approved and which we maintained presented grave risks (including stroke and diabetes) to an elderly population.

Just last month, a major biotech company resolved criminal charges that it violated the FDCA arising from the unlawful distribution of a surgical adhesion barrier that it marketed.  As part of the agreed resolution, the department filed a two-count criminal information charging that between 2005 and 2010, the company caused the medical device to become adulterated and misbranded while being offered for sale.  The company entered into a deferred prosecution agreement, admitted to and accepted responsibility for the facts underlying the charges and paid a penalty of $32.5 million.  It further agreed to undertake several groundbreaking measures to enhance its internal compliance program.

We have also pursued allegations of illegal kickbacks paid by companies to induce the use of their drugs.  In 2014, a generic drug company settled allegations that it paid kickbacks to a Chicago psychiatrist in the form of consulting and speaking fees in exchange for an agreement to prescribe the antipsychotic drug clozapine to several thousand patients over an eight-year period. 

I want to emphasize that although many of the matters we undertake involve large monetary losses sustained by the federal government, our enforcement actions are about more than money.  Certainly, the total recoveries and big-dollar cases make headlines and those headlines have an important deterrent effect.  But we pursue many cases that recover less money but protect the health of our most vulnerable patients – children, the elderly and people without financial resources.  Our cases against pharmaceutical and medical device companies address misleading sales practices that can lead to the use of such products when they are potentially ineffective and can harm patients.  In cases involving direct and illegal marketing to nursing homes, or those alleging unnecessary therapy services rendered to frail populations and undertaken solely to increase federal Medicare funding, or any other number of schemes targeting our elderly citizens, we are protecting one of our nation’s most vulnerable populations.  I mentioned earlier the matter involving the use of illegal kickbacks to induce the prescribing practices of a psychiatrist.  We have pursued many such kickback matters that have involved a variety of health care providers – not just pharmaceutical manufacturers.  Whether it is a hospital inducing physicians to refer patients or a laboratory inducing health care providers to perform and refer more tests, we view our enforcement efforts in this area as necessary to preserve the integrity of physicians’ decision-making, protect patient choice, and deter unnecessary and sometimes dangerous medical services.  All of these cases have real consequences for the people who need and rely on government health care programs and we will continue to make these cases a top priority.

I’d like to now speak briefly about a number of issues of note in our current law enforcement efforts that may bear on what the future holds, at least from my perspective. 

Certainly, the most recent development that you may all have read about and that will affect future matters is the department’s renewed commitment to ensuring that individuals who engage in fraud schemes and other wrongdoing are held accountable.  Pursuing culpable individuals has many effects:  it deters other persons from engaging in similar illegal conduct; it addresses the misconduct directly by focusing on the actors who made or executed the decisions within the organization; and it encourages changes in corporate culture.        

For these reasons, in September, the Deputy Attorney General issued a memorandum on individual accountability to reinforce the department’s commitment to pursuing not just the corporation or entity involved in fraudulent behavior, but the people whose decisions and actions caused that misconduct to occur.  The memorandum is a significant and welcome ratification of a lot of the work we have been doing – such as the criminal prosecutions and conviction of the former president and CEO of a medical device manufacturer that had distributed adulterated devices; the criminal case against five individuals who worked for a peanut processing company, stemming from a salmonella outbreak; the prosecutions of two egg industry executives, arising out of the sale of adulterated eggs; and the $26.1 million False Claims Act settlement with a Florida dermatologist to resolve allegations that he accepted illegal kickbacks from a pathology laboratory.  The memorandum is also a galvanizing spur to do even more and even better.  These recently announced principles are critical to strengthening the department’s ability to pursue individuals for corporate wrongdoing and to obtaining meaningful individual accountability.

Let me emphasize a few specific points about this policy statement. 

First, if a company wants credit for cooperation, it has to identify all individuals involved in the wrongdoing, regardless of the individual’s position or seniority in the company.  This includes providing all relevant facts about the individual’s misconduct.  Specifically, this means no partial credit for cooperation that doesn’t include information about individuals.   

This threshold requirement of cooperation as to individuals governs not only criminal investigations, but also civil investigations, including False Claims Act matters.  Companies are expected to provide the same type of information about individuals if they want consideration for their cooperation in a civil matter, including how a case is resolved.  Importantly, in order to qualify for the reduced multiples provision under the False Claims Act, the organization must voluntarily identify any culpable individuals and provide all material facts about those individuals.

Second, the department will focus from the outset of an investigation –on both the criminal and civil sides – on individuals.  This will maximize our ability to gather the evidence as to the misconduct, obtain cooperation and potentially reach a resolution that includes not only the corporation but the actors involved in the decision-making and wrongdoing.

Third, and critical from our perspective, the Deputy Attorney General underscored a point made by the Attorney General not long ago and that is the vital importance of the criminal and civil sides working in collaboration toward our shared enforcement goal.  Department civil and criminal attorneys have been directed to cooperate to the fullest extent permitted by law at all stages of an investigation.  We know that such cooperation and information sharing produces tremendous efficiencies and results and maximizes our ability to bring to bear all of the remedies we have to pursue responsible individuals. 

Let me turn to another development which has already been influencing and will continue to affect future enforcement.  This is the government’s increased use of health care data to identify trends and outliers in charging practices and reimbursement.  This development has greatly enhanced our ability to both identify potential frauds for further investigation and support the cases we are investigating and litigating.   The ability to get at the data quickly and analyze it has already produced impressive results.  For example, looking at the data allows us to expedite our investigations and decisions to proceed or not.  It allows us to identify the damages resulting from a particular practice.  And it lets us look at trends and areas of concern more broadly and proactively.  As our techniques get better refined and more sophisticated, law enforcement – and the programs we protect - will no doubt greatly benefit.   

Another area of increasing focus in our Food, Drug and Cosmetic Act enforcement concerns the treatment of scientific information in connection with the sales and marketing of medical products.  Health care providers and patients rely heavily on the integrity and accuracy of claims made by manufacturers.  They are entitled to be presented with information about a product’s clinical risks and benefits that is fair, balanced and sound.  Only then can they be confident that they can make informed decisions about the best treatment options. 

More and more, we are encountering instances in which companies fail to meet this reasonableness standard.  And, more and more, we are taking enforcement action to address these failures.  For instance, in the recent medical device matter involving the surgical adhesion barrier I mentioned earlier, the company claimed that its product had been proven safe and effective for use in cancer surgeries, even though the FDA-approved label cautioned that the device had not been clinically evaluated in the presence of malignancies.  The company based its claim on a study that involved only 14 patients, which was far too few to make such an assertion reliable.  In another recently settled misbranding case, the company made efficacy claims based on a non-randomized, open-label study, even though two more rigorous studies had failed to replicate the favorable results.  Yet, there was no disclosure of that fact as part of the company’s promotional activities.  These are just two examples.  The department will continue to root out and pursue those who violate the law in this way.

I think it is appropriate as I close to publicly acknowledge that many of you are on the front lines to ensure that your organizations are complying with federal law.   Together, you represent a tremendous share of the national economy and contribute significantly to the well-being of the people of our country.  I want you to know that my Department of Justice colleagues and I greatly appreciate your efforts and look forward to working with you into the future to achieve our shared goal of ensuring the integrity of our nation’s health care system.     

Thank you very much for the opportunity to speak with you here today.