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Pills, Capsules, and Kickbacks: Drug Manufacturer Pays $125 Million. Execs Plead Out, Another to Be Tried

Last November, the U.S. sales arm of pharmaceutical manufacturer Warner Chilcott plead guilty to felony charges of health care fraud including violation of the federal Anti-Kickback Statute (the “AKS”). The criminal and civil penalty paid: $125 million.

Underlying Warner Chilcott’s guilty plea was a scheme of paying kickbacks to doctors to encourage them to prescribe its medications. Those payments were in connection with “medical education events” and speaker programs. Held at expensive restaurants, the programs involved little or no actual education. Paid speakers often didn’t speak about any clinical or scientific topics, but were awarded from $600 to $1,200 for each presentation. According to the government’s allegations, the company told some speakers they would not be paid for additional events unless they prescribed more medication.

And now, the trial of the W. Carl Reichel, the entity’s former president, is about to commence. He’s charged with directing the company’s employees to engage in those illegal sales tactics.

Several other individual defendants have already plead out. They face significant jail time.

It’s far too soon to know Reichel’s fate. But it goes without saying that it’s highly likely that other individuals targeted in the prosecution will testify against him.

Two major lessons for you:

1. Individual Culpability For Corporate Behavior

The Justice Department’s current policy, as outlined in a September 2015 memo, is to combat corporate misconduct by seeking accountability from the individuals who perpetrated the wrongdoing as well as from the company.

Under that policy, in order for a company to receive “cooperation credit” in respect of its prosecution, the entity must completely disclose all relevant facts about individual misconduct. Consistent with that policy, both criminal and civil investigations focus on the individuals involved, as well as the entity, from start of the investigation. And, as Mr. Reichel is experiencing, a company’s resolution of its civil and criminal liability does not provide protection for the individuals involved.

Accordingly, a physician or other healthcare provider, or an executive with a healthcare entity, from a physician practice to a pharmaceutical mega-giant, is as much a target under the AKS and other federal prosecution as is his or her employer. Not only are other individuals involved potential witnesses for the prosecution, so, too, essentially, is the company.

2. Think Twice

If you were plumbers, not physicians or pharmacists or physical therapists, there’d be nothing wrong with a plumbing fixture manufacturer taking you out to dinner at Chez Milliard Euros or paying you $600 to speak for five minutes at a meeting.

But you’re not plumbers and we’re talking healthcare not hot tubs, so it could mean jail.

And, as I supposed Mr. Reichel would testify, the same risks appear on the flip side, the payment side.

The time to analyze your “business opportunity” is not when you’re waiting for the bail bondsman or when you’re planning your defense. It’s upfront.

Sure, you might be out $1,200 for a speech consisting of “thank you very much,” or still hankering for a bottle of Chateau Lafitte 1982. But you won’t have to be worrying about doing jail time, paying astronomical fines, or losing your medical license.

 
 

Wisdom. Applied. 89 - Your Exclusive Contract Is About To Be Non Exclusive

What good is an exclusive contract if the facility demands that it become non-exclusive?

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All Things Personal

As I travel, I noticed more small-format markets opening up, as opposed to the large, full size markets that dominated in the past.

These stores are in no small part a response to the tech-based fresh food delivery businesses now making inroads in major cities, for example, Instacart, Amazon Fresh, and Google Express.

We’re all seeing the same thing happening in the hospital industry as well. For example, the just announced replacement of New York City’s 865-bed Mount Sinai Beth Israel hospital with a 70-bed facility.

Technology and the drive for customer (patient) convenience are reshaping healthcare just as they’re reshaping food shopping.

The bad news for the traditional food market is still good news for the farmer and for those who can take action to own the elements of the new delivery system, from home delivery to super-convenience fresh food stores.

In like manner, the bad news for the traditional acute care general hospital is still good news for those who own the independent outpatient facilities that will capture the huge volume of cases that used to be performed in a hospital.

To help you further your place in this future, we’ve implemented a strategic partnership with one of the most successful facility development companies in the country, HDA Enterprises.

If you’d like to learn more about outpatient facilities, contact me.

 
 

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Mark F. Weiss
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Having fallen for the fallacy that there’s profit in market share, hospitals have gorged on acquisitions and on employment and alignment of physicians. Many physicians have been willing participants through practice sales and in the belief that there’s safety in hospital employment. But it’s becoming evident that physician employment leads to losses and that integrated care delivers neither better care nor lower costs. And now, technology is about to moot many of the reasons for a hospital’s existence. How can your practice survive and even thrive in the post-hospital world?
 
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Today’s medical groups must confront multiple challenges: The impact of Obamacare. Increasing commoditization. More competition, not just from other physicians and medical professionals, but also from hospitals, investor-owned groups, and disruptive ventures. Yet at the same time, the future of healthcare offers medical groups tremendous opportunity.
 
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Some days, it seems as if everyone, from anesthesia groups to vascular surgery practices, is talking about selling their practice to a larger group, to private equity investors, or to a hospital.


The reality is that some practices can be sold, some can never be sold, and some have nothing to sell.

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Recent Interviews and Published Articles
 
Finders keepers, losers weepers. Except in connection with overpayments from Medicare, then it’s a violation of the federal False Claims Act leading to significant liability—that is, unless you repay the overpaid sum within 60 days. Read CMS Resets the Clock for Return Of Medicare Overpayments published on AnesthesiologyNews.com in May 2016.

Mark's article
A New Strategy To Profit From Interventional Radiology , co-authored with Cecilia Kronawitter, was published on AuntMinne.com on May 23, 2016. Read or download here .

Three of Mark’s blog posts were republished as a column entitled
Practice Challenges in the Spring 2016 issue of the Pennsylvania Society of Anesthesiologists Newsletter, the Sentinel . Read or download here .
 
Mark's article Is There An Interventional Radiology ASC (irASC) In Your Future? was published in the April/May 2016 volume of Radiology Business Journal. Read or download here.
 
Mark's article Impending Death of Hospitals: Will Your Anesthesia Practice Survive? was published in the winter 2016 volume of Communique. Read or download here.
 
Mark was quoted in the article Practice Patterns Change While Outcomes Remain Steady Among Older Anesthesiologists, published in the December 2015 issue of Anesthesiology News. Read or download here.
 
Mark's article Anesthesia Group Mergers, Acquisitions and (Importantly) Alternatives was published in the summer 2015 volume of Communique. Read or download here.
 
Mark was quoted in the article Anesthesiology Acquisition Rate Still at Fevered Pace, published in the July 2015 issue of Anesthesiology News. Read or download here. 
 
Mark's article Seeking Certainty In Radiology: Mergers, Acquisitions and Alternatives was published in June 2015 on Imagingbiz.com. Read or download here.
 
Mark's article Give Disruptive Docs the Boot was published in the April 2015 issue of Outpatient Surgery. Read or download here.
 
Mark's article Do You Make This Mistake Concerning Customer Value? was published in the April 2015 issue of Anesthesiology News. Read or download here.
 
Mark's article Do You Make This Mistake Concerning Customer Value? was published in the March 2015 issue of General Surgery News. Read or download here.
 
Mark's article McDonald’s and Delivering Anesthesia Group Value was published on AnesthesiologyNews.com on December 30, 2014. Read or download here.
 
Mark was quoted in the article Top 5 financial challenges facing physicians in 2015, published in the December 2014 issue of Medical Economics. Read or download here.

Mark was quoted in the article Top 15 challenges facing physicians in 2015, published in the December 2014 issue of Medical Economics. Read or download here.
 
Mark's article Bundled Billing or Bungled Billing? was published in the October 2014 issue of Pain Medicine News. Read or download here.