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| Dear Friend,
Price-fixing is a bitter pill to swallow. It's even worse when it costs you close to a billion dollars.
As anyone reading the news knows, the rising price of prescription drugs has plenty of people worried.
But what about the rising price of settling allegations of pharmaceutical price-fixing?
Pursuant to an October 1, 2021, announcement by the U.S. Department of Justice, three generic drug manufacturers, Taro Pharmaceuticals USA, Inc., Sandoz Inc. and Apotex Corporation, paid a combined $871.9 million to escape further liability.
That’s a big pill to swallow.
Fortunately for the patients, um, I mean defendants, the bitter pill was swallowed in two gulps.
The first was a combined $424.7 million paid to resolve criminal antitrust allegations. Under deferred prosecution agreements, Taro paid a criminal penalty of $205.6 million and admitted to conspiring with two other generic drug companies to fix prices on certain generic drugs; Sandoz paid a criminal penalty of $195 million and admitted to conspiring with four other generic drug companies to fix prices on certain generic drugs; and Apotex paid a criminal penalty of $24.1 million and admitted to conspiring to increase and maintain the price of pravastatin.
The second, announced this month, pertains to related civil False Claims Act allegations which themselves have underpinnings in alleged violations of the federal Anti-Kickback Statute, specifically through arrangements on price and supply, as well as via agreements allocating customers. The civil settlements, which resolved allegations only, without determination of actual liability, total an additional combined $447.2 million from the three drug companies.
Some takeaways for you:
- You’d think that they know better.
- You do, right?
- Violations of the criminal Anti-Kickback Statute can underlie civil violations of the False Claims Act. Although physicians are most cognizant of the AKS’s prohibitions on the offer or acceptance of remuneration in return for referring an individual for a service or item covered by a federal health care program, the law also prohibits companies from receiving or making payments in return for arranging the sale or purchase of items such as drugs for which payment may be made by a federal health care program.
- The False Claims Act serves to compensate the government when it’s the victim of kickbacks paid to further anticompetitive conduct.
- Think first. Act third. Get qualified healthcare counsel as step two; it will always be less expensive than getting criminal defense counsel later on.
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| | | Business Life in the Time of Coronavirus Mini-Series
The coronavirus crisis caused a short term economic crisis for many medical groups. Our mini-series shows you the way out. Plus, many of the concepts discussed are applicable during both good times and bad.
[If you haven't already seen them, follow this link to watch our entire series.] |
| | Watch Tuesday's video here, or just keep reading below for a revised, more polished transcript:
I want to talk to you today about Stark. In particular, how the updated Stark regs issued by CMS that become effective January 1, 2022, impact physician compensation when group members make referrals within the group for designated health services, "DHS".
To begin, nothing has changed in terms of the fact that the law prohibits physicians from being compensated for the value or volume of referrals of designated health services. However, the method of compensation for those referrals within a medical group’s compensation structure has been a moving target over the years as the regulations have morphed.
Effective for January 2022, the regs have morphed again. As opposed to past, broad statements of principle, CMS has implemented a mathematical test to determine whether compensation varies depending on referrals of DHS within the group. Pass the test, you're a winner. Fail the test, you're an automatic loser.
If your medical group provides any service that is deemed to be DHS, you need to pull out your compensation plan to track it pursuant to the new rules. You need to make sure it’s compliant.
I can guarantee you that CMS is going to be looking for those groups that have walked into an absolute Stark law violation, there being no excuse other than fitting within a safe harbor.
Stark, a civil statute, unlike the AKS, a criminal statute, requires no intent. If you come within the statute and fail to meet a safe harbor, it's an automatic violation. Check your compensation plan before CMS checks you.
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| | How to Deploy the Secret Sauce of Opportunistic Strategy
Webinar On Demand
They say that COVID-19 has changed the world, creating the "new normal." Many of your colleagues and many hospital administrators are running scared.
Others, leaders like you, know that crisis means opportunity.
Let me provide you with the strategic tools and insights that you need in order to seize opportunities, whether they’re in the context of your current business relationships, the expansion of your business activities, or the creation of new ventures.
You will learn:
•Defense as a defective default: It’s necessary, but not sufficient.
•Exploiting weakness: Drop the guilt and identify opportunity.
•Flat line negotiation is fatal: Understand its myths and limitations.
•Negotiation reality: Learn to identify and deploy on multiple planes to affect the outcome.
•Maneuver: Harness the power of maneuver, both in overall strategy and in specific negotiation strategy.
Others see a crisis and freeze in fear. Learn how to see the opportunities and obtain the tools to increase your odds of obtaining them.
The price to attend is $479. The cost of not attending is astronomical. |
| | | Wednesday - Does Your Group's Compensation Plan Measure Up? - Medical Group Minute
Watch the video here, or just keep reading below for a slightly polished transcript:
There’s a management saying that what’s measured improves. As a result, managers love to measure things. But measuring does not always indicate value.
Take for example a family of three with total income of $200,000 a year. The parents have another child. Should grandma call the parents to commiserate because the family’s per capita income just dropped from $66,666 to $50,000?
So clearly, you’ve got to be measuring the right thing.
The family comedy described above has a medical group analogy. Groups must distinguish between measuring things which are efficient and measuring things which create a much improved or larger experience for the recipient.
What if you were running a restaurant instead of a medical group. Let’s say you decide to measure and reward on the basis of the time a waiter or waitress takes to picks up food in the kitchen and deliver it to the table. Soon, waiters would be jogging through the joint, tossing plates onto the tables. Slopping the food onto the table with a smirk would still be 99th percentile performance, but the total customer experience would be at rock bottom.
So clearly, some things that measurement says are now “improved” aren’t anything of the sort.
Now back to running a medical group. Take a look at your group’s compensation plan. If you simply measure units produced by your group members–that is, you pay by units only–then you are encouraging fast delivery, not courteous service: tossing the plates, so to speak. On the other hand, if you’ve adopted a fixed compensation system, $X per month as salary, you’ve taken away the incentive to work harder, and you’ve ignored the notion of an incentive for better performance. Of course, that still begs the question, what is better performance?
Correctly formulated, a group compensation plan is not just about encouraging efficiency, it’s about encouraging effective performance in a broad sense. Some of that performance is capable of meaningful objective measurement, but a significant portion is not — but that portion can’t be ignored, it still has to be considered and group members must be cognizant of its impact on their overall compensation. |
| | | | | Listen to the podcast here, or just keep reading for the transcript.
United States Department of Justice recently announced that Akron General Health System, which was acquired by the Cleveland Clinic Foundation at the end of 2015, will pay $21.25 million to resolve violations of the federal Anti-Kickback Statute brought to issue pursuant to a False Claims Act lawsuit.
The payment, by now owner Cleveland Clinic, resolves allegations that between August 2010 and March 2016, the hospital system paid compensation substantially in excess of fair market value to physicians in order to secure patient referrals.
As always in these types of cases, which are civil actions, the settlement does not involve any admission that the allegations were true.
Here are two takeaways for you:
- If a hospital violates the law by overpaying physicians for their services, the physicians were overpaid as a result of accepting the extra compensation. Depending on the regulatory scheme, that leaves open the question as to whether the physicians receiving the payments also violated the law. For example, anti-kickback law turns on intent, which can be inferred, but prohibitions against self-referral, such as the federal Stark Law, are strict liability statutes – no intent required.
- As indicated, the Cleveland Clinic settlement on behalf of its Akron General Health System resulted from a whistleblower action under the federal False Claims Act. Interestingly, the whistleblower was Akron General Health System’s former Director of Internal Audit, Beverly Brouse. She raised issues concerning the arrangements that the system had with certain physician groups and was subsequently terminated. Whether or not those concerns were correct or not and whether or not her termination related to her concerns have now been settled.
As I’ve written before, physicians and their medical groups need to be extremely careful not to create whistleblowers within your ranks. Take compliance concerns to heart and investigate them as part of your internal compliance program. And whatever you do, don’t retaliate against someone for raising compliance concerns; it only adds fuel to the fire and you’re the one who’s likely to get burned. |
| | | Calibrate Your Compass
Read our exclusive RedPaper to guide you through this evolving situation.
The coronavirus crisis caused a short-term economic crisis for many medical groups. Our RedPaper shows you the way out. Plus, many of the concepts discussed are applicable during both good times and bad.
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| | Help Us Help You With Helpful Content
What tailored content would you most like to see during this
time? How can we focus on solutions to your most pressing strategic concerns?
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| | | | We all hear, and most of us say, that the pace of change in healthcare is quickening. That means that the pace of required decision-making is increasing, too. Unless, that is, you want to take the “default” route. That’s the one is which you let someone else make the decisions that impact you; you’re just along for the ride. Of course, playing a bit part in scripting your own future isn’t the smart route to stardom. But despite your own best intentions, perhaps it’s your medical group’s governance structure that’s holding you back.
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| In fact, it’s very likely that the problem is systemic. The Medical Group Governance Matrix introduces a simple four-quadrant diagnostic tool to help you find out. It then shows you how to use that tool to build your better, more profitable future. Get your free copy Free.
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| | | | Whenever you're ready, here are 4 ways I can help you and your business:
1. Download a copy of The Success Prescription. My book, The Success Prescription provides you with a framework for thinking about your success. Download a copy of The Success Prescription here.
2. Be a guest on “Wisdom. Applied. Podcast.” Although most of my podcasts involve me addressing an important point for your success, I’m always looking for guests who’d like to be interviewed about their personal and professional achievements and the lessons learned. Email me if you’re interested in participating.
3. Book me to speak to your group or organization. I’ve spoken at dozens of medical group, healthcare organization, university-sponsored, and private events on many topics such as The Impending Death of Hospitals, the strategic use of OIG Advisory Opinions, medical group governance, and succeeding at negotiations. For more information about a custom presentation for you, drop us a line.
4. If You’re Not Yet a Client, Engage Me to Represent You. If you’re interested in increasing your profit and managing your risk of loss, email me to connect directly. |
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