Categories
Everything Compliance

Episode 102 – the Technical Edition

Welcome to the only roundtable podcast in compliance as we celebrate our second century of shows. In 2021, Everything Compliance was honored by W3 as a top talk show in podcasting. In this episode, we have the quartet of Jonathan Marks, Jay Rosen, Tom Fox, and Matt Kelly. In this episode, we discuss some technical issues which have all been thinking about. We conclude with our fan-favorite Shout Outs and Rants.

1. Matt Kelly takes a deep dive into the CCO certification issue focusing on the term ‘reasonable.’ He rants about the LIV exhibit golf tour and the insane amount of money being spent by Saudi Arabia to rehabilitate its reputation through sports.

2. Jonathan Marks explores auditing business segments and what it means for auditors and investors. He shouts out SEC Chairman Gary Gensler on the 20th anniversary of the enactment of SOX.

3. Tom Fox looks at the bribery schemes used in the Biotronik FCA action and mines them for lessons learned for the anti-corruption compliance professional. He shouts out to Vin Scully, the former play-by-play announcer for the Los Angeles Dodgers.

4. Jay Rosen explores FCA USA LLC’s fraudulent emissions criminal action. He shouts out to Celtic great Bill Russell, who died this week.

The members of the Everything Compliance are:

•       Jay Rosen– Jay is Vice President, Business Development Corporate Monitoring at Affiliated Monitors. Rosen can be reached at JRosen@affiliatedmonitors.com

•       Karen Woody – One of the top academic experts on the SEC. Woody can be reached at kwoody@wlu.edu

•       Matt Kelly – Founder and CEO of Radical Compliance. Kelly can be reached at mkelly@radicalcompliance.com

•       Jonathan Armstrong –our UK colleague is an experienced data privacy/protection lawyer with Cordery in London. Armstrong can be reached at jonathan.armstrong@corderycompliance.com

•       Jonathan Marks is Partner, Firm Practice Leader – Global Forensic, Compliance & Integrity Services at Baker Tilly. Marks can be reached at jonathan.marks@bakertilly.com

The host and producer, ranter (and sometime panelist) of Everything Compliance is Tom Fox, the Voice of Compliance. He can be reached at tfox@tfoxlaw.com. Everything Compliance is a part of the Compliance Podcast Network.

Categories
Compliance Into the Weeds

Lessons from the Biotronik Anti-Kickback Enforcement Action

Compliance into the Weeds is the only weekly podcast which takes a deep dive into a compliance related topic, literally going into the weeds to more fully explore a subject. In this episode, we take a deep dive into the recent settlement by Biotronik with the DOJ over allegations of the violation of the Anti-Kickback Statue  Highlights include:

  • Background facts.
  • Training programs as cover for bribes.
  • What is lavish entertainment?
  • What were the internal control failures?
  • Controls for high-risk payments.
  • Lessons learned for the ABC compliance professional.

Resources

Tom in the FCPA Compliance and Ethics Blog

Part 1-Background

Part 2-the Bribery Schemes and Lessons Learned

Matt in Radical Compliance

Categories
Blog

Biotronik Anti-Kickback Enforcement Action: Bribery Schemes and Lessons Learned

Today we conclude our series on a Federal Anti-Kickback enforcement action which was announced last week, involving the Oregon based medical device manufacturer Biotronik Inc. (Biotronik). Today, I want to consider the corruption schemes and the lessons learned for the compliance professional. As stated in the Settlement Agreement, Biotronik “knowingly caused the submission of false claims for payment to federal healthcare programs by providing remuneration to physicians to induce them to use Biotronik’s CRM devices in violation of the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b).”

I. The Bribery Schemes

 a. Abuse of Training Programs

The Settlement Agreement alleges “Biotronik knowingly paid excessive payments to physicians with a purpose of inducing and rewarding their use of Biotronik’s pacemakers, defibrillators, and other cardiac devices. One of ways the company did so was through “its new employee training program (“Training Program”) by knowingly paying some of its physician customers (“Training Physicians”) to provide excessive employee trainings.” Under this scheme, the Training Physicians were to be paid a fixed fee of approximately $400.00 each time a Biotronik employee trainee received training during one of the Training Physician’s CRM implant procedures. For instance, under the Training Program implant procedure, the “Training Physician was supposed to educate the employee trainee on Biotronik’s devices and teach how to assist a physician during an implant procedure.”

However, it was the sales team which set up these training programs. Biotronik’s compliance and training functions warned that “Biotronik’s salespeople had too much influence in the selection of Training Physicians, that the Training program and resulting payments were being over- utilized, and that the goal of educating Biotronik employees could be achieved without paying Training Physicians.” However, “Biotronik permitted trainees to attend an excessive number of training procedures for which Training Physicians received payment from Biotronik without first conducting an adequate assessment of the trainee’s need for additional training.”

To further line the pockets of the Training Physicians, “salespeople, including managers, intentionally prevented otherwise qualified trainees from successfully completing the Training Program, not because they needed additional training, but rather as a means of ensuring that the trainee could attend more trainings, thereby purportedly justifying additional payments to Training Physicians.” Biotronik also knowingly paid Training Physicians for some trainings that either never occurred or was of little or no value to trainees. This included paying one “Training Physician for certain trainings for which there was no trainee physically present to observe the implant procedure.”

b.  Lavish Entertainment

The Settlement Agreement also alleged that “Biotronik knowingly paid for lavish meals, entertainment, and travel for certain physicians who are known to Biotronik and the United States (hereinafter the “Subject Physicians”) with a purpose of inducing and rewarding their use of Biotronik’s pacemakers, defibrillators, and other cardiac devices.” The company “did not require sign in sheets for lavish meals with physicians and did not use adequate methods to verify the number or identity of attendees or to confirm whether the meals were for a legitimate business purpose.”

This led to  some Biotronik employees falsifying “receipts and participant lists, making it possible to exceed the company’s compliance spending limit per attendee.” These meals and outings often included little or no legitimate business discussion. There was also the amount of the entertainment expense, which included “winery tours, annual office holiday parties, and lavish meals with certain Subject Physicians and their guests at high-end restaurants.” Yet another example of spending far too much on entertainment was “one Subject Physician’s international business class airfare and honoraria in the thousands of dollars for a short, 30-minute talk at an international conference.”

II. Biotronik Remediation

No doubt one of the reasons Biotronik did receive the settlement amount was that, at some point, it recognized the issues and instituted remediation. With the training programs “beginning in 2017, Biotronik added new compliance measures and oversight of the Training Program, limited the number of Training Program events, and reduced payments made in connection with such Training Program events.” In April 2021, Biotronik hired a new Vice President of Compliance and was able to get the lavish entertainment under control by adding “new compliance measures related to the provision of meals and travel to healthcare providers which provided additional employee training, imposed new restrictions, and improved oversight to identify and prevent meal and travel policy violations.”

III. Lessons Learned

There are multiple lessons here for the compliance professional outside the laws under which Biotronik ran afoul. Perhaps the clearest and foremost is that compliance not only needs visibility into areas of risk about also some modicum of control. In the area of Physician Training, the Settlement Agreement specifically noted that the Biotronik compliance function “warned that Biotronik’s salespeople had too much influence in the selection of Training Physicians, that the Training program and resulting payments were being over-utilized, and that the goal of educating Biotronik employees could be achieved without paying Training Physicians.” Here a control should have been put in place which required compliance approval before payments and reimbursements were made for the training. This is similar to a compliance oversight and control of expenses paid or reimbursed to foreign government officials in a Foreign Corrupt Practices Act (FCPA) compliance program.

Interestingly, the Department of Justice (DOJ) also discussed a more nuanced approach to determining if the Physician’s Training is both initially warranted and then continues to be warranted. This is ongoing monitoring. Obviously for Biotronik, one of their risks was when the company paid for training provided by doctors who could also prescribe the company’s products and services. The risk to the company is similar to the risk of an internationally focused company doing business with foreign governments or state-owned enterprises, under the FCPA. If you are paying out monies for training and that puts you in a high-risk category, you need to make sure those receiving the training are required to receive it or even need it.

Under the lavish spending on entertainment and travel, the same type of analysis can apply. The key is both “reasonable spending and business purpose.” The amount spent must be reasonable for the time, locale and participants. There should also be an articulated business purpose for the dinner or other event.

Under the FCPA, there is no threshold that a Company can establish a value for business entertainment. However, I believe there are clear guidelines which should be incorporated into your business expenditure policy, which should include the following:

  • A reasonable balance must exist for bona fide business entertainment during an official business trip.
  • All business entertainment expenses must be reasonable.
  • The business entertainment expense must be commensurate with local custom and practice.
  • The business entertainment expense must avoid the appearance of impropriety.
  • The business entertainment expense must be supported by appropriate documentation and properly recorded on the company’s book and records.

The incorporation of these concepts into a compliance policy is a good first step towards preventing potential violations from arising, but it must be emphasized that they are only a first step. There must be procedures to implement these policies. At a minimum, you must require a business justification from the business representative requesting to provide the gift or business entertainment. Next it should be reviewed and approved by a front-line compliance professional. Then, depending on the amount and nature of the request, it may need Chief Compliance Officer (CCO) approval. Finally, if there is a Compliance Committee it should go to that Committee for a final check to make sure everything is in order.

These guidelines must be coupled with active training of all personnel, not only on a company’s compliance policy, but also on the corporate and individual consequences for violation of the policy. Lastly, it is imperative that all such business entertainment be properly recorded, as required by the books and records component of the FCPA.

And, as always, do not forget the gut check test.

Categories
Blog

The Wreck of the Andrea Doria and the Biotronik Anti-Kickback Enforcement Action

We have not had a This Day in History opening for the FCPA Compliance and Ethics Blog for some time. So not only is one long overdue but a shipwreck which occurred some 66 years ago makes a great opening for today’s start of a multi-part blog post series on a Federal Anti-Kickback  enforcement action which was announced last week, involving the Oregon based medical device manufacturer Biotronik Inc. (Biotronik).

The shipwreck of course was the catastrophe involving the Italian passenger liner the Andrea Doria and the Swedish passenger liner, the Stockholm off the coast of New York on this date in 1956. According to This Day in History, at approximately, 10:45 pm, the Stockholm showed up on the Andrea Doria’s radar screens, at a distance of about 17 nautical miles. Next Andrea Doria showed up on the Stockholm’s radar, at 12 miles away. The Andrea Doria Captain then “exacerbated a dangerous situation by making a turn to port for an unconventional starboard-to-starboard passing, which he wrongly thought the other ship was attempting.” Third Officer Johan-Ernst Bogislaus Carstens, commanding the bridge of the Stockholm, then made a conventional turn to starboard. Andrea Doria Captain Calami realized he was on a collision course with the Stockholm and turned hard to the left, hoping to race past the bow of the Swedish ship but it was too late. Five were killed on the Stockholm and 46 persons on the Andrea Doria died but over 1,600 were rescued. It was one of the final great nautical disasters involving the collision of passenger ships.

According to the Department of Justice (DOJ) Press Release, “the Federal Anti-Kickback Statute prohibits offering or paying anything of value to induce referrals of items or services covered by Medicare and other federally funded programs. The statute is intended to ensure that medical providers’ judgments are not compromised by improper financial incentives.” Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division, said, “Paying kickbacks to doctors to influence their selection of medical devices undermines the integrity of federal healthcare programs. When medical devices are used in surgical procedures, patients deserve to know that their device was selected based on quality of care considerations and not on improper payments from manufacturers.”

Biotronik is a company which manufactures and sells cardiac rhythm management (CRM) devices, including pacemakers, defibrillators, and cardiac resynchronization therapy (CRT) devices throughout the United States. The company engaged in bribery and corruption inside the US rather than outside of the US as we see in cases involving the Foreign Corrupt Practices Act (FCPA). The Press Release claims that the company engaged in a “kickback scheme to pay certain favored physicians to induce and reward their use of Biotronik’s pacemakers, defibrillators and other cardiac devices. In particular, Biotronik allegedly abused a new employee training program by paying physicians for an excessive number of trainings and, in some cases, for training events that either never occurred or were of little or no value to trainees.”

Biotronik was on actual knowledge that these payments were illegal as the corporate compliance function “warned that salespeople had too much influence in selecting physicians to conduct new employee training and that the training payments were being over-utilized.” The Press Release also noted, “the settlement also resolves allegations that Biotronik violated the Anti-Kickback Statute when it paid for physicians’ holiday parties, winery tours, lavish meals with no legitimate business purpose and international business class airfare and honoraria in exchange for making brief appearances at international conferences.”

Interestingly, this matter involved two whistleblowers. The civil settlement included the resolution of claims brought under the qui tam or whistleblower provisions of the False Claims Act (FCA),  which, under those provisions, a private party can file an action on behalf of the United States and receive a portion of any recovery. The whistleblowers were Jeffrey Bell and Andrew Schmid, both of whom had been employed as independent sales representatives for Biotronik. They brought suit against the company, alleging, as stated in the Settlement Agreement, that Biotronik “knowingly caused the submission of false claims for payment to federal healthcare programs by providing remuneration to physicians to induce them to use Biotronik’s CRM devices in violation of the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b). The United States intervened in the Civil Action on June 21, 2021.” Bell and Schmid received approximately $2.1 million as their share of the recovery in this case.

Biotronik agreed to pay $12.95 million to resolve these allegations “by causing the submission of false claims to Medicare and Medicaid by paying kickbacks to physicians to induce their use of Biotronik’s implantable cardiac devices, such as pacemakers and defibrillators.” There were multiple US enforcement authorities involved in this case. The Press Release noted, “the resolution obtained in this matter was the result of a coordinated effort between the Justice Department’s Civil Division, Commercial Litigation Branch, Fraud Section and the U.S. Attorney’s Office for the Central District of California. HHS-OIG assisted in the investigation.”

Join us tomorrow when we consider the bribery schemes allegedly used by Biotronik and the lessons learned for the compliance professional.