Portions of this article initially appeared here and are republished with the author’s permission.
At a Food and Drug Law Institute webinar last week, Robin Usi, the Director for the Division of Data & Informatics (DDI), in the Data Sharing & Partnership Group of the CMS Center for Program Integrity, made clear that accuracy matters in the reporting of spend data to CMS pursuant to the Physician Payments Sunshine Act. She further stated that CMS is working to identify inaccurate data reporters and that reporters of inaccurate data are prime targets for agency audit and/or compliance actions.
As pharmaceutical and device companies gear up to report 2015 payments and other transfers of value made to physicians and teaching hospitals as required by the Sunshine Act, many companies may be concerned that they will miss something when the March 31 deadline rolls around. And while there are statutory penalties for not reporting – as Ms. Usi made clear at the FDLI webinar – the penalties for what is reported may be much more significant if the government views a company’s payments to physicians as kickbacks intended to induce the use of the company’s product.
The CMS Open Payments database offers tremendous data mining possibilities. For 2014 – the first full year of Open Payments reporting – the database contains over 11 million transactions valued at almost $6.5 billion. This obviously makes for unprecedented public visibility into the financial relationships between the almost 1,500 reporting companies and the over 600,000 physicians receiving payments.
Government enforcers, private plaintiffs and even investigative reporters are mining this data to make the case that certain payments to physicians are nothing more than kickbacks. One company in particular – Insys Therapeutics, Inc. – has already witnessed the mining of its Open Payments data firsthand. The CMS Open Payments database shows that, during the last five months of 2013, Insys made over $2.7 million in general payments to physicians and teaching hospitals.
This is a fact that was not lost on the plaintiffs in a class action lawsuit filed against Insys in October of 2014 – only about four months after CMS published the 2013 Open Payments data. The class action plaintiffs alleged that Insys made material misrepresentations and omissions about its sales and marketing efforts for its drug Subsys. Among the sales and marketing tactics complained about were payments made to physicians.
The class action complaint attached a 39-page spreadsheet that detailed the payments Insys made to physicians who spoke promotionally for the company. The payment data came straight from the CMS Open Payments database. According to the Complaint, Insys’ then-CEO noted during an earnings call that a small number of physicians write a large percentage of prescriptions for opioid drugs and that Insys “appeared to have targeted these doctors and rewarded them generously for writing Subsys prescriptions.”
The class action plaintiffs used Insys’ own Open Payments data against the company to make the case that the payments essentially were kickbacks to induce prescriptions. Insys agreed to settle the lawsuit for $6.1 million in 2015.
Insys also paid $1.1 million to settle allegations made by the Oregon Attorney General that the company paid improper financial incentives in exchange for Subsys prescriptions. The Oregon AG specifically connected the dots between payments made to physicians who spoke promotionally for the company and prescriptions written by those physicians. The Oregon Notice of Unlawful Trade Practices alleged that Insys’ payments to a particular physician were intended to “incentivize him to prescribe” and stated that the physician was responsible for almost 50 percent of the prescriptions written for Subsys in Oregon.
Two articles by the Southern Investigative Reporting Foundation (SIRF) detailed the payments reported to CMS by Insys to a number of physicians. In a July 2015 article entitled “The Black World of Insys Therapeutics,” SIRF reported that Dr. Gordon Freedman received $204,000 from Insys during the 2013 and 2014 Open Payments reporting periods.
Drilling down further into the data shows that the $204,000 that Insys spent on Dr. Freedman in 2013 and 2014 constituted almost 97 percent of all payments reported to Dr. Freedman in the CMS database. The next closest company spent only $3,871 on Dr. Freedman during the first two reporting periods. Furthermore, of the just over $48,000 in spend reported to Dr. Freedman from all sources in 2013, he received $38,500 from Insys as compensation for speaking promotionally on behalf of the company ($43,405 total from Insys in 2013). And of the $162,000 in spend reported to Dr. Freedman from all sources in 2014, he received $147,250 from Insys as compensation for speaking ($160,200 total from Insys in 2014).
The July 2015 SIRF article goes on to examine Medicare prescription data – which shows that in 2013 Dr. Freedman was the 15th highest writer of subscription reimbursed through Part D. The article charts other physicians receiving payments from Insys and, where available, shows the rank of these physicians by dollar value of Subsys prescriptions reimbursed by Medicare Part D.
The second SIRF article, entitled “Insys Therapeutics and the New ‘Killing It,‘” examined the highest writers of prescriptions reimbursed by TRICARE. The top two physicians on this list are part of a disturbing trend. Drs. Xiulu Ruan and John Couch were both arrested in April 2015 and charged with health care fraud and conspiracy to distribute a controlled substance. Open Payments data show that Insys paid Dr. Ruan $100,000 and Dr. Couch $45,000 in speaker payments in 2014.
Dr. Gavin Awerbuch, who received $56,000 from Insys in 2013, also was arrested on charges of defrauding Medicare. He was the third-highest recipient of payments from Insys in 2013. Open Payments data show that of the just over $90,000 in spend reported to Dr. Awerbuck from all sources in 2013, he received $44,100 from Insys as compensation for speaking promotionally on behalf of the company ($56,140 total from Insys in 2013). And of the $65,000 in spend reported to Dr. Awerbuch from all sources in 2014, he received $30,700 from Insys as compensation for speaking ($33,752 total from Insys in 2014). Payments to Dr. Awerbuch dried up following his arrest in May 2014.
The legal and disciplinary issues faced by some of Insys’ top speakers – the New York Times further reported that five of the top 20 recipients of payments from Insys have faced legal or disciplinary actions – makes clear the importance of monitoring spend data, not only so that analytics can be done to ensure the spend does not raise red flags, but also to identify highly paid physicians so that more intensive background checks can be done on these individuals.
The final chapter of the Insys story likely has not yet been written. The company has disclosed that it has received subpoenas from the Office of Inspector General (in 2013) and the U.S. Attorney for the District of Massachusetts (in 2014). In addition to the Oregon investigation, Insys also has disclosed that four other states are investigating. In the company’s Form 10-K annual report for 2015, the company further disclosed that it is cooperating with the ongoing OIG and U.S. Attorney investigations as well as with the state investigations.
The Insys case study clearly demonstrates that the mining of CMS Open Payments data can prove tremendously useful in supporting allegations that payments to physicians are kickbacks to induce the writing of prescriptions. Continued mining of this data may demonstrate that the penalties for what is being reported under the Sunshine Act are much more significant than any statutory penalties for failing to report or reporting inaccurately.
That shouldn’t be taken as encouragement to not report. Rather, it is encouragement to put in place controls to manage the risk that payments to physicians may be viewed as kickbacks. It is essential that a company have a clear understanding of what is has spent well before it comes time to report to CMS. That means periodic monitoring of spend over the course of a reporting period to identify outliers and spot red flags.
At the PCF Compliance Congress in October 2015, Mary Riordan of the Office of Counsel to the Inspector General suggested that companies use Open Payments data as a tool in ongoing compliance efforts. She may well know something we don’t yet regarding the OIG’s efforts to mine the Open Payments data.