By Jeff Overley

Law360 (November 16, 2020, 12:02 AM EST) -- Drugmakers should consider permanently ending purportedly educational events that have been paused during the coronavirus pandemic, the federal government's health fraud watchdog said Monday, citing "inherent risks" that paid speakers will be getting illegal kickbacks.

In a special fraud alert, the Office of Inspector General at the U.S. Department of Health and Human Services called the pandemic an opportunity for the pharmaceutical industry to ask itself whether in-person events with paid speakers are worth the risk of criminal charges and huge financial penalties under the Anti-Kickback Statute.

"We are issuing this alert during the pandemic emergency, which is necessarily curtailing many in-person activities," the OIG's alert said. "Companies should assess the need for in-person programs, given the risks associated with offering or paying related remuneration, and consider alternative less-risky means for conveying information" to health care professionals.

The alert, which was made public Monday and dated Nov. 12, said its purpose is "to highlight certain inherent risks of remuneration related to speaker programs." The U.S. Department of Justice has targeted such programs in many fraud cases; recent examples include a $678 million civil settlement with Novartis AG, a massive civil and criminal case involving Insys Therapeutics, and an $8 billion civil and criminal settlement with Purdue Pharma LP.

Gregory E. Demske, the OIG's chief counsel, told Law360 in an interview that drugmakers "should think very carefully about the risks of speaker programs, and in particular in-person speaker programs," given that the pandemic has demonstrated that high-quality events can be held virtually.

"In the pandemic situation, many of us, particularly those of us in white-collar professions, are learning and adapting to providing information through very different means, and not depending on in-person meetings," he said.

"So many of the abuses we've seen with payments to prescribers or referrals through speaker programs have been with in-person events," he added. "We think it's an important opportunity for companies to really reflect on whether there's actual important information that has not been able to be conveyed in the absence of in-person programs."

Drugmakers are prohibited from simply paying doctors to prescribe medications for patients in taxpayer-funded programs, such as Medicare and Medicaid, because financial incentives can warp clinical judgment. As a result, unlawful fees are often disguised as bona fide compensation to doctors for speaking at educational gatherings.

But speakers commonly turn out to be prolific prescribers of drugs sold by the company paying the fees. And when the events are held in-person, they often turn out to be light on learning and heavy on wine, steaks and lap dances — the sort of perks that can indicate payments were intentionally meant to reward prescribers, as required to prove Anti-Kickback Statute liability.

In one of the biggest such cases, Novartis in July reached a nine-figure settlement covering allegations that it staged tens of thousands of sham educational events, sometimes in the context of fishing trips and meals at Hooters. The settlement included a corporate integrity agreement with unusually strong restrictions on alcohol, restaurant settings and nonemployee speakers at future events.

Asked whether the Novartis restrictions are a sign of things to come for compliance, Demske told Law360 that they "certainly would inform our approach in future speaker-program kickback cases."

"What we've done in the Novartis [corporate integrity agreement] we think should help address the problem that occurred in the case there, and that may also make sense in other cases," he added.

Shady speaker fees have been a persistent problem despite years of enforcement. Trade group Pharmaceutical Research and Manufacturers of America issued an ethical code in 2002 addressing speaker events and other drugmaker interactions with prescribers, and it has subsequently revised the code multiple times.

Monday's alert took issue with a portion of PhRMA's code that said speaker programs help to "educate and inform" health care professionals about medications.

"OIG is skeptical about the educational value of such programs," the alert said.

Demske made a similar point, saying that while "there may be some very legitimate motivations" for in-person speaker programs, they "may also be a tempting way to put an innocuous or positive veneer on payments" that reward doctors for writing prescriptions or encourage them to do so.

That's not to say things haven't improved during the past two decades. Demske told Law360 that the drug industry has "put a lot of energy and resources into compliance programs, so that a lot of the more blatant compliance issues that we saw 10, 15, 20 years ago are not as prevalent."

Monday's alert was also aimed at medical device makers, which have similarly found themselves in hot legal water for paying doctors to praise their products at nominally educational gatherings. The drug and device industries paid nearly $2 billion from 2017 through 2019 for speaker-related services, the alert said.

The alert was further directed to health care providers, saying that they "should likewise consider the risks of soliciting or receiving remuneration related to speaker programs, given other available means to gather information relevant to providing appropriate treatment for patients."

Physicians have been charged and given lengthy prison sentences for enriching themselves with bogus speaker fees in exchange for prescribing medications, including addictive narcotic painkillers with potentially serious side effects.

The HHS OIG has only issued a handful of special fraud alerts during the past decade, and the alerts have sometimes been bookended by enforcement actions on related topics. In one example, the OIG in 2014 sent an alert regarding laboratory kickbacks to doctors, and cases alleging bribery and False Claims Act violations played out both before and after the alert.

Demske declined to discuss the nature or volume of pending cases involving speaker kickbacks, saying only that "certainly we get allegations about kickbacks and speaker programs, and we continue to investigate such matters."

--Editing by Adam LoBelia.

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