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Some Things Never Change: Lavish Meals Result in Significant FCA Liability for Device Manufacturer

A recent settlement announced by the US Department of Justice serves as a warning to pharmaceutical and device manufacturers that the government remains concerned about the provision of expensive meals to physicians and the impact such meals may have on a physician’s independent medical judgment.

Device manufacturer Abiomed, Inc., which manufacturers and markets a line of heart pumps, agreed to pay $3.1 million to resolve allegations that the company violated the Anti-Kickback Statute and False Claims Act by providing physicians meals at some of the country’s most expensive restaurants. Among other things, Abiomed allegedly paid for meals where the amount of alcohol ordered was inconsistent with conducting legitimate scientific discussions, as well as meals where the cost per-attendee exceeded Abiomed’s internal $150 per-attendee guidelines. Abiomed also allegedly paid for meals for physicians’ spouses where the spouses had no legitimate business purpose for attending the meals and misrepresented the number of attendees by listing fictitious names of supposed attendees, which resulted in masking the true per-attendee cost. 
Interestingly, Abiomed appears to have had some internal compliance processes meant to address meals provided to physicians. Specifically, Abiomed established internal per-person spending limits. The company also had a process requiring mangers to approve expenses for meals provided to physicians. However, as the company’s managers are alleged to have approved the expenses for the meals at issue in the settlement, the company’s internal compliance processes do not appear sufficient to prevent the noncompliant behavior. 
It's been over 17 years since the Pharmaceutical Research and Manufacturers of America created a voluntary code of conduct aimed at ending similar practices throughout the pharmaceutical industry and over 8 years since the Advanced Medical Technology Association followed suit and crafted a similar Code of Ethics for the medical device industry. Nonetheless, it’s evident from the allegations in this settlement that risky sales practices persist throughout the medical device industry. It’s imperative that device manufacturers, like their pharmaceutical manufacturer counterparts, adopt robust compliance programs. Specifically, manufacturers should not only have policies and procedures that address interactions with physicians (including the provision of meals to physicians), but they should also take steps to ensure compliance with those policies and procedures. To this end, manufacturers must routinely audit and monitor sales representative interactions with physicians to identify and address improper interactions (e.g., expensive meals) in a timely manner. Manufacturer compliance programs also should include regular training on the risks associated with interactions with physicians, including the potential for such interactions to lead to violations of the Anti-Kickback Statute and False Claims Act.

Arent Fox’s Health Care group will continue to monitor developments in the Abiomed settlement and how your business can take steps to mitigate risks associated with manufacturer interactions with health care providers. If you have any questions, please contact Stephanie Trunk, Linda BaumannJacques Smith, Randall Brater, Michael DearingtonHillary Stemple, or the Arent Fox professional who usually handles your matters.