Government Enforcement Initiatives Third Annual Medical Device Congress At Harvard March 28, 2008

1. Government Enforcement InitiativesThird Annual Medical Device Congress At HarvardMarch 28, 2008 Stephen C. Payne 202.736.8068

2. Enforcement Tension • Physician participation v. independence • Value of information flow v. FDA approval/clearance role Testimony of Gregory E. Demske Office of Counsel to the Inspector General, HHS Senate Special Committee on Aging, Hearing: February 27, 2008 However, …where physicians routinely receive substantial compensation from medical device companies through stock options, royalty agreements, consulting agreements, research grants, and fellowships, … there is a significant risk that such payments will improperly influence medical decisionmaking. [P]hysicians play an essential role in the development, testing, and extensive training involved in producing effective and safe medical devices….

3. Enforcement Agencies/Parties • FDA • OIG • DoJ (Criminal, Civil, OCL, USAOs) • State AGs, MFCUs • Congress • Whistleblowers • Consumers -Decentralized -Multi-dimensional

4. Enforcement Tools Criminal Charges Injunctions Criminal/Civil Investigations Seizure of Product Recalls Detention of Devices — Adulterated or Misbranded Warning Letter(s) Form 483

5. Legal Framework • Kickbacks • 42 USC § 1320a-7b(b) • FDCA Misbranding, Adulteration • Off-Label (PMA), Unapproved, Not Cleared (510k) • QSR • False Claims Act • 31 USC §§ 3729-3733 • Civil Monetary Penalties • 42 USC § 1320a-7a(a)(7) • Exclusion from federal health care programs • 42 USC § 1320a-7

6. Significant Settlements • Dr. Chan 2008 • Gifts, payments for consulting agreements, research • $1.5 million civil • Guilty plea • Hip and Knee Devices 2007 • Alleged inducements to use artificial hip and knee reconstruction and replacement products through consulting agreements, lavish trips, other • $311 million • Deferred Prosecution Agreements • CIAs

7. Significant Settlements • Advance Neuromodulation Systems 2007 • Alleged marketing program to pay physicians $5,000 for every five new patients tested with spinal cord stimulation product • $2.95 million Civil Monetary Penalties settlement • CIA • Bryan Corp. 2007 • Shipping to hospitals misbranded drug (“sterile talc powder”) and medical device (“barium sulfate”), obstructing administrative proceeding (FDA inspections) • $5 million (criminal and civil)

8. Significant Settlements • NuMed 2007 • Distributing stent and balloon-in-balloon catheter not approved by FDA • $2.3 million (criminal) • $2.2 million (funding of clinical trial) • Provide stent at no cost for 5 years after approval • Medtronic 2006 • Alleged kickbacks to spine surgeons in form of consulting and royalty agreements, trips, lavish venues, entertainment • $40 million civil • CIA

9. Significant Settlements • Boston Scientific 2005 • Allegedly continued to ship defective balloon catheters for implanting stents • $74 million (civil) • Guidant (Endo Vascular Technol.) 2003 • “Ancure” device used for treatment of abdominal aortic aneurysms – failed to file over 2600 MDRs, sales reps instructed physicians on removal of malfunctioning device, misled FDA inspector re: number of complaints • Pled guilty to introducing misbranded device into commerce and making false statements to FDA • $92.4 million (civil and criminal)

10. Individual Exposure • FDCA strict liability for individuals in management positions (U.S. v. Dotterweich; U.S. v. Park) • Acquittals in cases against individuals in TAP & Serono • Health care entity – FCA case against individual who certified compliance • Pharma Co. – General Counsel pled guilty • Pharma Co. – CEO indicted • Devices • Caputo • Dr. Chan • NuMed

11. Ongoing Investigations/Activities • Other companies received subpoenas in New Jersey hip and knee investigation • Doctors in NJ investigation • Biliary stents • Many more • Keep in mind Statutes of Limitations, False Claims Act qui tam seal

12. Substantive Enforcement Issues • Payments/Anti-Kickback • Reimbursement • Unapproved/Not Cleared Products • Off-Label Promotion • Medical Device Reporting (MDRs) • QSR • Clinical Investigation Issues • Supplier Quality and Control

13. Enforcement Emphases • Not in the patient’s best interest – safety, cost • Increase health care costs • Research independence • Unfair competition

14. Basic Anatomy of an Enforcement Case • Whistleblower? • Agent activity • Subpoenas • Government interviews • Company presentations • Negotiations • Charging/litigation/resolution • Device industry: close connection to site inspections

15. Responding to an Enforcement Case • Team & client buy-in • Cooperation • Privilege? • Disclosure? • Document production & confidentiality • Internal investigation • Representation of individuals and other employee matters • Defense development – constitution, law, regulation, policy, label/statement of intended use, clinical studies and guidelines, causation, reimbursement, facts • Experts • Consideration of exclusion/debarment

16. Preventing/Mitigating Enforcement Cases • Invest in looking at yourself • Compliance programs – keep in mind, still dealing with potentially criminal conduct, not mere technical regulatory issues • Risk assessment – big off-label use, big physician role, patient safety • "Systemic" – whole picture, not just issue-by-issue

17. Current Trends • FCA "Delta" issues: • Damages in FCA cases • DoJ: If do not meet conditions of participation, single damages are full value of the claims, even when care given to patients not challenged (don’t get “credit” for value provided to government beneficiaries under) – US v. Rogan, US Court of Appeals for the Seventh Circuit, No. 06-4144, 2/20/08 • Off-label damages • DRG defense in FCA cases • US ex rel. Digiovanni v. St. Joseph’s/Candler Health System Inc., S.D. Ga., No. 4:04-cv-00190-WTM-GRS, 2/11/08

18. Current Trends • 1st Amendment: • Caputo – 7th Cir. declines to decide because protects only speech that promotes lawful activity, and marketing a device that is not approved/cleared is unlawful (large vs. small sterilizer) • Off-Label • Causation and claims-submission process • Proposed FCA amendments • FDA Draft Guidance for Industry – Good Reprint Practices, February 2008 • FDAAA • E.g., certifications of compliance with requirements for submission to the expanded clinical trials data bank

19. Current Trends • Spin-offs • Products liability • Riegel v. Medtronic (preemption) • Pallone/Waxman? • Consumer fraud cases • State AGs • State FCAs, AKSs • Competitors • Shareholders • Ongoing regulatory approval considerations

20. Current Trends • Acquisitions and their aftermath • Pending investigations • Approvals/clearance • Promotional activity • Managing Suppliers • 483s and Warning Letters • QSIT revision?