Biopharmaceutical and Medical Device Compliance

Off-label marketing occurs when doctors prescribe a drug or device for a use that has not received FDA approval (1). Physicians have the unfettered right to prescribe the best drugs or devices for their patients, including approved drugs and devices for unapproved uses. Pharmaceutical and medical device manufacturers, however, cannot promote their products for such uses — even if those are supported in medical literature. Companies cross the line when their sales representatives sell physicians on the idea of using drugs for off-label purposes, sometimes with inducements and misrepresentations.

Civil and Criminal Penalties

During the past five years, the Department of Justice has exacted substantial criminal and civil penalties through settlements with several of the nation’s largest biopharmaceutical and medical device companies arising from wide-ranging allegations of healthcare fraud. Eight of the 10 largest settlements by the Department of Justice involved pharmaceutical companies. Drug maker Allergan paid $600 million to settle off-label marketing allegations of its Botox antiwrinkle drug (2), Astra Zeneca paid $520 million to settle off-label marketing claims (3), Novartis settled a suit involving off-label marketing of epilepsy drugs for $422 million (4), and Forest Labs paid $313 million to settle a suit for distribution of unapproved drugs and off-label marketing of two antidepressants (5). These settlements follow on billion-dollar settlements by Pfizer and Eli Lilly in 2009 (6, 7).

Notwithstanding the illegality of off-label marketing, pharmaceutical and medical device companies have used it to increase profits from their best-selling products. It is an alluring shortcut by which they reap the benefits of previous drug discovery investment without investing in further FDA approvals. For some companies, the benefits of off-label marketing far outweigh the downside. Volume incentives for salespersons can also compound the problem.

Critics are starting to question these settlements, pointing out that even such large fines have yet to make a serious dent in recurring marketing abuses (8). If off-label marketing has become an accepted practice, then settlement fines can be viewed as a cost of doing business. That is especially true for cases in which penalties are minimal compared with the profits drug and device makers can make on a successful product. For example, Pfizer paid $2.3 billion in fines for four drugs, including its Bextra drug (approved only for the relief of arthritis and menstrual discomfort) for treatment of acute pains of all kinds (9, 10). That penalty, however, amounted to just 14% of the company’s $16.8 billion in revenue from selling those medicines from 2001 to 2008.


Corporate Integrity Agreements

The US government is becoming more active in pursuing violations by imposing liability on owners, officers, and managers and by making comprehensive compliance programs a critical part of any settlement. Government settlements with pharmaceutical manufacturers have some significant similarities: They involve relatively few statutes, require payment of significant monetary fines, and require “corporate integrity agreements” (CIAs). Those have been common since the mid-1990s when the government began strengthening its efforts to enforce federal healthcare statutes and recoup funds lost as a result of fraud and abuse. The Health Insurance Portability and Accountability Act of 1996 (HIPAA) significantly enhanced the resources and capabilities of federal agencies involved in such efforts, including the Department of Health and Human Services’ Office of Inspector General (OIG).

CIAs were originally structured fairly rigidly on the core elements of the Federal Sentencing Guidelines of 1995. In the late 1990s, OIG recognized the need for a flexible approach in which self-regulation was important. That is, companies adopting compliance programs to detect misbehavior were more likely to have reduced sanctions and penalties. Many corporations implemented an enhanced compliance program upon discovery of a problem. That action was usually recognized during subsequent government settlement negotiations.

In essence, a CIA is a contract between a company and the OIG, in lieu of OIG’s discretionary right to exclude an individual or entity from participating in a federal healthcare program such as Medicare or Medicaid. CIAs address conduct giving rise to settlements and contain baseline compliance requirements (a list of CIAs is available at Standard terms include

  • creating a corporate “code of conduct”

  • designating a compliance officer

  • specifying training requirements

  • providing for employee disclosure without retaliation

  • implementing compliance policies and procedures, including disciplinary policies for violation of the company compliance program

  • reviewing and auditing programs.

Additional topics addressed in certain CIAs provide further insight into the types of activities subject to government oversight through the CIA process. They include

  • reimbursement support

  • sales representative interactions with healthcare practioners (HCPs), specifically responses to questions for off-label information

  • interactions with HCPs; sample distribution

  • compensation incentives; consultant arrangements

  • educational activities

  • sponsorship of grants

  • charitable contributions

  • review of written materials intended for dissemination to sales representatives

  • information that can be distributed by Medical Affairs personnel and tracking of those inquiries

  • publication review.

Notwithstanding the widespread use and acceptance of CIAs, many of them have been considered too general to curb future abuses. For example, one company was already operating under a CIA (for criminal and civil charges relating to marketing a drug) when it was found liable for fraud associated with a second drug’s off-label sales (11). We anticipate that the government will tighten up CIA requirements to create a viable tool to halt marketing abuses.

Achieving Compliance

As is apparent from the multitude of corporate prosecutions, all companies must invoke a culture of compliance throughout their organizations. OIG has provided some assistance. In 2003, the office issued compliance program guidance (CPGs) for pharmaceutical manufacturers’ monitoring adherence to applicable statutes, regulations, and program requirements (12). The final CPG provides important guidance on development of an effective compliance program and specific elements that manufacturers should consider when implementing it. In particular, the final guidance details actions that guard against violating federal
fraud and abuse laws in marketing and sales activities. Around that same time, OIG also began issuing fraud alerts, advisory opinions, advisory bulletins, and work plans to make its concerns and expectations more transparent.

Accordingly, tools exist for senior management to make compliance an integral part of business and specifically to give employees ownership over their compliance-related actions. CIAs and CPGs are also informative tools for creating dynamic compliance programs. For example, well-designed compliance programs will include many topics that CIAs address.

The first step in achieving corporate compliance with these rules is to initiate a compliance program. Companies must assess their risks and identify areas that need particular attention. High-risk areas normally include HCP interactions, promotional materials, behavior of sales representatives, consulting arrangements, use of customer lists, and giving grants and sponsorships.

HCP relationships should be examined for noncompliant behavior. For example, HCPs often work as consultants, serve on advisory boards, and engage in speaker programs. HCPs working in such activities should be selected on the basis of their expertise and not for potential referrals or off-label discussions.

Promotional materials also should be thoroughly reviewed to meet labeling regulations as well as to ensure on-label messaging. Processes for reviewing promotional materials should be instituted. All materials including detailing pieces, training materials, press releases, and reprints must be approved through such a process before distribution.

Sales representative management is significant. Representatives must be thoroughly trained in the harm associated with off-label promotion. Conversely, representatives must understand how to monitor and respond to off-label inquiries. Companies must make certain that their incentive programs do not promote off-label use (e.g., whether goals and bonuses are appropriate for on-label use). Companies must ensure that they provide their representatives with appropriate target customer lists.

Designing a compliance program is only part of the battle. Companies need to implement — and continually “pressure test” — the design to ensure its continuing viability. Means for investigating complaints, monitoring ongoing activity, and implementing corrective action plans are critical to halting noncompliance. Training and retraining relevant personnel is equally important.

Finally, company compliance programs need to document related controls so that the information is readily available should regulators or government enforcement personnel come knocking. If a problem arises, take immediate corrective action, conduct a cause analysis, take human resources action (if appropriate), and make self-disclosure to the government (if required). Anything less only invites trouble, and with the increasing threat of personal liability, every owner, officer, and manager should be forewarned.

About the Author

Author Details
Corresponding author David Restaino, Esq. is a partner in the Princeton, NJ office of Fox Rothschild LLP; 1-609-895-6701; [email protected]. Leslie Gladstone Restaino, Esq. is general counsel of Validus Pharmaceuticals LLC.


1.) US Code. Title 42.

2.) US Department of Justice. (1 September 2010).. Allergan Agrees to Plead Guilty and Pay $600 Million to Resolve Allegations of Off-Label Promotion of Botox®.

3.) US Departement of Justice. (27 April 2010). Pharmaceutical Giant AstraZeneca to Pay $520 Million for Off-label Drug Marketing.

4.) US Departmentof Justice. (30 September 2010). Novartis Pharmaceuticals Corporation to Pay $422.5 Million for Off-Label Drug Marketing.

5.) US Department of Justice. (15 September 2010). Drug Maker Forest Pleads Guilty; To Pay More Than $313 Million to Resolve Criminal Charges and False Claims Act Allegation.

6.) US Department of Health and Human Services. (2 September 2009). Justice Department Announces Largest Health Care Fraud Settlement in its History.

7.) US Department of Justice. (15 January 2009). Eli Lilly and Company Agrees to Pay $1.415 Billion to Resolve Allegations of Off-label Promotion of Zyprexa.

8.) Stier, K. 2010.. Curbing Drug Company Abuses: Are Fines Enough?.

9.) Rubin, R. 2009.. Pfizer Fined $2.3 Billion for Illegal Marketing in Off-Label Drug Case.

10.) US Health and Human Services. (2 September 2009). Justice Department Announces Largest Health Care Fraud Settlement in its History.

11.) Evans, D. 2009.. Pfizer Broke the Law by Promoting Drugs for Unapproved Uses.

12.) 2003. OIG Compliance Program Guidance for Pharmaceutical Manufacturers. Fed. Reg 68:23731.

You May Also Like