Medicare Compliance & Reimbursement

The feds -- who were already hassling Johnson & Johnson and Omnicare for their financial relationship -- now have a PowerPoint presentation to add to their contention that J&J violated the False Claims Act when it attempted to influence the prescribing of J&J drugs. The case contains some important lessons for providers and facilities. Read on to find out why the PowerPoint was way too sketchy to be called professionally-prepared, and what you should do to avoid making the feds think you are intentionally beating around the bush.

A little over a year ago, it was alleged that nursing home giant, Omnicare, took kickbacks from J&J after which it settled a False Claims Act case with the feds and a handful of states for $98 million. But that was not the end of it. On Jan. 15, 2010, the DOJ announced it was suing J&J again under the FCA, this time for paying kickbacks to Omnicare to induce the nursing home pharmacy company to purchase and recommend J&J drugs, including anti-psychotic Risperdal, for use in nursing homes.

J&J, in an attempt to defend its goodwill and reputation, got a PowerPoint presentation prepared in which it addressed another drug, Levaquin, and compared two sets of data: Levaquin profitability with and without the Omnicare contract. In that presentation, gross margins under the contract are estimated at $8.1 million, and without it, at $3.4 million. However good the intentions of the team that prepared this PowerPoint presentation were, judging by the reactions of the feds and of anyone who knows the very basics of accountancy, things are going very wrong for J&J. So where exactly did J&J go wrong? To quote Wayne Miller, a lawyer and compliance expert with the Compliance Law Group, "The PowerPoint and other documents that DOJ has reviewed indicate that J&J executives or managers were using terms like 'market share success rebates' or other euphemisms for paying what is alleged to be kickbacks."

While J&J still holds its stand that the money was paid for information and educational services, DOJ alleges there is little or not enough evidence that any such information or services were actually supplied, Miller says.

Miller says even though this presentation might not hold water as solid proof in any court of law because, "it does not expressly say that the payments are intended as kickbacks," he fears, "however, the DOJ may use it to support a contention that at least one purpose of the payments was to induce use of the drugs." Under current federal case law, only one purpose of the payments can be to induce illegal referrals, and that's enough to trigger liability under fraud and abuse laws.

What can facilities and providers take away from this case?

• "Payments involving pharma companies continue to be scrutinized," says Miller, "and the review is going beyond physicians to other professionals or companies who can influence prescribing."

• "Compensation between referring parties must always be for bona fide, valuable information and services that are not a guise for rebates or kickbacks," he says. "The information and services need to be clearly described, and evidence of the work done maintained."

• "Review pro forma or other financial information that is going to be disseminated in connection with a potential deal with a referring party to make sure that it is not misconstrued as evidence of wrongful intent," Miller concludes.

Here's how you can stay out of predicaments like these: If you ever intend to pay for any service or data, make sure your financial information includes an estimated value of the service or data through comparables or appraisal, as well as evidence that the compensation you're paying is fair market value, Miller says. "And keep in mind that on the other hand, pro formas that focus  on how the recipient's referrals may improve the bottom line could be problematic, too."

(Editor's note: Read more about the PowerPoint presentation at: www.industry.bnet.com/pharma/10006194/dumbest-powerpoint-ever-jjs-pl-slideshow-ofalleged-kickback-scheme/?tag=homeCar. And the DOJ press release is posted on the page: www.justice.gov/opa/pr/2010/January/10-civ-042.html.)