DOJ’s Top 7 List for Effective Compliance Programs …and Other Hot Button Items

By Steve Vincze

On March 18th, I had the pleasure of moderating a distinguished panel of representatives from the U.S. Department of Justice at the 3rd Annual CBI Compliance Monitoring Conference in Philadelphia.  Dubbed the “Enforcement Panel,” we kicked off the conference first thing in the morning with every attendee leaning forward in their chairs anxiously waiting to hear about the latest enforcement priorities, trends and insights straight from the DOJ itself.

The panel did not disappoint.  Comprised of DOJ representatives from Boston, Philadelphia, NJ and Washington, D.C., the panel shared that the era of big pharma mega settlements was over.  This is significant news.  Who should know better as to what’s in the DOJ pipeline than the DOJ itself.  You can take this one to the bank that for the second year in a row, no multi-billion dollar settlements are likely.  Instead, the DOJ is now focused on smaller life science companies that may not have the compliance infrastructure in place that is necessary – i.e., low hanging fruit (my term, not theirs!).

The DOJ representative from NJ, stressed, however, that big or small, the DOJ will come down hard on any company that is out of compliance.  Striking a note of encouragement, however, he also confirmed that “Yes,” companies with effective programs, companies that cooperate with the DOJ and companies that self-disclose do receive mitigating value, where, subject to the specific circumstances of the case, the DOJ can choose a variety of less severe actions to include declining to prosecute a case completely.

  1. One hot button area discussed was the rise of biotech/specialty pharma companies with orphan drugs that often result in an M&A situation.  In these situations, common circumstances include: insufficient M&A due diligence; immature compliance programs, incentives to get products to market quickly to boost sales numbers, science that does not support marketing claims, and use of co-pay patient assistance programs.

In addition, the panel stressed that individual prosecutions, off-label cases and kickbacks remain key enforcement priorities.  Underscoring this on a bit of an ominous tone, the DOJ Washington representative shared that 40 DOJ attorneys in Washington are focused full-time on criminal healthcare fraud.  These attorneys review every single qui tam/whistleblower case.  Their goal is to put wrong-doers in jail and to hold individuals criminally accountable.  To catch them, aggressive investigative techniques, used previously against organized crime, are now being used for healthcare fraud enforcement.

But the best was definitely saved for last, where in an effort to share some positive takeaways, I asked the panel to share what they considered to be “Green Flags,” i.e., what signals an effective compliance program to them from a DOJ perspective.  The Boston DOJ representative shared the following Top 7 List that he had compiled after canvassing his colleagues in the Boston office:

1. Proactive monitoring of sales calls and expense reports

2. Listening to complainers and following up with investigations

3. When fraud is found, heads roll – people are fired

4. Credible Compliance Structure – compliance does not report to sales & marketing; compliance reports to the President or Board

5. Good Compliance Officers are respected. Great Compliance Officers are feared.

6. Tone from the Top matters. Whether the CEO, CFO, COO are all people who care about compliance.

7. If the Compliance Officer doesn’t have an office with a window, you know compliance doesn’t matter.

Of course, #7, in David Letterman tradition, was intended to add some humor, while making the point that appearances matter with regard to the authority vested in the compliance officer position and individual.

Perhaps the most controversial point that drew a reaction from the audience, was #5, which stressed Fear.   The key takeaways are: #1 this is a view currently held by DOJ – accept this as a reality; and #2 without consequences for bad conduct, nothing else matters.  That said, members of the audience stressed the need to build trust and reduce fear to have employees embrace and use the compliance program proactively.  As the moderator, I suggested, that the audience and panel’s view could be viewed as complimentary and not contradictory if you accepted that wrongdoers should fear severe consequences while compliant employees should not.

The NJ DOJ representative also shared, that while almost all major life science companies currently have impressive compliance programs on paper, going forward, what will be telling is how those companies adapt their compliance programs to stay current with changing conditions, especially through the use of data analysis.

Finally, the point was made by the Philadelphia DOJ representative that with regard to individuals, effective programs check before paying bonuses, and if appropriate, employ claw back provisions to recoup bonuses if subsequent findings show an individual used inappropriate and non-compliant measures to earn a bonus.

Confirming previous priorities and providing new insights, this enforcement panel certainly achieved its goal of providing valuable insights to the life science compliance community.  It was an honor and a privilege to participate as a moderator.  Thank you to the DOJ representatives, to CBI and to the conference attendees for making this a valuable event.