Tougher federal prosecution of health-care fraud
U.S. Attorney Zane Memeger told the Inquirer he hopes prison sentences deter pharmaceutical and medical device executives from improper behavior.
Tougher federal prosecution of health-care fraud
Zane Memeger, the U.S. Attorney for the Eastern District of Pennsylvania, spoke with The Inquirer last week about his office's efforts to fight health-care fraud.
Memeger graduated from James Madison University and then the University of Virginia Law School. He prosecuted cases as an Assistant U.S. Attorney in Philadelphia, then worked in private practice at Morgan, Lewis & Bockius in Center City. Pharmaceutical companies were among his clients. He then returned as the U.S. Attorney in 2010.
Monday's Inquirer story is here. Below is the extended version of that Q&A.
Q: How can regular people - patients and taxpayers - help fight health care fraud?
A: Patients, doctors, nurses and people in the health care industry should be vigilant in terms of billing practices that just don't look right, being charged for procedures or items that aren't consistent with their conditions. They should consider reporting that to the proper authorities and there are a number of hotlines set up for various agencies, including the Office of the Inspector General of the Department of Health and Human Services." (The number is 1-800-HHS-TIPS or 1-800-447-8477.)
Q: With about eight of the 128 attorneys on staff mostly focused on health care fraud and government fraud - and other crimes to prosecutes - how do you decide what cases to pursue?
A: We want to make sure we're doing solid cases. We have to look at the facts and see whether or not there is liability from a civil angle or if there is enough evidence to prove to a jury beyond a reasonable doubt that an individual or a company engaged in criminal conduct and that is a very high standard. You look at different cases and you might evaluate early on that there is just not enough evidence, so we have to let it go by the wayside. We need to do cases that have a deterrent effect. When dealing with companies, you want to make sure you're sending a signal that you're looking at their conduct and that they need to adjust their conduct to comply with the laws and regulations that apply to their industry, so people aren't harmed.
Q: Johnson & Johnson, the world's largest health care company, agreed to pay $158 million on Thursday to settle a Texas lawsuit regarding charges of illegal promotion of the anti-psychotic drug Risperdal. There was a report that J&J reached an agreement with your office to pay $1 billion settle federal charges for the same drug and activities.
A: I have no comment.
Q: In November and December, four local men, former executives from medical device manufacturer Synthes, were sentenced to prison terms for their role in an illegal and unapproved clinical study of bone cement. The cement was provided to doctors for use in spinal surgeries, three of which ended in patients dying on the table. It is unusual for health care executives to go to jail. What was your view of the sentences?
A: This was egregious conduct and if you make decisions that result in these types of deaths, you need to be held accountable and prison is an effective deterrent, in my view, for the long term. Other executives will see that they need to be on top of their people, that they need to make the right decisions and make sure they are not putting patients at risk unnecessarily.
It gets back to how do you modify corporate conduct? We've done a large number of these pharmaceutical company cases, with heavy fines, penalties and large civil settlements. Hopefully, conduct changes by those types of cases, but I think the real change will come when people actually realize that there is a risk that, if they make a bad decision, they will go to prison, because it's no longer just the company paying out the money. It's them actually going to a four-wall cell and doing the time for a really poor decision. If people see that as a possibility, maybe they will think twice about how they are going to market and promote a product.
Q: Was the Synthes case an extraordinary set of facts, relative to other pharmaceutical or medical device cases, or is it emblematic of the industry?
A: I'm not prepared to extrapolate the case to the industry. There are companies that have issues, that have problems and engage in misconduct. But having worked on both sides, in investigating these cases, but also representing companies, there are a lot of good people who believe they are trying to do the right thing. Unfortunately, some cross the line and end up in situations where they are being investigated and being prosecuted, and appropriately so.
But I don't want to say that there is a culture out there where every single executive is making really poor decisions. A lot of medical device and pharma companies provide very valuable products and services to people worldwide, allowing people to live longer, with a better quality of life. We need to make sure that innovation continues, but if it is not being done in compliance with regulatory schemes, then they need to be held accountable because the regulatory schemes are put in place to protect patients.
Q: Pharmaceutical and medical device companies have been fined billions of dollars for illegally promoting drugs for uses not approved by the U.S. Food and Drug Administration. But there is a perception that fines are simply the cost of doing business and conduct hasn't changed. If individuals were charged, they usually got probation. Now that you have sent a few to prison, do you think some will resist plea bargains and take their chances before a jury?
A: I'm not sure how that will play out. It is a big risk to just roll the dice and, at the end of day, go to jail. I'm hoping we don't even get to the point where we're talking to individuals about rolling the dice. I hope they are sitting in the board room saying, 'Those guys at Synthes knew the reports were coming back, knew that patients were dying and they made a decision to go ahead and continue running their study.' I hope the executive in the board room is saying, 'I'm not making that same decision because of what happened there.' That would be a good day for us, because then we don't end up investigating and litigating.
The vast majority of people in the industry do things the right way and are not looking to cut corners. There are other people - it's like anything else, a subset - who think cutting corners is okay, and they will run with that risk. We need to catch those people and prosecute them.
Q: Do you imagine more individuals being charged, with those from big companies on down?
A: Whenever a case comes into our office, we do an analysis as to whether there is potential individual liability that we need to look at during the course of the investigation. One of the difficulties with these cases is that information often doesn't come to light until several years after, sometimes by virtue of a whistleblower coming forward. They are time intensive. You have to go back and re-construct history. With some cases you're dealing with industries where people come and go. In trying to figure out the paper trail and the human trail, the interactions and who to interview, all of that can be difficult. Getting at the individuals can be hard. If we get the information sooner, it is easier for us to identify those people that can be prosecuted or held civilly liable. But time is always of the essence. You start running into the statute of limitations, which might limit a resolution."
Q: Some people in the pharmaceutical industry, including lawyers, say that companies feel they have to plead guilty to cut off the discussion and stop the release of embarrassing information because they get hammered by the stock market. How does that help you from a litigation standpoint?
A: Both sides have risk. At the end of the day, a settlement has two perspectives, the government and the defense. They are accountable to their shareholders. It is valid for them to take into consideration what may happen to their stock price if they let this become protracted litigation. From our perspective, we're dealing with these cases and we have to think about the burden of proof. Are you guaranteed that if you put a case before a jury that you will get a favorable verdict?
You also have to deal with the damage calculations. The calculations are complex and not always easily understood, so you have to be able to present that to a court and argue that the damage figure is the right one. You've seen in some cases that there is push back in terms of settlements and some judges rejecting them. You think about all of these things and whether this is a case you want to go to trial on or whether it's time to say, 'We can get a good result and we can send a deterrent signal, appropriately. We can re-coup dollars invested by the taxpayers.'
Q: Does the Supreme Court's decision in Sorrell vs. IMS Health influence your approach to prosecuting health-care fraud and off-label marketing cases? The industry is increasingly claiming that it is unfairly restricted by FDA rules.
A: The Sorrell decision was unique in terms of the circumstances. In that case, the [other] entities were going to have access to patient-doctor information and pharmaceutical companies were not, and the issue was whether you were favoring a select group. With regard to the First Amendment issue and promotion, there is the regulatory scheme. But at the end of the day, you can't present information that is false and misleading in the promotion of your product. You've got to provide a complete picture. If your information is not supported by clinical studies and you present it as if it were, that's improper conduct and that is not going to be protected by the First Amendment, as far as we're concerned. That might be litigated down the road, but the First Amendment doesn't give you a right to lie in the promotion of your product."
Note: The Inquirer's Nathan Gorenstein reported in April 2010 that Memeger said in Senate Judiciary Committee documents submitted as part of his nomination that he advised pharmaceutical companies, medical device manufacturers, software firms, and financial companies facing federal investigations on health-care fraud, violations of the food and drug laws, and other issues. That work took up about 70 percent of his time, Memeger wrote. Memeger did not represent those companies in court, according to court records. The other 30 percent of his time was spent "conducting internal investigations" and providing legal advice for corporate clients.
Gorenstein also reported that, according to congressional records, Memeger's clients included Merck, Cephalon, Elan and Independence Blue Cross. Merck and Cephalon have been the subject of probes by the federal government. In 2008, Cephalon entered a guilty plea and agreed to pay $425 million to resolve claims that it marketed three drugs for uses not approved by the Food and Drug Administration. In 2010, the Justice Department reached a $582 million settlement with AstraZeneca, whose team of attorneys included lawyers from Morgan Lewis. Judiciary committee records do not include the firm as one of Memeger's clients. The documents also do not say what work Memeger did for the various firms.
Gorenstein's story is here.
Memeger declined in the interview to say which companies he represented.
A: "When I came into government, I had to disclose during the vetting process who my clients are. To the extent that one of my clients is the focus of an investigation, I am conflicted out of that. If there is something that comes in here, I don't get any information and I don't have any input, so we keep that clean. I should not make those decisions regarding clients I represented previously."
Q: You worked as an Assistant U.S. Attorney, then went into private practice with Morgan Lewis and then returned to be U.S. Attorney. Other health-care fraud prosecutors have gone to the other side to represent drug companies. What do you think of that situation?
A: Having been in the private sector, it gives you some insight into how industries work, how companies work and the interplay with various divisions of the company. It teaches that companies are not monolithic, that there a lot of moving parts, which gives you some insight when, on the other side, you're looking at the conduct as to how best to investigate and work out any resolution you're trying to achieve.
From my perspective, you're always looking for truth and accountability. When you're on the other side, you're not being paid just to give them the good news. You're there to give them critical analysis so they can operate the business better. If the news is bad, you provide the information that can guide them and in how they need to react and what steps they need to take to address the situation. In the pharmaceutical industry, the reality is that if you step over the line, there are significant things put into play in terms of oversight, so you have to deal with a corporate integrity agreement, so when issues come up they are reported to the government.