Compliance implications of drugmakers’ $447M False Claims Act settlements

Taro will pay $213.2 million, Sandoz $185 million, and Apotex $49 million. The civil settlements are in addition to criminal penalties assessed upon each company as part of previously entered deferred prosecution agreements with the Antitrust Division to resolve related charges. In those cases, Taro paid $205.6 million, Sandoz $195 million, and Apotex $24.1 million.

According to the Justice Department, between March 2013 until at least December 2015, Taro, Sandoz, and Apotex “paid and received compensation prohibited by the Anti-Kickback Statute through arrangements on price, supply, and allocation of customers with other pharmaceutical manufacturers for certain generic drugs manufactured by the companies.”

Equally notable to the financial penalties are the compliance obligations imposed on each company.

Corporate integrity agreements

Taro, Sandoz, and Apotex each entered five-year corporate integrity agreements (CIA) with the Department of Health and Human Services’ Office of Inspector General (OIG). All three agreements include “unique internal monitoring and price transparency provisions,” the Justice Department said. The CIAs expire in 2026.

Key compliance obligations include:

Contract monitoring: Under the CIAs, each company must establish and implement “a written review and approval process for contracts with customers for the purchase of government reimbursed products that includes a business review and a legal review and that specifies the documentation required in support of activities relating to pricing and contracting functions.”

Each company must also maintain related records in centralized electronic repositories that include documentation of decision-making and required approvals relating to list and contract price increases; records relating to all bids submitted to potential customers of government reimbursed products; and a list of all contracts in which the company has entered with customers of government reimbursed products.

Internal review processes to be instituted will require compliance or other trained personnel to review a certain number of contracts per reporting period using either a risk-based targeting approach or a random sampling approach. Sandoz will need to review 10 contracts per reporting period, while Taro and Apotex will each review four. For each contract reviewed, monitoring personnel will assess whether pricing decisions and approvals are consistent with the company’s policies and procedures.

Records reviews: Interactions between covered persons who engage in pricing and contracting functions with competitors must also be monitored to identify potential improper conduct, according to terms of the CIAs.

The agreements also call for the review of a number of covered persons (five for Sandoz, three for Taro and Apotex) who are engaged in establishing or changing the prices of government reimbursed products. This shall include an interview and a review of all company records relating to interactions or communications between the covered person and any competitor; all training records; and all performance review/disciplinary records.

Results shall be compiled and reported to the companies’ respective compliance officers for review and remediation, as appropriate. Any issues identified and corrective action taken shall be recorded by the compliance officer, the CIAs state.

Price-related reporting: Each company must report quarterly to the OIG a wide range of price-related information, including summaries of internal decisions relating to list and contract price increases for top 10 government reimbursed products

The CIAs also require the companies to implement compliance measures including risk assessment programs, executive recoupment provisions, and compliance-related certifications from company executives and board members.

In a statement, Sandoz President Keren Haruvi said, “The agreement is consistent with our commitment to resolve legacy compliance matters and continuously improve our compliance and training programs and evolve our controls.” The individuals implicated in the underlying conduct are no longer employed by the company.

Regarding the CIA, Haruvi said, “Sandoz will be implementing controls designed to ensure compliance with the terms of this settlement.”