Senator Elizabeth Warren (D-MA) recently introduced legislation that, if passed, would require certain pharmaceutical companies that enter into settlement agreements with the Department of Justice or other governmental agencies to pay a supplemental amount, based on revenue, that would provide an additional funding source for the U.S. Food and Drug Administration (FDA) and National Institute of Health (NIH). The Medical Innovation Act, Senate Bill 320, would require manufacturers of a “covered blockbuster drug” with a reported net income of at least $1,000,000,000 that entered into a “covered settlement agreement” during the five year period immediately preceding the date on which the payment is assessed to pay an amount equal to 1 percent of the net income for the previous calendar year multiplied by the number of covered blockbuster drugs of the covered manufacturer for that year. Senator Warren describes this assessment as a “swear jar” for “drug companies that break the law.”
Although this legislation is receiving criticism from industry organizations, such as PhRMA and MassBio, and others as unrealistic, the key takeaway for pharmaceutical companies of any size is that the government is interested in aggressively pursuing enforcement actions and looking for ways to put additional pressure on industry when fraud is identified. Government enforcers are utilizing a significant number of tools to combat fraud, including expansion of the successful HEAT program and exclusion of corporate executives under the Park doctrine, while government legislators are actively pursuing ways to combat fraud in the health care industry, as evidenced by this 2013 report. It is critical for health care companies to take steps to implement effective corporate compliance programs that prevent, detect and fix potential issues before they result in a government action.