Action Items Monitoring OffLabel Promotion Dos and Donts

Action Items: Monitoring Off-Label Promotion Do’s and Don’t’s Medical Device Regulatory, Reimbursement and Compliance Congress March 29, 2007

Panel Stephen C. Payne, Partner, Sidley Austin Washington, DC Jeffrey K. Shapiro, Partner, Hogan & Hartson Washington, DC Tracy Mastro, Director, Huron Consulting Washington, DC (Moderator) 2

Recap n Since 1991, there have been only 10 DOJ settlements with medical device companies that have exceeded $10 million. n The total amount of those settlements is $450 million. n Most (and largest) settlements in the last five years have been with the pharmaceutical industry. 3

Recap (cont’d) n n There is a “substantial” pending inventory of False Claims Act cases involving pharmaceutical products, many related to issues of: Ø Off-label promotions Ø Pricing Ø Anti-kickback Statute violations These investigations and prosecutions will continue and “will likely be joined by allegations involving devices. ” 4

Recap (cont’d) Most of the government’s leads for investigations come from one of three sources: n Whistleblowers n Anonymous sources (e. g. , competitors) n Audits 5

Recap (cont’d) The message: n The medical device industry is subject to the same rules as the pharmaceutical industry. n There is much to be learned from the experiences of the pharmaceutical industry, especially regarding the areas in which the government has focused its investigations (e. g. , off-label promotions, financial relationships with physicians) n The device industry should expect to experience increased scrutiny and government investigations. 6

Examples of Recent Enforcement Activities n Sofamor Danek/Medtronic settled with the DOJ for $40 million to settle charges that it paid kickbacks to doctors to induce them to use the company’s spinal products. Ø n Allegations of sham consulting and royalty agreements, and lavish trips It also entered into a 5 -year Corporate Integrity Agreement (CIA) with the HHS Office of Inspector General (OIG). 7

Examples of Recent Enforcement Activities (cont’d) n Inter. Mune was charged with illegal promotion and marketing activities related to its drug Actimmune and alleged violation of the False Claims Act. As a result, Inter. Mune has: Ø Agreed to pay $37 million to resolve criminal charges and civil liability, Ø Entered into a deferred prosecution agreement with DOJ, and Ø Entered into a 5 -year CIA with the OIG. 8

Examples of Recent Enforcement Activities (cont’d) DOJ investigation into several major orthopedic companies related to their sales & marketing practices and their consulting/financial arrangements with physicians n FDA meetings with manufacturers of biliary (bile duct) stents to discuss its concerns that their devices have been promoted for off-label uses in blood vessels. n n Subpoenas issued by DOJ to: Ø Cardiovascular companies (sales & marketing, consulting relationships) Ø Orthopedic companies (possible antitrust issues) 9

Regulatory Enforcement Activities for 2007 Medical device companies will continue to be subject to federal and state fraud investigations that will most likely focus on: n Ø Sales & Marketing activities Ø Consulting/financial relationships with physicians Ø Educational grants Ø Off-label promotion 10

What do we mean by “Off-Label” Promotion? Involves claims regarding use(s) of a medical device that have not been cleared by the FDA via a pre-market notification (510(k)) or a premarket approval notification (PMA). This includes: n Ø Promotion outside cleared indications (e. g. , modifies the intended use(s) of the device) Ø Web site promotions Ø Manufacturer-funded educational activities 11

FDA and Off-Label Promotion n FDA regulatory authority extends to the labeling of medical devices and drugs. n FDA authority does not extend to the practice of offlabel use or prescribing of products by physicians. The focus of FDA regulatory efforts towards off-label use has been on manufacturers’ product promotion. n Ø n Device manufacturers may receive an untitled letter that addresses alleged off-label promotion violations (less serious than those addressed in Warning Letters) The Agency has taken action against manufacturers of products used for unapproved purposes. 12

Industry and Off-Label Promotion n It is appropriate for a physician to utilize a device for a use that is not approved by the FDA. n It is not appropriate (or lawful) for a manufacturer to promote a device for an off-label purpose. Examples: Ø Targeting physicians who do not treat patients for the intended use of the device Ø Compensating sales representatives based on marketing for non-approved uses of a device 13

Session Objective What are the issues and priorities firms need to consider as they monitor and audit their promotional activities? 14

Discussion 15