Life Sciences

To safeguard your business, train device reps about compliance concerns

Device Regulation Alert: Safety, Compliance and Reimbursement News, July 16, 2007

Part I

Editor's note: Enjoy this first installment of our series to train your device representatives on the risks and benefits of compliance training.

The medical device industry faces unique legal challenges and compliance concerns. That's one important reason to pay special attention to training device representatives who deal with healthcare providers and professionals. Any appearance of impropriety-anything which appears as if the company wants to improperly induce the order, purchase, or lease of its products-could land your company in legal and financial trouble.

There is no more important part of your device company's compliance program than training, advises healthcare attorney Michael Manthei, a partner with the law firm of Holland & Knight LLP.

"Policies and procedures are great but if you don't train your representatives in those policies and procedures repeatedly, then the program is useless," he says.

Training is particularly important for medical device companies as the industry grows and brings staff in from other industries, says Manthei. Just because you hire a representative who worked in another healthcare business-such as the pharmaceutical industry-do not assume they understand all the compliance risks related to device companies.

There is a tendency for people to think that the pharmaceutical and medical device industries face the same compliance issues, but that is not always the case, Manthei says. Medical device manufacturers train physicians and healthcare providers on the use of their devices-which raises unique compliance risks that are different from pharmaceutical and other healthcare groups, he says. Those risks are "varied and significant," says Manthei. It's not just the anti-kickback law, companies must worry about, he explains.

Relevant laws and regulations include:

  • the federal anti-kickback statute,
  • the False Claims Act,
  • the federal health care fraud statute (which applies to fraud perpetrated on private payers, not federal health care programs),
  • government contracts anti-kickback law (applicable if medical device company had an arrangement with a managed care entity that manages a federal health care program such as managed Medicare) state law.

    State attorneys general have become very active in prosecuting cases against pharmaceutical and medical device and biotech manufacturers, says Manthei.

    Violations of any of these laws brings penalties in the millions of dollars or even criminal prosecution which makes training representatives on appropriate conduct critical.

    Additionally, manufactures don't often think in advance about the ramifications of a corporate integrity agreement (CIA), which the government will impose as part of the settlement of any fraud and abuse investigation and which imposes significant and onerous oversight of the company, says Manthei.

    In some instances, the government has demanded that the CIA include requirements related to Board composition and structure and to the composition of senior management. They also often require costly annual audits that must be conducted by an approved outside auditor, he says. From a practical perspective, these agreements impose significant scrutiny and oversight and are a significant burden on the company, Manthei adds.

    Sales and other device representatives are also often a source of qui tam or whistleblower litigation, says Manthei. Training representatives not only helps avoid violations but also indicates to employees that your company takes compliance seriously. By itself, this sense that the company is serious about compliance can diminish the likelihood that disgruntled employees will become whistleblowers, advises Manthei.

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