The onset of the COVID-19 pandemic and the Jan. 31, 2020, public
health emergency declaration that followed pushed those of us
working in the life sciences and health care industries into
uncertain waters.

Drug sample delivery, pharmaceutical industry educational
programs, routine and COVID-19 related patient care visits, rollout
of timely diagnostic and surveillance testing and personal
protective equipment, and ongoing data collection in open or new
clinical trials are just a sample of the issues that had to be
addressed.

Business and patient care exigencies soon outpaced the capacity
of state and federal regulators to react — the regulators
themselves facing staffing shortages, difficult and unprecedented
questions, and technological challenges.

Centers for Medicare and Medicaid Services policy statements,
U.S. Food and Drug Administration draft guidances and town hall
pronouncements, governors’ emergency declarations and waivers,
and trade and professional society self-regulatory guidance were
issued and updated frequently.

Often, these regulatory changes were announced in podium policy
or communicated in technical advisory meetings or private
correspondence prior to being announced in formal guidance
documents. The result was a patchwork of temporary policy
pronouncements that bypassed traditional notice and comment
procedures.

In this fast-changing ad hoc environment, the vast majority of
health care and life sciences companies sought to serve the public
health and to comply with regulators and the shifting regulatory
landscape as best they could.

The uncertainty and fear caused by the COVID-19 pandemic
however, created an environment vulnerable to fraud and unamenable
to routine oversight. Now regulators, investigators and prosecutors
have been working hard — and, in some eyes, overzealously
— to uncover and punish such conduct.

As we enter the end of the third year of the COVID-19 pandemic,
a few fraud-related enforcement trends and risks have emerged.
These trends and risks include:

• Limited prosecutorial leniency despite new and sometimes
  unclear COVID-19-related regulatory requirements and guidance;




• Creative enforcement strategies to implement COVID-19-related
  enforcement goals and priorities;




• Continued and potentially increased enforcement of fraud
  surrounding products that are important in fighting COVID-19;
  and




• Increased scrutiny of telecare reimbursement claims.

Limited Prosecutorial Leniency Despite New and Sometimes
Unclear COVID-19- Related Regulatory Requirements and Guidance

We have already seen evidence in ongoing criminal and civil
actions that the government often does not view the lack of clarity
from regulators and policymakers as a bar to relying on
pre-pandemic enforcement norms.

Thus, we predict that the private sector may have limited
success arguing to the government that it made decisions
contravening pre-pandemic norms to meet clinical needs in a
shifting regulatory environment during an unprecedented pandemic.
The government, whether it be the U.S. Department of Justice, FDA,
U.S. Department of Health and Human Services or state attorneys
general, may well bring charges regardless.

Additionally, health care fraud statutes have long statutes of
limitations. In particular, the Federal Food, Drug and Cosmetic
Act, False Claims Act, Medicare Fraud Statute and related laws
generally have statutes of limitations ranging from five to 10
years.

While the compliance bar often observes that enforcement trails
conduct by three to five years, the pandemic could extend this
trail.

For example, undetected overbilling when hospitals and other
providers were short-staffed during the pandemic or continued
billing for certain types telehealth services after the expiration
of insurer policy changes could create latent liability that may
not be discovered by billing or compliance personnel — or CMS
or private insurance auditors, for that matter — until years
later.

In short, the window of time for health care and life sciences
companies to evaluate compliance issues is starting to close, as
motivated prosecutors or disaffected employees start reviewing
companies’ activities and conduct with fraud enforcement in
mind.

Creative Enforcement Strategies to Implement COVID-19-Related
Enforcement Goals and Priorities

Prosecutors are going to get more creative. With government
leadership prioritizing COVID19 fraud, line civil and criminal
assistant U.S. attorneys and agency chief counsel’s offices are
continually evaluating ways to build cases they believe can show
results and make a splash, and are increasingly relying on
sophisticated data analytic tools to do so.

State attorneys generals’ offices will also likely become
more creative in bringing fraud cases, particularly for issues they
believe the federal government is not adequately addressing.

At the same time, because of the significant uncertainty felt by
everyone during the pandemic, particularly in the pre-vaccine
phase, the government faces litigation risks if seeks to bring
cases against good faith actors.

For example, it seems difficult to imagine charging physicians
who in good faith distributed unused vaccines outside of the
prescribed queues to avoid wastage due to expiration, yet at least
one such case was brought by a local district attorney and promptly
dismissed by the judge.

Nevertheless, prosecutors are showing a willingness to apply a
broader array of legal theories to implement the anti-fraud agenda.
While there have no doubt been brazen instances of fraud —
entities falsifying information to receive Paycheck Protection Act
money, entities peddling unsafe or home-brewed therapeutics, etc.
— the use of these tools, in the context of an emergency, can
be overzealous.

In addition to the use of the typical health care fraud statutes
including the False Claims Act, Anti-Kickback Statute and Stark
Law, the government has used or may use other statutes, that are
less often applied in the health care space, to prosecute alleged
fraudulent activity related to COVID-19 products and services.
These other statutes include (1) receipt of misbranded or
adulterated medical devices or drugs, (2) Klein conspiracy, (3) the
Travel Act, and (4) reverse FCA.

Receipt of Misbranded or Adulterated Medical Devices or
Drugs

The FD&C Act presents a relatively low bar for committing a
criminal violation, particularly for misdemeanors, which are
punishable by up to one year in prison, and in some circumstances
by fines of up to $500,000.

For example, under the FD&C Act, a person may commit a
misdemeanor if they receive an adulterated or misbranded medical
device or drug, e.g., mislabeled, even unintentionally, and even
without any knowledge the product is misbranded and without any
intent to fraud or mislead, sends or offers to send the misbranded
medical device or drug to another person.

Further, anyone who causes such activities to occur, even
without knowledge or criminal intent, may also have committed a
misdemeanor under the FD&C Act.

Although some judges have written that this strict liability
application of the FD&C Act is unconstitutional or inapplicable
in some settings,¹ it remains a tool that the DOJ can
wield or threaten to wield. The mere threat of its use can cause an
individual or corporate defendant to accept a misdemeanor plea
offer to avoid the expense of a trial or the risk of greater
charges.

Of note, although the Public Readiness and Emergency
Preparedness Act provides certain liability immunities against
claims for damages relating to the manufacture, distribution,
administration or use of drugs and medical devices used to combat
COVID-19, the PREP Act does not provide immunity against federal
enforcement actions brought by the federal government —
whether civil, criminal or administrative.

Klein Conspiracy

It is a federal crime to conspire to commit any offense against,
or to defraud, the U.S. government, including any U.S. government
agency. This can include conspiring to interfere with or impede a
regulatory agency’s ability to carry out its mission, and is
often referred to as a Klein conspiracy after the tax evasion case
U.S. v. Klein in the U.S. Court of Appeals for the Second Circuit
in 1957.²

To establish a Klein conspiracy the prosecutor must prove that
(1) the defendant entered into an agreement, (2) to obstruct a
lawful function of the government, (3) by deceitful or dishonest
means, and (4) committed at least one overt act in furtherance of
the conspiracy.

The statute does not limit the method used to defraud, and the
government does not need to suffer monetary loss. The prosecution
only need demonstrate the conspirators intended to harm the federal
government.

Moreover, it is often true that the recommended sentence, under
the U.S. sentencing guidelines, for Klein conspiracies can be
Draconian and sweep in a broad array of conduct and actors.

Thus, prosecutors often rely on it when a defendant’s
actions do not fit a typical false claims case, for example where
the conduct did not easily result in the submission of a false
claim or in monetary losses to the U.S. government.

Travel Act

The Travel Act criminalizes traveling, or using the mail or a
facility — which includes the use of a cellphone, mail or
email — in interstate or foreign commerce, for the purpose of
furthering an unlawful activity, which includes certain offenses
that would otherwise be state law violations.

The government must show that the defendant intended to
facilitate the unlawful activity and performed or attempted to
perform an act to facilitate it. The Travel Act is an attractive
tool for prosecutors due to the ease in establishing federal
jurisdiction.

Although originally enacted to combat organized crime, in recent
years prosecutors have used it in federal health care fraud
prosecutions. In April 2019, for example, seven health care
providers in Texas were convicted under the Travel Act for paying
$40 million in bribes and kickbacks to medical providers in a
fraudulent patient referral program.

Reverse False Claims

The reverse false claim provision of the FCA aims to penalize
those who prevent the government from collecting what is owed to
it.

A violation of the reverse false claims act provision occurs
when a person knowingly makes, uses or causes to be used a false
claim material to a monetary obligation to the government, and then
knowingly conceals or improperly avoids or decreases an obligation
to pay the government.

In the Medicaid and Medicare context, the government may use the
reverse false claim provision to pursue health care providers who
identify, or should have identified through reasonable diligence, a
Medicaid or Medicare overpayment and, with either intentional or
reckless disregard, fail to repay it within the allotted 60
days.

Continued and Potentially Increased Enforcement Focus on Fraud
Related to Products That are Important to the Fight Against
COVID-19

We expect the government will continue to investigate and bring
charges against actors who the government determines may be or are
marketing or selling COVID-19-related medical products through
fraudulent means, regardless of whether the product falls under an
FDA enforcement discretion policy or emergency use authorization,
or EUA. This scrutiny will likely increase if the conduct or
product poses a high public health risk.

At the pandemic’s start, the FDA moved fairly quickly to
establish enforcement discretion policies and EUAs to permit the
distribution and import of medical products that could be used to
combat COVID-19 but did not meet applicable FDA requirements.
Although the FDA has ended some of these policies and EUAs, most
are in still in force, albeit in amended form.

In tandem, the FDA has pursued administrative compliance and
enforcement actions against products and actors that the FDA
asserts did not fully comply with its enforcement discretion
policies and EUAs, while the DOJ has charged cases of fraud and
apparent fraud for the same conduct.

For example, beginning in early 2020, the DOJ has brought civil
and criminal cases against manufacturers, distributors and
importers who fraudulently represented respirators as being N95s
approved by the National Institute for Occupational Safety and
Health.

DOJ enforcement related to the sale and distribution of
fraudulent N95 respirators and other important COVID-19 related
products, e.g., COVID-19 tests, will likely be an area of continued
scrutiny.

Additionally, the DOJ’s ongoing focus on clinical trial
fraud and data integrity is likely to expand to include individuals
and entities operating under the FDA’s COVID-19 enforcement
discretion policies for clinical trials, which relaxed certain
record-keeping standards, recognized the use of telehealth
technologies to replace in-person investigator-subject visits, and
allowed for a more streamlined approach to deviation documentation
and reporting by sponsors.

Eventually, the FDA will rescind its COVID-19 enforcement
policies and EUAs. Products no longer covered by an enforcement
discretion policy or EUA would in most cases be misbranded or
adulterated under the FD&C Act if they did not comply with
standard applicable FDA requirements.

Eventually, the FDA will rescind its COVID-19 enforcement
policies and EUAs. Products no longer covered by an enforcement
discretion policy or EUA would in most cases be misbranded or
adulterated under the FD&C Act if they did not comply with
standard applicable FDA requirements.

Increased Scrutiny of Telecare Reimbursement Claims

The pressure on providers to make up for profit losses from
closed clinics, patient reluctance to go to the doctor’s office
in-person and staffing shortages during the early days of the
pandemic have had the potential to put undue pressure on billing
compliance programs.

Further, early and successful adoption of waiver-based
approaches during the pandemic created a market expectation and
demand for telemedicine services and for insurance reimbursement of
such services.

Many new medical practices and entities providing
telehealth-based services, such as those involved in supervising
at-home COVID-19 testing for clinical care or as part of data
collection in COVID-19 therapeutics clinical trials, have
flourished.

Many of these practices and entities, however, can exist only in
large part thanks to temporary COVID-19 policies that have allowed
new diagnostic testing technologies to be shipped to patient homes,
purchased in pharmacies and supervised through remote monitoring
technologies.

Reimbursement for these visits must also be made in accordance
with certain pandemic-era policy clarifications and waivers from
CMS, state public health regulators and private insurance
plans.

What are the enforcement consequences for these practices and
entities when state and federal public health emergency
declarations and associated policies end?

With billions of dollars of fraud in the Medicare and Medicaid
system prior to the pandemic, and estimates of potentially tens of
billions of dollars in fraud related to PPP loans and other
COVID-19 related financial incentive programs, it is a virtual
certainty that state and federal regulators and auditors will
scrutinize reimbursement claims sent by medical systems,
diagnostics laboratories and other organizations set-up to perform
telecare services.

Already, in July, the HHS Office of Inspector General announced
it had been conducting dozens of investigations of fraud schemes
involving companies that purported to provide telemedicine
services.³

In the announcement, the HHS OIG includes a list of suspect
characteristics of telemedicine arrangements that, together or
separately, could suggest fraud or abuse.

These suspect characteristics are, in short:

• The telemedicine company identifies or recruits purported
  patients by advertising free or low out-of-pocket cost items or
  services.




• The physician does not have sufficient contact with or
  information about the patient to meaningfully assess medical
  necessity.




• The practitioner receives volume-based compensation.




• The telemedicine company furnishes products or services only to
  patients who are federal health care beneficiaries.




• The telemedicine company falsely or incorrectly claims to not
  furnish any products or services to federal health care
  beneficiaries.




• The telemedicine company furnishes only one product or class of
  product, which, the HHS OIG noted, could limit the
  practitioner’s treatment options.




• The telemedicine company does not expect physicians to
  follow-up with the patient.⁴

While these factors are not exhaustive, they can be used as a
road map for companies now working to identify current or past
potential compliance gaps that were created by exigent
circumstances and the use of new telemedicine technologies.

For example, many providers relied on third-party turn key
telemedicine technology consultants and providers to manage the
technological and administrative details of telehealth. The OIG and
DOJ are likely interested in the extent to which providers have
exercised appropriate oversight over care quality and billing
accuracy and compliance.

Steps Health Care and Life Sciences Companies Should Take Right
Now

Provider and clinical laboratory risk assessment plans for 2022
should include a sophisticated review of compliance with CMS and
state telehealth and billing related waivers, including a look at
technical billing software issues such as auto billing, resolution
of current procedural terminology coding blanks and use of
miscellaneous codes, and identification of referring provider
national provider identifiers.

Additional scrutiny and review of such information is
particularly warranted in states where telehealth was highly
restricted prior to the pandemic. As noted, the OIG’s indicia
of potential fraud and abuse should also be considered in any
provider compliance review of telehealth billing and
implementation.

Life science product companies should similarly review and
confirm their compliance with applicable FDA policies and EUAs
during the pandemic, including applicable policies and EUAs
relating to sale, distribution and use of their products, including
those relating to the diagnosis, cure, mitigation, treatment or
prevention of COVID-19, including laboratory testing services, and
to distribution of drug samples.⁵

Clinical trial sponsors and related entities such as clinical
research organizations would also be wise to confirm that their
clinical trial activities during the pandemic complied with all FDA
requirements and guidance, including the FDA’s enforcement
discretion policies for clinical trials during COVID-19.

All entities in the health care and life sciences space should
closely scrutinize any indications of potential fraud or other
criminal violations.

Additionally, many laws and regulations affecting the health
care and life sciences industries did not change during the
pandemic, and so health care and life sciences companies should
also take care to confirm they continued to comply with those
requirements despite the exigencies of the COVID-19 pandemic.

The pandemic has been a time of immense change and uncertainty,
and the health care and life sciences industries, as well as its
regulators, should be commended for the overall composure with
which they have addressed and are addressing its exigencies.

Moreover, certain industry and regulator practices that began
during the pandemic will, for the better, likely continue into the
foreseeable future. However, as the dust begins to settle, the
government will continue to aggressively scrutinize
COVID-19-related practices for noncompliance and potential
fraud.

All things considered, there is no better time than the present
for health care and life science companies to confirm their
compliance with applicable rules and policies in place throughout
the pandemic.

Footnotes

1. See, e.g., U.S. v. DeCoster, 828 F.3d 626 (8th Cir.
2016) (Beam, J., dissenting).

2. See, e.g., U.S. v. DeCoster, 828 F.3d 626 (8th Cir.
2016) (Beam, J., dissenting).

3. Additionally, on September 7, 2022, HHS OIG issued a
report, titled “Medicare Telehealth Services During the First
Year of the Pandemic: Program Integrity Risks,” assessing the
program integrity risks associated with Medicare telehealth
services and identifying ways to safeguard Medicare from fraud,
waste, and abuse related to telehealth. In conducting a study
underlying the report, HHS OIG determined that the billing of 1,714
providers for telehealth services during the first year of the
pandemic poses a high risk to Medicare (although HHS OIG stopped
short of stating that any particular provider was engaging in
fraudulent or abusive practices). The full report is available
through https://oig.hhs.gov/oei/reports/OEI-02-20-00720.asp
.

4. The full HHS OIG Special Fraud Alert is available at
https://oig.hhs.gov/documents/root/1045/sfa-telefraud.pdf.

5. Although not discussed in-depth in this article, FDA
issued a temporary COVID-19 policy loosening certain FDA
requirements governing distribution of drug samples. Accordingly,
health care practitioners, pharmaceutical manufacturers and
distributors, pharmacies, and other entities working with drug
samples should reconcile internal recordkeeping approaches with
pre-pandemic state and federal laws requiring sample traceability,
inventory management, and audits. Reporting times for significant
theft, loss, recordkeeping falsification, and other issues related
to drugs samples have not changed under federal or state
law.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.