Life Spine, Inc. Corporate Integrity Agreement Indicates the Office of Inspector General Monitors Small and Large Corporations Alike
By Nicolette Taber and Ann Ford
Although the underlying civil lawsuit was settled back in 2019, the Office of Inspector General (“OIG”) recently released its Corporate Integrity Agreement (“CIA”) with Life Spine, Inc. It is worth noting a few key elements directed to Life Spine that all medical device manufacturers, regardless of size, should know about.
In 2019, the U.S. Government intervened in a qui tam complaint against Life Spine, Michael Butler (Founder, President, and CEO of Life Spine), and Richard Greiber (Vice President of Business Development of Life Spine) alleging Life Spine, with the knowledge, participation, and involvement of Butler and Greiber, violated the Anti-Kickback Statute (“AKS”). From January 2012 through at least December 2018, the government alleged Life Spine had offered and paid remuneration, in the form of millions of dollars in consulting fees, royalties, and more, to surgeons to induce them to utilize Life Spine’s products.
By way of brief background, the AKS is a federal statute that prohibits individuals or entities from knowingly and willfully offering, paying, soliciting, or receiving any remuneration to any person to induce or reward the referral of business reimbursed by a federal health care program. The OIG may pursue criminal charges under the AKS or it can also pursue administrative proceedings to exclude individuals from the Federal health care programs and impose civil monetary penalties against medical device companies for prohibited conduct.
Life Spine is a Delaware corporation with its principal place of business in Huntley, Illinois, a town located an hour outside of Chicago. Life Spine is a privately held company that has approximately 80 employees. It develops and manufactures medical devices and equipment primarily used in spinal surgeries performed by orthopedic surgeons and neurosurgeons.
According to the allegations, Life Spine aggressively recruited surgeons who had the potential to use a high volume of Life Spine products to enter into consulting agreements and/or to transfer their patents/patent applications to Life Spine in exchange for payments and promised support. Life Spine allegedly kept a close eye on the retained surgeons’ use of their products to ensure Life Spine’s payments to them resulted in significant sales revenues for the company. According to the complaint, Life Spine senior executives, including Mr. Butler and Mr. Greiber, were responsible for recruiting the surgeons and negotiating their agreement terms. In addition to paying consulting fees, royalties, and intellectual property acquisition fees, it is claimed that Life Spine also offered surgeons lavish gifts and dinners as remuneration. This kickback arrangement purportedly accounted for half of Life Spine’s total domestic sales of spinal products between 2012 and 2018.
Importantly, the government alleged Life Spine, Mr. Butler, and Mr. Greiber were aware of the AKS risks but failed to implement an effective compliance program. Although Life Spine had previously enacted a compliance policy that prohibited entering consulting agreements to generate business, that policy was not enforced. Further, Life Spine did not have a centralized process to review and approve proposed consulting arrangements to ensure they did not violate Federal law. It was not until mid-2018 that Life Spine created a compliance department, but actually designated Mr. Greiber as the sole compliance point person while he also maintained the position as Vice President of Business Development and Professional Relations.
In November of 2019, the Government reached a settlement of this lawsuit against Life Spine, Mr. Butler, and Mr. Greiber, wherein Life Spine agreed to pay $5.5 million, Mr. Butler agreed to pay $375,000, and Mr. Greiber agreed to pay $115,000. As part of this settlement, the OIG negotiated a CIA, wherein the entities agree to the obligations, and in exchange, OIG agrees not to seek their exclusion from participation in Federal health care programs.
The CIA executed between OIG and Life Spine contains many requirements that are often inserted into all CIAs. The period of the compliance obligations under the CIA is five years. For example, the CIA requires Life Spine to appoint a compliance officer within 90 days and maintain an officer for the term of the CIA. That officer is required to make periodic reports to the Board of Directors and monitor daily compliance activities. Life Spine must also appoint a Compliance Committee, to include the compliance officer and other members of senior management, to monitor compliance matters.
The CIA spells out a long list of what Life Spine’s Compliance Policies and Procedures shall address. On top of typical requirements such as appropriate ways to comply with relevant Federal laws, it also must address consultant arrangements entered into with health care providers, agreements with health care providers for purchasing or licensing of intellectual property, sponsorship or funding of grants involving health care providers, and more.
Of note, this CIA requires policies and procedures specific to retaining health care providers as consultants and the licensing of intellectual property. The CIA requires all health care provider consultants to enter into written agreements describing the scope of work to be performed, the fees to be paid, and the compliance obligations for the consultants. Further, Life Spine is required to establish an annual budgeting plan that identifies the need for consultants and what is expected to be expended on those arrangements. The CIA requires a similar written agreement and budgeting plan for the purchasing or licensing of intellectual property from health care providers. These budgeting responsibilities and scientific exchanges are often undertaken by a company’s medical affairs personnel. Though smaller medical device companies may not have internal medical affairs personnel, it is worth considering engaging this role. Another noteworthy requirement under the CIA is that Life Spine must post on its website a description of the payments it makes to physicians and include a link to CMS’s Open Payments Data Website.
As evidenced by the nearly $6 million settlement and recently enacted CIA with Life Spine, the government remains vigilant in identifying fraud and abuse within the life sciences industry, regardless of the size of the company. It is crucial for any medical device corporation, large or small, to continually emphasize the importance of a compliance program. It is imperative that as medical device and DME companies conduct their annual reviews, they should evaluate their current compliance programs (if any) and whether there is any room for improvement.
Do you have questions about the Anti-Kickback Statute or compliance programs? Please contact Ann Ford (aford@hpslaw.com) and Nicolette Taber (ntaber@hpslaw.com).
Disclaimer: This publication is not intended to provide legal advice but to provide general information on legal matters. Transmission is not intended to create and receipt does not establish an attorney-client relationship. Readers should seek specific legal and/or medical advice before taking any action with respect to matters mentioned in this publication. The attorneys responsible for this publication are Ann Ford and Nicolette Taber. This post constitutes a form of attorney advertising as defined by some state bar associations.