In this episode, partner Jana Kolarik of Foley's Health Care Practice Group and PYA principal Angie Caldwell interview partner Kyle Faget, co-chair of Foley's Health Care Practice Group and co-chair of the firm's Health Care & Life Sciences Sector's Medical Device & Equipment Area of Focus, and PYA consulting principal Tynan Kugler on medical device company arrangements with physicians. Specifically, we'll be discussing arrangements that can raise compliance issues and how to potentially mitigate some of those compliance issues.
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Please note that the interview copy below is not verbatim. We do our best to provide you with a summary of what is covered during the show. Thank you for your consideration, and enjoy the show!
Angie Caldwell
Hello and welcome to the Let's Talk Compliance Podcast series of Health Care Law Today, presented by Foley & Lardner and PYA. I'm Angie Caldwell, PYA consulting principal. My co-host for the Let's Talk Compliance series is Jana Kolarik, a partner in Foley's Health Care Practice Group. Before we begin our show, we want to remind you to subscribe to Health Care Law Today either on iTunes or your preferred podcast app. Please visit healthcarelawtoday.com or pyapc.com. Jana, tell us about our topic today.
Jana Kolarik
Great, thanks so much, Angie. For today's show, Angie and I will be interviewing Kyle Faget, a partner in Foley's Health Care Practice Group, and Tynan Kugler, PYA's consulting principal.
Our broad topic today is medical device company arrangements with physicians, and specifically, we'll be discussing arrangements that can raise compliance issues and how to potentially mitigate some of those compliance issues. We're going to spend some time with PODs or physician-owned distributorships, key opinion leader physician arrangements, and other physician arrangements, frankly – speaking, consulting royalties – and then how systems, hospitals, and physician practices can really look at those arrangements and audit those arrangements. And then we're also going to spend some time on the Open Payments or other people know it as the Sunshine Act and how it should be used by device companies and how it can be used as a tool. So with that, Kyle, please provide a brief introduction of yourself in your area of practice.
Kyle Faget
Thank you, Jana. Hi, I am Kyle Faget. I'm a partner in Foley & Lardner's Boston office, and I am also the co-chair of our health care and life sciences practice group here at Foley. I advise a number of medical device companies on compliance-related issues. I help build and scale and execute compliance programs, and I also do quite a bit of work in the clinical trial research-related areas and a lot of work in digital health and telemedicine.
Jana Kolarik
Fantastic. Thank you, Kyle. And Tynan, tell us a little bit about yourself.
Tynan Kugler
Thank you, Jana. I'm Tynan Kugler. I'm a principal in our Atlanta office. I spend my time in our valuation practice specifically related to service valuations. I work with both physicians in the hospital/health system space but have been spending a good bit of time in med device, pharma, and med tech related to some of the topics we're going to be talking about today.
Jana Kolarik
Awesome. Thanks so much, Tynan. All right, so let's just dive into this, physician-owned distributorships. So Kyle, what is a POD?
Kyle Faget
Yeah, good question. I guess we should all know what we're talking about before we jump off the cliff here. So physician-owned distributorships are physician-owned entities that derive revenue from selling or arranging for the sale of implantable medical devices ordered by their physician-owners for use and procedures by those physician owners who perform their procedures on their own patients at hospitals or ambulatory surgical centers.
Jana Kolarik
Yeah, and there's been a focus on PODs or physician-owned distributorships – we're just going to call them PODs – for a number of years. We had the 2013 special fraud alert on physician-owned entities. Why don't you tell us a little bit about that concern or that focus by the U.S. Department of Health and Human Services Office of Inspector General (OIG)?
Kyle Faget
Sure. So OIG's concern is that there exists a strong potential for improper inducements between and among the physician investors, the entities, device vendors, and device purchasers. And OIG has stated that these ventures should be closely scrutinized under the fraud and abuse laws. So recall that the Anti-Kickback Statute exists to protect patients from inappropriate medical referrals or recommendations by health care professionals who may be unduly influenced by financial incentives. So the opportunity for referring physicians to earn a profit, including through an investment in an entity for which they generate business could constitute illegal remuneration under the Anti-Kickback Statute.
So OIG expressed concerns about arrangements that exhibit questionable features with regard to the selection retention of investors, the solicitation of capital contributions, and the distribution of profits. So things that OIG is zeroing in on here are selecting investors because they're in a position to generate substantial business for the entity, requiring investors who cease practicing in the service area to divest their ownership interests, and distributing extraordinary returns on investment compared to the level of risk involved in the investment.
Jana Kolarik
I hear you. But to be clear, physician ownership in and of itself is not prohibited?
Kyle Faget
No, not at all. In fact, there exists a small entity investment safe harbor to the Anti-Kickback Statute that requires that no more than 40% of an entity's investment interest be held by investors in a position to make or influence referrals, furnish items or services to or otherwise generate business for the entity. So we do see physician investors, we definitely do. That's fairly normal course of business, particularly in the medical device space. But I think the issue becomes, as OIG pointed out, you don't want a situation where you've almost got a closed loop where you've got physician investor and an entity and then the physician utilizing the products from that exact entity, thereby generating revenue for the entity. The idea of course being that physicians should be selecting products that are in the best interest of their patients and it's the right medical device to be used with the patient not because the physician is going to generate a profit from use of that particular device.
Jana Kolarik
So what steps? Because I know OIG and the focus on this is definite, and I know there have been cases where some of these PODs actually have even had U.S Department of Justice (DOJ) scrutiny. What steps can an organization take to either evaluate relationships with PODs or address if there are some POD arrangements?
Kyle Faget
Yeah, so PODs are not inherently wrong per se, right? I mean, in this special fraud advisory alert, obviously, OIG has actually said that these types of arrangements deserve close scrutiny. But in 2022, there was an advisory opinion 22-07 that addressed how physician-owned entities that the government indicated there, there are ways to structure these arrangements such that they don't raise fraud and abuse concerns. And in fact, in that advisory opinion, OIG clarified that that special fraud alert should not be read to mean that the physician ownership of a medical device maker without something more presents a significant risk under the Anti-Kickback Statute. So just to be clear, it doesn't mean that per se a POD, an investment in a POD, is necessarily fraudulent. The concern again is that the physician-owned distributors that derive revenue from selling or arranging for the sale of implantable medical devices ordered by their physician-owners for use in procedures that physician owners perform on their own patients.
Jana Kolarik
So talk to me about some of those inherently suspect sort of characteristics of PODs. If an organization is supposed to sort be looking at it, how do they look at it? How do even physicians or device companies as they're entering into arrangements with physicians need to assess risk related to those arrangements?
Kyle Faget
Sure. So OIG actually enumerated a number of these inherently suspect characteristics, and they include the size of the investment opportunity offered to each physician varying with the expected or actual volume or value of devices used by the physician; distributions not being made in proportion to ownership interest or physician owners being paid different prices for their ownership interests because of the expected or actual volume or value of devices used by the physicians; physician owners conditioning their referrals on the purchase of the PODs devices through coercion or promises or by requiring an exclusive purchasing arrangement; physician owners being required, pressured or actively encouraged to refer, recommend, or arrange for purchase of the PODs devices or being threatened with negative repercussions for failing to use the PODs devices for their patients; the POD retaining the right to repurchase a physician owner's interest for failing to refer; the POD being a shell entity that doesn't conduct appropriate product evaluations, maintain or manage sufficient inventory in its own facility or employer or otherwise contract with personnel necessary for operations; the POD not maintaining continuous oversight of all distribution functions; the physician owners failing to disclose their ownership interest to a hospital or to the ambulatory surgical center customers.
And these characteristics, I mean, that's a mouthful, right? So those are the things you want to look at. And probably not any one of these is necessarily dispositive, although you can imagine that some of these characteristics are worse than others. But you can avoid these characteristics by structuring an arrangement carefully. So for example, the physician and other members of their medical group should not be the sole or even primary users of the POD's products and generating a very limited and steadily decreasing amount of the company's business. So you saw that as one of the elements in the advisory opinion – that characteristic was present and there should be no requirement to make or maintain any level of referrals to hold the ownership interests.
And no repercussions should exist for not using the company's products. So in other words, you shouldn't have divestiture requirements or company repurchase rights in the arrangement. The profit distribution should be based only on ownership percentages. And you can even add as an additional safeguard that the company reduces any profit distributions to the trust by the amount of revenue resulting from orders from the physicians and the medical group to which they belong. So you're actually then cutting out that direct closed loop where if I use the product, I'm going to generate revenue for myself – you excise that piece. The patients and purchasers should be informed of the ownership interests.
And that's not going to be enough, obviously just to disclose to your patient, "Hey, I'm a part owner of the company that we're actually using the device that we're going to implant in you." That's fair because how many patients are going to raise their hand and say, "Oh, well never mind. I'm going to look for a different surgeon then." But it is important to be forthright about it, and it will cause even physicians to think about, "Well, what am I exactly investing in? Is this something that I want to represent to my patients that I'm doing?"
Another one of these sort of careful structuring element is the physicians being empowered to order company products for their own surgeries and recommending the company products to others, but not otherwise attempting to influence hospitals or ASCs to purchase the company's products and not conditioning referrals on the purchase of the company products via shifting or threatening to shift their business or requiring minimum or exclusive purchase arrangements. And then the company being a legitimate manufacturer, so not that shell that I mentioned earlier, so not a shell that doesn't conduct appropriate evaluations, manage inventory, or employer contract with appropriate personnel.
Jana Kolarik
No, that's super helpful. And the details are super helpful there, obviously. And I think one of the things that I know we've advised clients, especially hospitals and health systems as well as ASCs on, are conflict of interest forms to kind of dig into some of those details. Tynan, I know maybe you have some insight into that type of audit or that type of review.
Tynan Kugler
Yeah, I thought I would just touch on several of the things that we look at from just, I'll say an audit or sort of pressure testing because interestingly enough, just last week I got a question – timing was interesting – on a potential issue with a POD. There are a couple of things that we look at. One of them is theoretically an organization should be able to know whether there's ownership in a distributorship. But getting back to Kyle's point about sort of the shell company, I think sometimes that can be difficult to track down. You can start with Secretary of State websites, start with a company's website, but oftentimes that's not going to give you the information you need.
Jana, you hit on the annual conflicts of interest [forms] from providers. One of the other things we see, and a lot of internal audit departments will do this, but they'll review vendor purchases. So they'll look for upticks or abnormal levels of vendor purchases or physicians that are using products more than others as just sort of a red flag. The other thing, I think we had an instance of this several years ago where there were compliance hotline calls. So there was some suspected overutilization because of a potential relationship, and that made its way through the compliance hotline. So I guess that speaks to how beneficial your compliance processes can be, not just for the things that we typically think about, but for also these kinds of things. And then it's going back and looking at your vendor policies. So have you refreshed your vendor policy for physician practices for what you expect of physician ownership and/or has it been appropriately communicated? So we'll touch on some of the Open Payments issues in a few moments, but that just potentially gives a little bit more sort of granular – what do I do if I need to pressure test a couple of things?
Jana Kolarik
We'll talk a little bit, now that we're segueing from PODs, sometimes those physicians who are part of PODs are key opinion leaders. And we're going to talk generally about physician arrangements and also about key opinion leaders. So Tynan, what are some current compliance trends that you're seeing with respect to physicians, and if different, key opinion leaders? Are there any that really surprise you and are you seeing increased scrutiny really related to that?
Tynan Kugler
Yeah, it's interesting because I think we're really seeing in the last year or two an increase in requests for valuations or reviews of arrangements with physicians that have relationships with med device, health tech, so electronic medical record (EMR) companies, or other software companies that are engaging physicians to provide expertise. It's not just limited to physicians. I mean, we're seeing advanced practice providers, we're seeing practice managers. If it's a med tech issue where somebody's coming to a practice to see how an EMR works or a product is working, we've got more than just the physicians who are being paid on behalf of a med device or health tech or pharma company.
For a while there, it was not something that I thought we were going to see a lot of – it sort of was flying under the radar, but I think my guess is what's happening is with everything that was bombarding all of us in 2020, just like Kyle talked about the POD regs coming out a little bit earlier, there was a Special Fraud Alert. It was in November of 2020 and it really highlighted speaker programs. But November 16, 2020, is not exactly when everybody was going straight and looking at their fraud alerts for what speakers were doing. They were a little more concerned about other things.
So my guess is that what's happening now is we're starting see folks pay a little bit more attention to that now that the dust has settled. And curious to what Kyle's seeing as well. But I went back and looked. And from 2021 to 2023, just in a list of settlements related to med device and pharma, I counted nine settlements ranging from $9.75 million to $900 million for a slew of different allegations that were related to payments to health care providers for inducement of products, consulting arrangements, speaker programs, training programs, royalty payments. That kind of solidified and kind of made me understand that what maybe we were seeing in our practice is really truly playing out with what's taking place with some of these companies.
Kyle Faget
Yeah, I agree with that. I see on my end a real uptick in clients asking for these types of arrangements, the drafting of them, putting them together. And honestly, post-COVID, we're back on the speaker circuit, right? So people are traveling again, people are engaging again. I think with that uptick in in-person availability, we're seeing companies want to use Key Opinion Leaders (KOL) again and get them out there and promoting the products and educating on the products. And let me just even be clear, promoting, there's a piece of it that's that even though it's supposed to be based in education.
So yeah, I mean we are seeing an uptick for sure in use of KOLs and the need for those kinds of consulting arrangements. I think what's interesting from my perspective is we're almost back to, I'm seeing a lot more of, which is interesting to me in light of that special fraud alert, arrangements being structured in some of the ways that were previously disfavored, and I'm entering into a lot of conversations with clients about proper structuring of these kinds of consulting and KOL-type arrangements.
Tynan Kugler
Yeah, the other thing I'll say is that when you think about what COVID did for the speed of clinical trials, and this kind of gets back to some of your other experience, Kyle, is I think the speed with which clinical trials are now able to be brought to fruition, I think that's also going to have an impact on maybe the volume of these that we see just because of that particular path.
Angie Caldwell
I was just thinking about the compliance considerations for these things. So Tynan, if you can walk us through some of the compliance considerations for those consulting arrangements, those ownership arrangements, royalties, all of those things.
Tynan Kugler
Yeah, I think honestly one of the best places to start is understanding what the government called "suspect characteristics." Again, that seems to be a theme in fraud alerts, is you get a good menu of suspect characteristics because there's a really good list in there that helps organizations, I think, both the operators and those that are advising them. But one of the examples that they gave was a company sponsors a speaker program; they pay a physician or a key opinion leader, but there's little to no substantive information that's presented. So essentially, it's a gathering that's being sponsored with really no substantive knowledge sharing. Sometimes they're held at locations that aren't conducive to exchange of information. So that's another one from a compliance perspective, looking at if we're holding a speaking event at a football game, that's likely not going to be conducive to clinical knowledge sharing or otherwise.
The other thing, and we talked a little about this with PODs, but it's the relationship between the sales and marketing and the business units and their selection of speakers. So make no mistake, what ends up happening oftentimes in these is the business operators are the ones that are coming to the attorneys and the compliance folks saying, "This is the physician, or this is the advanced practice provider that I want to do this speaker program," and one of the things to look for is making sure that the payment to that provider is not tied inherently to the dollars that provider's generating for that business operator or that salesperson. And then one thing near and dear to Angie and my heart is always looking and ensuring that companies are paying at fair market value, which a lot of the companies will say, "We've done a fair market value opinion or an analysis," the provider accepts that. But again, I think it's don't be sorry, be safe, and make sure that you've vetted it if you're either paying or if you're receiving payment.
Kyle Faget
So you mentioned this concept of fair market value and something I'm seeing quite a bit on my end with... And this is what I was referencing with the structuring piece of these arrangements is ... younger companies, particularly younger companies, want to pay the physician consultants or the advanced practice individual with royalties or stock or options. And first of all, understanding, "Well, what's the difference? When is it appropriate to actually pay with royalties or stock or options? And then what's the difference between stocks and the options?"
And I think, let me just say at the outset, where I think it does make sense to pay with royalties is in the context of intellectual property, that's where you would see a compliant use of royalties. But paying royalties in the context of KOL arrangements is disfavored. And I'm seeing more requests for those kinds of arrangements. And then the other place that I'm seeing a number of requests are paying through stock and options. And obviously, stock, you can value it upon issuance, but that stock can change over time. And then the options, right? Options obviously are quite different from stock insofar as you have an option to purchase, right? And that when you choose to vest, again, what that option will be worth when you vest that option or when it becomes capable of being vested can change over time. So it's very difficult. And I try to explain this to clients, if you're trying to set your payment to HCPs based on fair market value, it becomes almost impossible to do that when you start using equity as a means of paying those HCPs.
Angie Caldwell
Absolutely. And I think that's then the hundred thousand dollars question, Tynan, how do we determine fair market value related to these types of arrangements?
Tynan Kugler
There are a couple different ways that we approach it. And Kyle, I agree with you 100%. I think one of the things that we're talking about here are services that are being provided, right?
So one of the things that we see pretty consistently, and this isn't anything new, is how lots of organizations, large organizations, smaller organizations, they want a consistent approach to how they apply their compensation model. So before we even get to what's the fair market value or how do we address the actual compensation, it's kind of the concept of how do I set up my comp model?
We'll often see those still structured based on rate ranges specific to how a KOL or a health care provider has experience. So if somebody just is experienced at a local level or a regional level or a national level or an international level, we'll often have rate ranges that give some flexibility within fair market value there. But Angie, to get really granular in valuation speak on everybody, I won't totally geek out, but you look and you say, "Okay, I've got my three approaches that I can value a service or a business or a house or anything on – market, cost, and income."
Typically, we'll use the market approach and the cost approach, the market approach most usually though. And the market approach can take a lot of forms. One is I go out and I say, "What are other companies paying for a similarly situated service?" There is data that you can look at. There's data that you can find on that, but the difficulty there sometimes is really understanding, is it an apples-to-apples comparison? So while that kind of market data is good, I think there's sometimes concern that it either could be tainted or not be an apples-to-apples comparison.
One of the other things from a market approach, and I know Kyle will talk about this in a minute, is Open Payments data. Open Payments data is really helpful, but it's difficult to get to something like an hourly rate. You can look at what somebody's gotten paid for a consulting service, but you can't really track it back to what the effective hourly rate is because there are no hours that somebody has to report. It's just the total payment. So where does that leave us? We will then typically start with survey benchmark data. And then to that benchmark data, we'll make an allocation for benefits, so nominal allocation typically for benefits, and then there's a premium that will often apply to those benchmarks because we know these are known experts in their field, they're typically providing these services outside business hours.
And there are a number of other considerations that we take that we look at. So just like a call coverage arrangement, we do the same thing and say, "What's the scope and burden of the services? Is there a shortage of providers? Is there subspecialty knowledge?" I'm sure all of us have had the company that says, "Well, this physician is the most known expert in their field, and therefore they're deserving of the highest amount we can possibly pay." Well, not everybody can be the international expert in their field, but there are some. And that's why when we do these, we poke and prod probably a little bit more than people would like, but it really does help us refine where a physician or a provider is going to fall. And in the rare instance, we have an outlier. It helps support if we have to do a separate valuation for that outlier so that not everybody then becomes the outlier, which then calls into question the compliance, the nature of your program itself. So probably a little bit more than you wanted, Angie, but hopefully helpful for the listeners.
Angie Caldwell
That's terrific. And you touched on the Open Payments registry. So, Kyle, we are going to ask the question, what is the Open Payments registry, and who is in scope to report data to the registry?
Kyle Faget
Fair question. And my answer is, it is the bane of everybody's existence. That's what it is. No, it is. It is considered quite burdensome. So what is it? First, let's just talk about who does it even apply to? So let's figure out if it's applicable or not first and foremost. So an entity operating in the United States that's engaged in the production, preparation, propagation, compounding, or conversion of a covered drug, device, biological or medical supply, but not if that covered product is solely for use by or within the entity itself or by the entity's own patients or an entity under common ownership with such an entity. So basically, if you're in the world of producing, preparing, propagating, compounding, or conversion of drugs, devices, biologics, and medical supplies, and you're operating in the US, you are an applicable manufacturer.
And the next question becomes, and this is where I get a lot of questions, "Okay, what is a covered drug, device, biological or medical supply?" And that's actually a really important question because it's in that particular analysis that you may find you're not subject to Open Payments at all. What are these covered products? A drug or biological that by law requires a prescription to be dispensed. Or in the context of a device, important for our listeners, including medical supplies, it's a device that by law requires pre-market approval by or pre-market notification to the FDA and for which payment is actually available under the Social Security Act or under a state plan. So it has to have a federal or state payer, government payer to be in scope.
And again, for drugs and devices, there's this piece of it that it has to be a drug that requires a prescription or a biologic that requires a prescription. And then on the device side, we're really only talking about devices for which pre-market approval or pre-market notification to FDA is required. So again, it's that analysis where some products fall out.
So what is this? Open Payments is the requirement that these applicable manufacturers report direct and indirect payments or other transfers of value to covered recipients.
So who are the covered recipients? Well, as long as this is not a bona fide employee of the applicable manufacturer, we're talking about physicians, physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, or certified nurse midwives. All the people that are in the position, quite frankly, to use and/or recommend the use of one of those covered products.
Angie Caldwell
So Kyle, are there state requirements too?
Kyle Faget
There are. This comes as a surprise to many companies that I end up talking to. Everybody at this point seems to know about the federal Open Payments, whether or not they're in scope or is perhaps another question. But I think it's general knowledge at this point that the Sunshine Act exists and that there's this big database and there's annual reporting requirements and people fret about that. But then I'll get on the phone with them and I'll say, "Hey, there are state corollaries to this as well." And that's where people's hearts start jumping out of their chest. "Wait, are you kidding me? There are state-level requirements?" Yes, there are. And it's not just for pharmaceuticals, it's also for medical devices.
Now, granted, it isn't the lion's share of states, but there are states like Connecticut, Massachusetts, California, just by way of example, that have transparency requirements for spend, for [health care professional] HCP spend, and the states look a little bit different, right? So not every state has the same kinds of requirements. And I'll just raise California as an example. So California doesn't impose actually specific reporting requirements per se but instead requires that companies annually declare in writing that they're in compliance with California's Comprehensive Compliance Program, and then also California's Health and Safety Code section 119.402. So this is a written declaration that has to be made available to the public on the company's website, and the company must operate a toll-free phone line where a copy of the written declaration can be obtained.
So what does this mean? It means for companies that are operating in California, that these companies are required to adopt a comprehensive compliance program that's consistent with PhRMA Code and OIG's compliance program for pharma manufacturers and must include specific annual dollar limits on gifts, promotional materials, or items or activities that the company may provide to medical or health care professionals. And so you might say, "Okay, Kyle, great, you're talking about PhRMA Code and you're talking about OIG's compliance program guidance for pharma manufacturers. Does that mean that device companies get a pass?" Nope, they don't.
Now, granted, you might end up talking to counsel about how to structure your compliance so that it's consistent with PhRMA Code being a medical device manufacturer, but no, medical devices don't get a pass because in California, the reference is to dangerous drugs. And "dangerous drugs" include devices that may only be dispensed pursuant to a prescription. So medical device companies are in scope. And in fact, if you go to some of the larger medical device companies, you will actually see on their public-facing websites, this declaration is readily available on those larger manufacturer's websites.
Angie Caldwell
So there's a ton of information out there available publicly. And Tynan, if you could speak a little bit to how the data is used, how people should be using the Open Payments data to understand what people are getting paid for all of the services that we've spoken about today, speaking, consulting, advisory board participation, all of the things.
Tynan Kugler
So it kind of works bi-directionally, but when you think about a compliance officer who's doing a look-see to see who is getting paid, we typically recommend that Open Payments, that the data and the registry be reviewed at least annually because that then helps determine if there are any potential conflicts of interest or violations of company policies. And then they can be addressed through an internal vetting process. We also see health care organizations either through compliance or counsel monitoring disclosures of that outside data or outside financial interests. And they typically will do that sometimes as part of an onboarding process. So not only if you're a provider that's participating with one of these device or pharma companies, you might, during the year, have to attest annually or disclose what you have and have not done. But prior to onboarding, so if you're a physician or a provider that's doing some of this work, it's kind of get your ducks in a row before you enter into an employment arrangement.
And then sort of the bi-directional piece is if you're a physician or a provider that is subject to the reporting of this data, it's equally as important for you to go in or for those individuals to go in on a routine basis and look at the accuracy of what's being published. Because to Kyle's point, it's out there. That data is out there and anybody can go look and see if their physician or their provider or somebody they see is getting money from a drug or device company. And it's released to the public annually, typically around June 30, and then it has to be updated annually. So lots of different things that can occur there, Angie, but I think the key is just staying on top of it because we know it's there and there's no sign – at least I haven't seen any sign – that the sun is going to set. It's continuing to be out there.
Kyle Faget
I also think that we're going to see regulators using this data more and more for enforcement purposes. So it's always been out there as a threat that, "Hey, what's this data out there for?" And sure, it absolutely is out there so that the public can log on and say, "Is my physician receiving money for the pills that I'm being prescribed?" Yes, absolutely. That exists there. But there's also ways that regulators can take that data and crunch that data and look to see, "Well, what's industry standard, and who are our outliers?" It becomes readily apparent. Even in California where you're required to set a limit, well, did the company adhere to the limit that they've set or no? I mean, you can easily do that math looking at Open Payments, for example.
Angie Caldwell
So Tynan, speak a little bit about the accuracy of what's reported in Open Payments. I know initially there were some concerns voiced about whether the data was accurate and if it should be audited. And then I know that there was an audit done of the data, and the results were good. The results were good, that the information being reported was fairly accurate. Have either of you had any follow-ups on that or any other awareness around the accuracy of the data being reported?
Kyle Faget
Tynan, you may know more than I do about this. I know when I'm advising clients on Open Payments issues, which I do all the time, and we're starting to get to that time of year pretty soon where the questions will come in. I think that the tendency, at least with my clients, is to over-disclose. And there is a process that physicians can undertake for corrections as well. So I think, Angie, like you said, I think what's in there is relatively accurate. I think physicians are correctly incentivized to check to make sure that what's reported about them is accurate.
And again, I think that companies are... Particularly because we've seen enforcement now under Open Payments where for a number of years there weren't any enforcement actions, so people thought, "Okay, I'm going to go through all of these hoops, and for what exactly what's going to happen on the other end if we don't do this correctly?" And then again, we saw some enforcement in this area. And so now I think that's had people say, "Well, wait a minute, they're not actually kidding around. We have to do this and we have to do it correctly." So when in doubt, I'm always in favor of over-disclosing as opposed to under-disclosing and then utilizing the assumptions document so that you can explain why it is you made certain decisions that you made along the way with your reporting.
Tynan Kugler
I would agree with Kyle. I don't think we've had any specific concerns about the accuracy, but I think like everything else, it's the data that's going into the system. So there's a lot of that work. You're making an assumption on the front end, for example, that the company is paying consistent with what the value of that service is. So there's kind of everything that goes along with how it gets reported and what gets reported is, to me, I think kind of the devil's in the details there. And that's not something that Open Payments is necessarily going to find or not find. It's only going to be kind of looking yourself and maybe questioning it or having just robust compliance programs for determination of compensation before you even get to the reporting stage that I think will continue to be a focus and will potentially play out like we've been seeing first part of this year or so.
Angie Caldwell
Before we wrap up today's episode, do either of you have any parting thoughts?
Kyle Faget
Clients, it isn't easy. It's just not. There's a lot of things to think about. And when I work with companies, they think that there is such a thing. And in fact, this has been recognized by regulators even more so recently that there is a right sizing to compliance programs, right? So a young company doesn't need the same exact bells and whistles as really large companies, but there are some basic compliance considerations that should be taken into account upon pre-commercialization, but definitely by the time you're out there with a commercial product and Open Payments is one of them, consulting with KOLs, and then again if you have clinicians who are involved in PODs, that needs to be carefully scrutinized. It's just important.
Tynan Kugler
Well, and we talked about this a little bit at one point, but the nature of the physicians that are providing and the providers that are providing these services, they're inherently entrepreneurial. You're getting some energy and some enthusiasm and some want to think outside the box anyway. And so I think that's what makes the right sizing all the more important, is it's important to sort of rein some of that in, but not quash the entrepreneurial spirit that frankly the opinion leaders are there to help with. So it's the balance I think.
Jana Kolarik
All right. Thanks so much. And again, thanks Angie, as always. Appreciate you Kyle and Tynan for the great discussion on this topic and taking the time to join us today. So we want to thank our listeners as well for joining our Let's Talk Compliance Podcast series with Health Care Law Today, your connection to timely legal updates in the health care and life sciences industry. We encourage you to subscribe to this podcast. And to do so, visit Foley's Health Care Law Today blog at healthcarelawtoday.com, and pyapc.com. Thanks so much, guys.
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