Posted On Thursday, February 18, 2016
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Last week, a Las Vegas resident was indicted in the District of Nevada on allegations that he sold counterfeit and misbranded contact lenses to customers via the internet. The defendant, Dmitriy Melnik, now faces one count of conspiracy to traffic in counterfeit goods and to introduce misbranded devices into interstate commerce, four counts of trafficking in counterfeit goods, and five counts of introducing misbranded devices into interstate commerce. The governments alleged that Melnik imported colored contact lenses from the Peoples Republic of China and South Korea – knowing them to be counterfeit or otherwise unauthorized by the FDA – to be sold in the United States.
Many of the contact lenses had counterfeit trademarks names and symbols of name brand lenses while others had labels of brands produced and sold in Asia. It was also alleged that some contact lenses were contaminated with a potentially dangerous bacteria. Contact lenses – even those which are solely decorative and do not correct vision – are considered medical devices and, thus, regulated by the FDA. Medical devices like contact lenses must also receive FDA authorization to be imported into the United States and sold in interstate commerce.
Trafficking in counterfeit goods, a violation of 18 U.S.C. § 2320, carries a variety of penalties depending on whether the crime was a first or subsequent offense, resulted in serious bodily injury or death, or involved counterfeit military goods or counterfeit drugs. The potential terms of imprisonment range from a maximum of 10 years for a first offense, 20 years for a second offense or if serious bodily injury occurred, or 20 years for an offense involving counterfeit military goods or counterfeit drugs. These penalties were increased to this level in 2012 which, in turn, led to amendments to the federal sentencing guidelines in 2013 under which Mr. Melnik would be sentenced if convicted.
Posted On Wednesday, February 17, 2016
On February 12, 2016, CMS published the long-awaited final rule implementing Section 6402 of the Affordable Healthcare Act (ACA), which requires Medicare Part A and Part B providers and suppliers to report and return identified overpayments within 60 days (aka the “60-Day Rule”). Under Section 6402, as codified in Section 1128J(d) of the Social Security Act, failure to timely report, and return identified overpayments, results in a violation of the False Claims Act (FCA).
In the summary section of the 60-Day Rule, CMS notes three specific areas in which the final rule differs from the proposed rule that was published almost four years ago. They are: (i) when does identification of an overpayment occur?; (ii) How far back in time do providers and suppliers have to look when investigating an overpayment?; and (iii) How to return and report an overpayment? Providers and suppliers have been seeking clarity on these three issues since the enactment of the ACA and the publication of the proposed rule.
Identifying Overpayments – You know my methods, Watson. . .
With regard to the identification of overpayments, in the final rule CMS has moved away from the “actual knowledge”, “reckless disregard” and “deliberate ignorance” standard(s) set forth in the proposed rule to a “reasonable diligence” standard. The final rule states “that a person has identified an overpayment when the person has or should have, through the exercise of reasonable diligence, determined that the person has received an overpayment and quantified the amount of the overpayment.” In comments and in the preamble to the final rule, CMS defines “reasonable diligence” as being “demonstrated through the timely, good faith investigation of credible information, which is at most 6 months from receipt of the credible information, except in extraordinary circumstances”.
Through the Looking Glass. . .is the Lookback Period 4 years or 10 years . . .or Neither?
After vigorous opposition to the 10 year look back period in the proposed rule, CMS reduced to 6 years how far back a provider and supplier must look to identify overpayments. In this regard, CMS stated that “[c]reating this standard for identification provides needed clarity and consistency for providers and suppliers on the actions they need to take to comply with the requirements for reporting and returning of self-identified overpayments”. Although the 6 years is certainly more favorable, it is not the 4 year look back period under which CMS’s Voluntary Self-Referral Disclosure Program (SRDP) had been operating. Importantly, however, any overpayments previously disclosed to a Medicaid Administrative Contractor (MAC) or CMS’s SRDP will not be subject to the 6 year time frame due to the absence of any retroactivity provisions in the final rule.
For Whom the Bell Tolls – Not with the Department of Justice. . .
The Final Rule notes that disclosure of an overpayment pursuant to the SRDP and the OIG Self-Disclosure Protocol (SDP) tolls the deadline for returning the overpayment. In other words, disclosure under either of these programs means that the provider does not have to return the identified overpayment within 60 days. However, CMS chose not to extend the tolling of this deadline for disclosures to other governmental agencies, including the Department of Justice. In the comments to the final rule, CMS states “[w]e decline to extend this treatment to self-disclosure to entities outside of the SRDP and SDP in his final rule. The SRDP and SDP are both formal processes managed by agencies within the Department, CMS and OIG respectively. As such, we believe it is appropriate to include those processes in this rule. However, DOJ is a separate department and we are not aware of any formal self-disclosure process by DOJ that is analogous to the SRDP or SDP.”
The Final Rule provides much needed clarity for providers and suppliers, and creates a process that provides a more measured approach than the Proposed Rule. Certain grey areas remain, due to conflicts between recent court opinions interpreting the 60-day Rule statutory provisions and this Final Rule, but much ambiguity has been resolved.
