GlaxoSmithKline’s $3 billion fraud settlement with the U.S. Department of Justice in early July turned many heads because of its historic nature.
But one element of the settlement that has not drawn much focus is the five-year corporate integrity agreement that the U.K. pharma company signed with the Department of Health and Human Services.
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Corporate Integrity Agreements are not new — Abbott signed one after it agreed to pay $1.5 billion earlier this year. Medical device companies in recent years have also been entering into such agreements.
But the GSK one is novel in a very important respect, said Margo Struthers, partner at Minneapolis law firm Oppenheimer, Wolff and Donnelly. She pointed to two compensation restrictions that she has not seen previously in such agreements.
One requires GSK to amend its sales compensation by tying it to quality and not sales targets based on territory or geography. The other gives GSK the authority to claw back some of the bonuses and long-term incentives from executives and board members if it is found that they have been involved with severe misconduct.
A news release issued by the DOJ explains the intent behind such “novel provisions.”
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The plea agreement and CIA include novel provisions that require that GSK implement and/or maintain major changes to the way it does business, including changing the way its sales force is compensated to remove compensation based on sales goals for territories, one of the driving forces behind much of the conduct at issue in this matter (emphasis added).
But Struthers believes the intent is broader than that.
“I think that these restrictions are intended to produce change at the individual employee level,” Struthers noted via email. “Federal prosecutors and regulators have expressed concerns about big fines being viewed by companies as a cost of doing business, and the OIG may be trying to change that with these provisions, together with other provisions focusing on individual certifications and accountability.”
That is exactly what Gerald Wilhelm, an assistant U.S. attorney from the District of Minnesota, also referred to in a talk last year where he declared that federal prosecutors are aggressively pursuing healthcare fraud.
