OIG: Manufacturers Could Face $10,000-Per-Day Fines for Late Overpayment Reporting

Manufacturers that are slow to report overpayments for drugs reimbursed through federal healthcare programs, such as Medicare or Medicaid, could face fines of $10,000 a day, under a proposed regulation — a rule that could cause major headaches for drugmakers trying to sort out complex government billing systems.

Consulting firm ReedSmith said the complexity of billing Medicare and Medicaid makes it difficult for drugmakers to determine when exactly a particular claim caused an overpayment, and that will make it difficult or impossible for drugmakers to avoid the new penalties.

The concern stems from a recent HHS’ Office of the Inspector General (OIG) proposed rule that expands the department’s civil monetary penalty authority under the 2010 Affordable Care Act (ACA). The rule would implement new penalties for certain conduct by drugmakers.

The proposed penalties are:

• $10,000 a day for failing to notify and return to CMS an overpayment for a reimbursed drug. The drugmaker has 60 days after identifying the overpayment to notify CMS, after which the daily penalty starts to take effect;
• $50,000 for each false statement or omission made on a bid or enrollment application to participate in a federal healthcare program such as Medicare and Medicaid, and for submitting any false record or statement that is integral to a false claim; and
• $15,000 a day for failing to grant timely access to records. The penalty would take effect if a drugmaker misses a deadline specified in OIG’s written request or immediately if OIG believes material is about to be altered or destroyed.

ReedSmith argues when the ACA modified the Social Security Act to implement the $10,000 penalty, the statute said it can be applied for each item or service, not for each day. Industry needs to speak out and call for an alternative methodology for calculating an overpayment penalty, ReedSmith says.

ReedSmith also was concerned the rule gives OIG wide latitude in specifying a deadline for drugmakers to submit records. OIG says it will take into account the volume of material and the size of the company when setting the deadline.

“However, nothing in the proposed rule guarantees a responding party a minimum amount of time in which to provide a response,” ReedSmith says.

OIG also noted it was hard to predict how much money it plans to collect based on the changes.

Comments on the proposed rule, docket no. OIG–403–P, are due by July 11.

Penalties for corporate compliance failures can cost your company millions; prevent them by purchasing FDAnews Pharmaceutical and Medical Device Compliance Settlement Trends.