Startup Innovation Meets DOJ Regulations

Startup Innovation Meets DOJ Regulations

Healthcare innovation has a unique relationship with federal regulation. Like a veritable cat and mouse game, the Department of Justice (DOJ) is constantly chasing after healthcare startups that push the envelope just a little too aggressively.

In recent months, there have been two notable investigations. The first was against startup Oak Street Health, a value-based primary care network for Medicare patients. The chain of primary care clinics faced a DOJ inquiry into its relationships with third-party marketing agents and its provision of free transportation for members. The second is more recent, against a mental health startup Cerebral, over its prescribing of controlled substances like Adderall and Xanax through telemedicine.

At first blush, the two investigations may appear different. But they belie a common investigational tactic used by the DOJ – target the patient recruitment methods of a healthcare company and determine whether these methods constitute illegal marketing tactics. It is a remarkable strategy because it puts healthcare companies at a uniquely disadvantageous position and gives federal prosecutors a tremendous – and possibly undue – advantage.

Marketing in healthcare has always been murky. And of late, the line between representing medical data and influencing public perception has blurred into an interpretive oblivion. Where marketing begins and ends is anyone’s guess. The DOJ capitalizes on this ambiguity to elicit the pretense of criminality, or at least of impropriety, in what otherwise would be established medical practice.

Pharmaceutical representatives have been coming into physician offices for years to discuss new medications and its benefits. It has been acknowledged that conflicts of interest can occur through such relationships, but provisions were set in place to minimize them. But regardless of what safeguards are placed, we will always have some gray area where pharmaceutical companies can leverage influence.

It happens at all levels of healthcare. Pfizer and Moderna actively collaborated with the FDA to demonstrate the clinical utility of a fourth COVID-19 vaccine dose. Yet the cries calling for a conflict of interest investigation in this arrangement rang hollow. It would be both naïve and insincere to suggest that neither company is profiting off their status as saviors of the pandemic. Just look at Pfizer’s 2021 annual shareholders report.

This is the point of contention for many healthcare startups who feel unduly targeted for their marketing efforts. There is no consistent standard by which healthcare companies are evaluated for inappropriate recruitment methods.

We have no set parameters to determine whether a Medicare Advantage company subsidizing car rides to incentivize patient visits constitutes good quality of care or illegal marketing tactics. It is subjective, and that is the problem.

When the interpretation of law is subject to the interpretations of those enforcing it, then those most vulnerable to the law are disproportionately affected by malicious interpretations. In healthcare, these would be the healthcare startups. The fledgling companies who seek to improve healthcare by taking genuine risks.

To re-contextualize those risks as crimes is anathema to the American spirit of ingenuity. Yet it is precisely the tactic taken by the DOJ. This is nothing short of disingenuous by the DOJ.

Look no further than the misguided attempt to introduce price transparency into healthcare. Former Center for Medicare and Medicaid Director, Seema Verma, wrote an op-ed comparing price transparency in healthcare to buying a car – as though the experiences are similar.

But the Government Accountability Office (GAO) has long acknowledged that price transparency is uniquely difficult in healthcare.

It is time the DOJ develop unique investigational practices specific to healthcare that recognize the unique patient experience. In other industries, a customer is a consumer, subject to laws of consumer behavior and general commerce. But in healthcare, we have patients, not consumers.

Needless to say, a patient is distinct from a consumer. And the distinctions merit different methods of regulating general business practices in healthcare. We would not consider theft to be the same as murder. We separate different crimes with their own punishments, unique to each criminal behavior.

When we muddle these distinctions, we create laws that make crimes out of behavior that would be standard industry practice. This is the current cat and mouse game between the DOJ and healthcare startups, balancing the line between marketing as a vehicle for growth and marketing as a criminal act.

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