Small No Longer Means Safe: What You Need to Know

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Today, the Wilson Sonsini Goodrich & Rosati (WSGR) Life Sciences Report for Spring 2011 was published. Thanks to David Hoffmeister and his colleagues for an insightful article.

Here are the GPP highlights:

Key Takeaway #1:  “While many of the more prominent fraud and abuse settlements have involved large-cap, public companies, small device and pharmaceutical companies should not consider themselves immune from investigation and prosecution by virtue of their size.”

As the government works their way through the larger, more obvious infractions such as the $311M settlement by four dominant orthopedic manufacturers in 2007, they are beginning to target the smaller medical device companies.

Examples of three smaller medical device companies who settled with HHS from September 2010 to December 2010 per WSGR are:

And, when they talk about small, they really mean it:

Key Takeaway #2: “Small, privately held, venture-backed companies that are commercializing products are among the companies receiving government subpoenas, and having their marketing programs and relationships with physicians targeted for possible violations of the Anti-Kickback Statute.”

Bottom line, the compliance bar has been raised for VC-backed start ups with commercial products.  And,  with the dusted-off Park Doctrine in play, all levels of the organization from the BOD to sales managers need to understand the potential consequences for themselves and for their companies.

Key Takeaway #3: Whether you are a VC, an executive, board director or a sales representative, ask yourself these five (5) questions. If you don’t know the answer, you need to find out because your ignorance could cost billions.

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