Health care providers, life sciences companies and other entities subject to regulation by the Food and Drug Administration ("FDA") or the Centers for Medicare & Medicaid Services ("CMS") should be aware that the U.S. Department of Health and Human Services ("HHS") is increasing the maximum civil monetary penalty amounts that may be assessed by the agency.
The new maximum adjusted penalty amounts may have a significant impact on entities that violate or fail to meet mandatory reporting requirements set by FDA or CMS. Of the 299 enumerated increased fines, 137 fines (45.8%) have increased by over 75%, 100 fines (33.4%) increased by over 97%, and 64 fines (21.4%) have doubled or more. These increased fines affect a wide variety of activities and providers illustrated by the following examples:
| Fine | Previous Penalty | New, Increased Penalty |
| Fines for failure to report drug samples required by 21 U.S.C. § 353(d)(3)(E) | $100,000 per instance | $197,869 per instance |
| Fines for participating in prohibited conduct under 21 U.S.C. § 331 (misbranding, unapproved alteration, use of counterfeits, and other conduct related to the use of drugs or devices) | $1,000,000 | $1,781,560 |
| Fines for any related series of violations of requirements relating to electronic products under 21 U.S.C. § 360pp(b)(1) | $375,000 | $937,500 |
| Improper billing fines for Hospitals, critical access hospitals, or skilled nursing facilities under 42 U.S.C. § 1395cc(g) | $2,000 | $5,000 |
| Fines for certain biological product recall violations under 42 U.S.C. § 262(d) | $100,000 | $215,628 |
| Fines to Medicaid MCOs that improperly expel or refuse to reenroll a beneficiary under 42 U.S.C. § 1396b(m)(5)(B)(i) | $100,000 | $197,869 |
| Fines for failure to report medical malpractice claims, or breaching confidentiality of information within such a claim, to the National Practitioner Data Bank under 42 U.S.C. § 11131(b)(2)-(c) | $10,000 | $21,563 |
| Skilled Nursing Facility fines for noncompliance under 42 U.S.C. § 1395i-3(h)(2)(B)(ii)(l) | $10,000 | $20,628 |
| Fines for failure to promptly provide appropriate diagnosis codes to CMS under 42 U.S.C. § 1395u(p)(3)(A) | $2,000 | $3,957 |
| Daily fines for failure by a home health agency to be in compliance with statutory requirements per 42 U.S.C. § 1395bbb(f)(2)(A)(i) | $10,000 | $19,787 |
The adjusted civil monetary penalty amounts became effective on September 6, 2016, and are applicable only to HHS civil penalties assessed after August 1, 2016 for violations that occurred after November 2, 2015. Pursuant to the Bipartisan Budget Act of 2015 ("2015 Act") and the Administrative Procedures Act (5 U.S.C. 553(b)(3)(B)), HHS finalized the interim rule without prior notice or comment period. As the 2015 Act provided a straight forward formula to calculate future civil monetary penalty adjustments, HHS determined that there was good cause for immediate implementation without a notice and comment period.
While penalties that more than double their previous amounts may be alarming, a penalty increase is not surprising considering some penalties have remained unchanged since 1968.[1] These increases represent only the initial "catch up" adjustments required by the 2015 Act. Similar to the U.S. Department of Justice and U.S. Railroad Retirement Board penalty increase adjustments for the False Claims Act discussed previously, HHS must also make subsequent annual civil monetary penalty adjustments for inflation by January 15 each year. These increased penalties, along with the anticipated yearly inflation adjustments, provide companies with additional incentives to increase their compliance efforts in the hope of limiting their exposure to additional penalties.
[1] For example, 21 U.S.C. 360pp(b)(1) increased the penalty for any person who violated requirements for electronic products 150% from its pre-inflation penalty, from $1,100 per unlawful act or omission pre-adjustment to $2,750 per act or omission post-adjustment.