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Compliance Requirements for the Pharmaceutical Industry and Impact on Marketing Practices . Timothy M. Cunniff, Pharm.D. Vice President, Global Regulatory Affairs Lundbeck Inc. May 2009. Disclosure Statement. Employee of Lundbeck Inc. (formerly Ovation Pharmaceuticals). Objectives.

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compliance requirements for the pharmaceutical industry and impact on marketing practices

Compliance Requirements for the Pharmaceutical Industry and Impact on Marketing Practices

Timothy M. Cunniff, Pharm.D.

Vice President, Global Regulatory Affairs

Lundbeck Inc.

May 2009

disclosure statement
Disclosure Statement
  • Employee of Lundbeck Inc. (formerly Ovation Pharmaceuticals)
  • Describe the various legal, regulatory and industry compliance standards
  • Discuss requirements applicable to industry interaction with healthcare professionals
  • Summarize recent revisions to the PhRMA code and impact on pharmaceutical marketing practices
legal basis for industry compliance programs
Legal Basis for Industry Compliance Programs
  • Federal and State Laws
    • Food, Drug and Cosmetic Act (21 U.S.C. 301 et. seq.)
    • Anti-Kickback Statute (42 U.S.C. & 1320a-7b[b])
    • Civil False Claims Act (31 U.S.C. 3729)
    • Fraud and Abuse Investigations and Prosecutions
    • General Criminal Fraud Statutes
    • Whistle Blower Act (31 U.S.C. 3730)
  • HHS Guidance
    • OIG
    • FDA
  • Industry and Medical Organization Recommendations
    • PhRMA
    • AMA
recent industry settlements for compliance violations
Recent Industry Settlements for Compliance Violations
  • Bayer: $14MM
  • TAP: $875MM
  • Abbott: $600MM
  • Schering–Plough: $435MM
  • Pfizer: $430MM
  • Serono: $704MM
  • Eli Lilly: $1.42BB
significant compliance standards for industry
Significant Compliance Standards for Industry
  • July 2002: PhRMA Code on Interaction with Healthcare Professionals
  • April 2003: OIG Compliance Program guidance
  • July 2005: California Law
    • Required industry to adopt policies that ensure compliance with OIG and PhRMA Code guidelines
  • January 2009: Revised PhRMA Code
oig compliance program guidance
OIG Compliance Program Guidance
  • Stresses the importance of the development and implementation of a functional compliance program
  • Cautions the pharmaceutical industry in three high risk areas
  • Identifies exemptions or “safe harbors” for federal and state healthcare programs
  • Utilized to decrease the risk of fraud and abuse in federally funded health care programs
oig compliance program guidance three potential areas of risk
OIG Compliance Program GuidanceThree Potential Areas of Risk
  • Accurate price and sales reporting to government agencies
  • Kickbacks and other illegal remunerations
  • Drug samples
oig potential area of risk accurate price and sales reporting
OIG: Potential Area of RiskAccurate Price and Sales Reporting
  • Accounting for price reductions, cash discounts, rebates, coupons, etc. for purchasers
  • Data submitted used to calculate AMWP and Best Price
  • Impacts reimbursement rates under Medicare and Medicaid
  • Violations covered by False Claims Act
    • Prohibits knowingly presenting to the federal government a false or fraudulent claim, or false record, to get a payment or false claim approved
    • Civil monetary penalties
oig potential area of risk kickbacks and other illegal remuneration
OIG: Potential Area of RiskKickbacks and Other Illegal Remuneration

Anti-kickback Statute

  • Criminal prohibition against payments made purposefully to induce or reward the referral or generation of federal health care business

Identifying potential risk behavior

  • Determine remunerative relationships
  • Is any one purpose of remuneration unlawful?
oig kickbacks other illegal remuneration relationships of concern
OIG:Kickbacks & Other Illegal RemunerationRelationships of Concern
  • Manufacturer-Purchasers
    • Including those using formularies and their agents
  • Manufacturer-Physician
    • Including persons and entities in a position to make or influence referrals
  • Manufacturer-Sales Agent
oig relationships of concern manufacturer purchaser relationship
OIG: Relationships of ConcernManufacturer-Purchaser Relationship
  • Discounts
  • Formulary Support Activities
  • Average Wholesale Price
    • Pharmaceutical companies have ability to control the AWP and indirectly influence customer’s profit
    • Wrongfully manipulating AWP violates anti-kickback statue
oig relationships of concern manufacturer physician relationship
OIG: Relationships of ConcernManufacturer-Physician Relationship
  • Consulting
  • Educational Grants
  • Research Funding
  • Business courtesies and other gratuities
oig manufacturer physician relationship consulting
OIG: Manufacturer-Physician RelationshipConsulting
  • Signed agreement for consulting services
    • Fair market value
    • Services pre-specified contractually
  • Legitimate need
  • Service is actually provided
oig manufacturer physician relationship educational grants
OIG: Manufacturer-Physician RelationshipEducational Grants
  • Unrestricted grant for a defined program
  • Independent from sales & marketing
  • Defined criteria
  • Awarded to conference sponsor
  • Industry cannot select speakers or control the agenda
oig manufacturer physician relationship research funding
OIG: Manufacturer-Physician RelationshipResearch Funding
  • Independent from sales & marketing
  • Fair market value
  • Legitimate and necessary
  • No “seeding” trials allowed
  • Clinical Officer conducts review of research
oig manufacturer physician relationship business courtesies other gratuities
OIG: Manufacturer-Physician RelationshipBusiness Courtesies/Other Gratuities
  • Determine and publicly document annual allotted amount
  • Meals
    • Modest
    • Industry representative present
    • Venue must be conducive for education
    • Entertainment prohibited
    • No Guests
  • Gifts/Reminder Items
      • Educational purposes only and should benefit patients
oig kickbacks other illegal remuneration manufacturer sales agent relationship
OIG: Kickbacks & Other Illegal RemunerationManufacturer-Sales Agent Relationship
  • Compensation and Bonuses Practices
  • Expense accounts
  • Regular PhRMA Code training
  • Audit and review sales force activities
oig potential area of risk drug samples
OIG: Potential Area of RiskDrug Samples
  • Selling drug samples or submitting claims for drug samples is unlawful
    • Prescription Drug Marketing Act of 1987 (PDMA)
    • False Claims Act
    • Anti-kickback statue
  • Label drug samples appropriately
  • Reconcile and account for drug sample distribution
phrma code
  • Originally issued in 2002 and revised in 2008 (effective January 1, 2009)
    • Addresses industry’s relationships with healthcare professionals with respect to marketed products and pre-launch activities
      • Ethical standards of conduct
      • Compliance with legal requirements
    • Goal is to benefit patients and enhance the practice of medicine
    • “Voluntary” for PhRMA member companies (not law)
phrma code informational presentations
2002 Version

Occasional meals may be offered


Conducive venue

Provide educational value

Company representative present

No guests

No entertainment

2009 Revision

Outside meals with sales representatives not allowed

PhRMA CodeInformational Presentations
phrma code third party educational meetings
2002 Version

Financial support for CME allowed

Funding via program sponsor

Cannot control content, faculty, materials or venue

Cannot reimburse travel for attendees

Can provide meals and receptions

2009 Revision

Follow ACCME standards or other entity that may accredit CME

Sales & Marketing cannot make grants

Industry cannot provide meals or receptions at CME events

PhRMA CodeThird Party Educational Meetings
phrma code consultants
2002 Version

Reasonable compensation for services and reimbursement for travel expenses

Written contract

Legitimate need

Criteria for selection

Number of consultants

Venue is appropriate

Social events subordinate

2009 Revision

No changes

PhRMA CodeConsultants
phrma code speaker training meetings
2002 Version

Reasonable compensation and reimbursement for travel allowed

Must receive extensive training on product AND on compliance with FDA regulatory requirements

2009 Revision

Firms to set a maximum amount per speaker

Number of speakers and number of engagements per speaker should be limited

Training should not be at “resort” settings

Must draw distinction between speaker’s programs and CME

Healthcare professionals should disclose relationship away form podium and for at least 2 years beyond termination of relationship

PhRMA CodeSpeaker Training Meetings
phrma code educational practice related items
2002 Version

Items that primarily benefit patients allowed

Not substantial value ($100 or less)

Occasional basis only

Practice-related items allowed

Minimal value

Must not provide a personal benefit

2009 Revision

Items must primarily benefit the education of patients or healthcare providers

Not substantial value

Occasional basis only

Practice-related items not allowed

What, No Pens!

PhRMA CodeEducational & Practice Related Items
phrma code potential future revisions
PhRMA CodePotential Future Revisions
  • Revision of Direct-to-Consumer advertising principles
    • DTC principles first described in 2005
    • Proposed revisions may cite standards developed by outside groups (i.e., AMA)
    • Congressional pressure by Reps. John Dingell (D-Mich) and Bart Stupak (D-Mich) is driving reform
phrma code impact of 2009 revisions
PhRMA CodeImpact of 2009 Revisions
  • Corporate compliance is paramount
    • SOPs- Hundreds!
    • Multiple approvals/Committee reviews
    • Training
    • Auditing
    • Disciplinary action
      • Individuals
      • Firms (i.e., ABPI suspension of Roche)
  • Many firms likely to scale back on marketing
    • Global economic crisis
    • Massive number of patent expirations
    • PhRMA code provides some assurance that firms aren’t unilaterally reducing marketing spend
state regulation of industry marketing practice one example
State Regulation of Industry Marketing Practice- One Example
  • Massachusetts
    • Code of Conduct effective July 1, 2009
      • Each firm must adopt a marketing Code of Conduct
      • Submit description of training program for appropriate employees to document knowledge of:
        • Code of Conduct
        • General science
        • Product-specific information
      • Bans practice-related items (i.e., pens)
      • Certify compliance with state law
      • Adopt and submit polices for investigating non-compliance
lundbeck s corporate compliance program
Lundbeck’s Corporate Compliance Program
  • Written code of conduct and ethical principles
    • Certify compliance with PhRMA Code on an annual basis (CCO and CEO)
  • Focus on specific “risk” areas
  • Effective training and education
  • Established lines of communication and processes to respond to issues
lundbeck s corporate compliance program cont
Lundbeck’s Corporate Compliance Program (cont.)
  • Oversight and monitoring
    • Primary: Compliance Officer
    • Secondary: Compliance Committee
    • Tertiary: President and CEO
    • Final: Board of Directors
  • Enforcement of standards through progressive discipline
  • Internal audit functions
lundbeck compliance policies
Lundbeck Compliance Policies
  • Lundbeck has well over 100 substantive polices and procedures including:
    • Meals, gifts and entertainment
    • Consulting agreements for healthcare providers
    • Medical education grants
    • Commercial program support
    • Advertising and Promotion
    • Dissemination of published literature
    • Prescription drug marketing and sampling
    • Medical Science Liaison policy
    • Medical Information response policy
lundbeck compliance committees
Lundbeck Compliance Committees
  • Promotional Advertising Review Committee
    • Legal/Compliance, Regulatory, Medical, Marketing
  • Medical Grant Review Committee
    • Legal/Compliance, Regulatory, Medical, Finance, Marketing
  • Corporate Compliance Committee
    • Legal. Regulatory, Clinical, Medical, Human Resources, Finance, Marketing