Changes in international legislation and trends in enforcement have continued to be a moving target for 2014 and 2015. In the area of FCPA enforcement, several trends provide guidance on what companies need to be conscientious about in the coming year. In the area of international regulations, there continues to be an upswing in the number of countries that have added new regulations or tightened requirements around existing legislation to send a message regarding their efforts to reduce corruption.
Assessing your 2015 Compliance Goals
It is hard to believe that we are half way through the year. Now entering prime vacation season, the office tends to be a little quieter and the work flow slower. This brief reprieve from the office hustle and bustle provides compliance professionals a great opportunity to look back at what has been accomplished thus far this year and prepare for what is to come as we quickly move into the second half of the year. Whether you started the year by conducting a formal risk assessment and prepared a formal remediation and compliance plan, or simply jotted some compliance goals on the office whiteboard, now is the perfect time to check the boxes on the tasks that were completed and see what is left to do. It is also important to ensure the plan you put in place at the beginning of the year still “makes sense” both based on your internal business environment as well as enforcement trends and expectations for the year made known by government agencies such as the DOJ and OIG. Taking advantage of the slower summer to do these things now will prove invaluable so that you can hit the ground running in the fall with a focused and achievable compliance game plan that will allow you to check the boxes all the way down your list.
The OIG plan for 2015, re-released in May, with updates from the plan that was released in October 2014, demonstrates a pattern of what we have seen in the past, as well as the addition of a few new items. Of note, the OIG will continue its investigative actions focused around their strike force teams (formed in 2007) and the Health Care Fraud Prevention and Enforcement Action Team (HEAT) (started in 2009). The OIG highlighted that their strike force activities from October 1, 2014 to March 21, 2015 have resulted in more than $163 million in fines and charges against 69 individuals or entities. The OIG will also continue to investigate companies that manipulate payment codes and submit false claims, as well as review business arrangements that could violate the Anti-Kickback Statute.
The life sciences industries are running rampant with transactional activity. Reports of new ownership of products, portfolios, or companies by acquisition, merger, or planned merger or acquisition make headlines on almost a daily basis. From the outside looking in, M&A activity is becoming “business as usual.” As with other aspects of the daily grind, however, the inside perspective tells a far different story: these mergers and acquisitions are fraught with a number of surprises—not the least of which is “what devil is (or how many devils are) in the details.”
In today’s market, pharmaceutical, medical device, and biotech companies straddle two worlds. In one world, they are driven by a public need to ensure access to a safe product at an affordable price. In another world, companies are driven by a competitive and capitalistic market to increase profit and market share while lowering costs. These two worlds do not have to be in conflict, but they sometimes are, and those conflicts can drive an ethical perception of an organization. The 2013 Harris poll in the United States indicated that American consumer perceptions of the pharmaceutical industry had gone down: only 10 percent of American consumers believed that the pharmaceutical industry was trustworthy (down from 13 percent in 2003), and were considered less trustworthy than other regulated industries, such as banking (18 percent) and public utilities (14 percent). In addition, 39 percent of survey respondents indicated that they wanted to see more government regulation in the pharmaceutical industry.
The sale and use of counterfeit medicines pose a real and potent threat to global health and commerce. Over the past decade, the threat of counterfeit medicines has increased, with incidents of counterfeiting reported in 123 nations. One watchdog group documented 2,193 incidents of pharmaceutical crime in 2013 alone, representing almost a 9 percent increase from 2012. This rise can be attributed largely to the growing online pharmaceutical marketplace that enables counterfeit drugs to permeate households. Counterfeit pharmaceuticals often lack active ingredients, depriving the patient of the medication they need. Even worse, counterfeit drugs have been found to contain poisons such as arsenic, shoe polish, nickel, and leaded road paint. While many counterfeits reach patients through online markets, these falsified medications have also penetrated legal supply chains.
In today’s life sciences industry, mergers and acquisitions are becoming ever more prevalent as a means to ensure that strategic, operational, and financial goals are met, and that customers and patients have the products they need. The planning and execution of a partnership is often vetted thoroughly in terms of complementary product lines, financial goals, strategy for market presence, and access for those who need it.
So your Board of Directors and senior management just handed you the keys to a brand-new, shiny compliance program. It conforms to the seven elements of the OIG Guidance for implementing an effective compliance plan. You’ve been designated as the chief compliance officer with single-point accountability for managing the day-to-day operations of the compliance program (No. 1). You’ve approved written policies and procedures for implementing your compliance program (No. 2). You’ve developed and trained all relevant personnel on your compliance program (No. 3). You’ve implemented a hotline for employees to anonymously report putative compliance violations (No. 4). You’ve developed a comprehensive auditing and monitoring program, in partnership with Internal Audit and the company’s external auditors (No. 5). You’ve created a program to investigate and take corrective actions to remediate credible allegations (No. 6). And finally, you’ve demonstrated a track record of taking disciplinary action against transgressors (No. 7).
By Edward J. Buthusiem & Gary F. Miller, Jr.
Providing incentives to spur the development of new and novel drugs to combat rare diseases has historically posed a challenge to drug manufacturers, the FDA, the medical community, and—most important—patients afflicted with these diseases. Given the high and ever-increasing costs and challenges of drug development, combined with the relatively small number of patients that would be eligible to receive such treatments—which limits a company’s ability to recoup its R&D investment—pharmaceutical manufacturers have struggled with the economics of rare-disease drug development. The Orphan Drug Act, passed in 1983, was designed to address these concerns by providing incentives for pharmaceutical companies to develop drugs for uses for rare disorders or conditions. While the act was well intended, its application in practice has generated speed bumps as companies try to navigate through the waters of government reimbursement programs applicable to these drugs, as well as an unpredictable and often inconsistent DOJ enforcement pattern.
By Edward J. Buthusiem & Gary F. Miller, Jr.
The enactment of the Dodd–Frank Act was intended to provide the SEC with an important weapon in its mission to seek and vigorously prosecute the commission of securities and other types of frauds domestically and overseas. By providing to whistleblowers monetary incentives ranging between 10 percent and 30 percent of fines assessed, the whistleblower program has gained an element of popularity—some would say notoriety—amongst would-be reporters of putative wrongdoing. Recent Federal Court decisions, however, have created significant roadblocks that could blunt the Dodd–Frank juggernaut.