50 5 2005

Five things you can do to prepare for compliance in all 50 states—starting today
Sep 01, 2005

Over the last three years, the federal government has increasingly regulated, investigated, and fined the pharmaceutical industry. Now, the states are taking their turn. Amidst rising state Medicaid costs, constituent concern over DTC advertising, and public scrutiny of industry motives, individual states are enacting their own legislation regulating industry behavior. However, while OIG guidelines focused on providing companies a broad ethical-operating framework, the states have enacted laws requiring more specific actions.

Looking at the Law
For pharma, the problem lies not with the act of complying with this or that particular law. Instead, the inconsistent standard of legislation across the states poses the greatest challenge to compliance for the industry. The state laws that have passed generally fall into one of four broad categories. (See "Looking at the Laws") But each state's requirements differ, with some calling for broad disclosures and others requiring detailed reporting of every promotional line item given to healthcare providers. Therefore, operational implementation of policies that respond to these compliance standards poses a considerable burden for companies in terms of time and expense, and is set to worsen unless the industry changes the way it responds to state laws.

In the past, companies would develop local responses when a state passed legislation regulating industry practices. When Minnesota created its law limiting gifts to healthcare providers in 1993, most pharma companies developed policies and training programs only for sales reps in that state. When Vermont enacted its marketing-cost disclosure law in 2002, companies again used a localized approach to frame their responses. Only in 2004, when California enacted its law requiring companies to establish a comprehensive compliance program that included an annual spend limit on healthcare professionals, did some firms begin to consider the impact of the new law on the overall business approach—as opposed to just the business in one particular state.

Six states have passed legislation regulating pharma's sales and marketing practices; at least 23 others have laws pending. As a result, it is no longer effective for companies to tackle compliance on a state-by-state basis. Companies that examine state laws from a national vantage point will be at a strategic advantage.
Today, six states have passed legislation regulating pharma's sales and marketing practices, and at least 23 other states have laws pending. (See "States that Regulate.") That's created a situation in which it is no longer efficient or effective for companies to tackle compliance on a state-by-state basis. Going forward, companies can be more strategic and better leverage internal resources by examining state laws from a national vantage point. In doing so, companies should develop systems that track all sales and marketing information across the country, so it can then segment out specific data according to a state's requirements. That approach offers several advantages:
  • Allows companies to have sound strategies for data collection already established so that they can respond to new laws in a timely manner. This way, the operating infrastructure is in place no matter which states pass laws, and no matter what the requirements are for compliance to those laws.
  • Avoids duplication of efforts in terms of setting up systems that collect and analyze data.
  • Allows companies to more completely capture and monitor their sales and marketing spend, which not only allows them to better adhere to compliance legislation, but more effectively understand their sales and marketing spend.

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