Compliance: Getting Those Ducks in a Row - Pharmaceutical Executive


Compliance: Getting Those Ducks in a Row

Pharmaceutical Executive

Legislation: The Lay of the Land

There are several other laws and issues pharma must be aware of when it comes to regulatory compliance, including legislation such as the Best Price Rule (BP) and the Foreign Corrupt Practices Act (FCPA).

The Dialogue Continues
The Best Price Rule was intended to minimize drug manufacturers from overcharging Medicaid by giving beneficiaries the best discounts that other purchasers negotiated. But as Tony Chen, associate director of government pricing, and David Cesani, senior consultant, revenue contract management at Alliance Life Sciences told Pharm Exec:

"BP presents a unique challenge to manufacturers as actions to profit-maximize serve to decrease compliance with Centers for Medicare and Medicaid Services (CMS) and the Office of Inspector General (OIG) guidance. Not surprisingly, the OIG has recognized that 'manufacturers have a strong financial incentive to hide de facto pricing concessions to other purchasers to avoid passing on the same discounts to the states' in the form of higher rebates that would have been paid had manufacturers not inflated their BPs.

The details for the offenses typically include fraudulent price reporting based on omitting certain BP-setting transactions or mathematically derived methodologies to artificially inflate BP. In turn, 'whistleblowers' incentivized both morally and financially report these erroneous methodologies to the OIG, triggering increased investigative diligence.

With recent prosecutorial trends that seek to not only punish corporations through fines and corporate integrity agreements, but also to target individual corporate officers, the risks have never been higher for those responsible to correctly certify and report Best Price."

In addition to BP, pharma must carefully consider the implication of the Foreign Corrupt Practices Act. FCPA aims to prevent government officials from exploiting their positions to gain unfair commercial advantage. Essentially, the law states that it is an offense for a U.S. person, entity, and certain applicable foreign entities to make bribes or offer any inducement for the purpose of obtaining or retaining business with a U.S. firm. While FCPA applies to a wide range of industries, the OIG has begun more strongly focusing on its applicability to the pharma industry within the past five years.

"Physicians in Europe and in many companies outside of the U.S. are employees of state-owned hospitals or government facilities, so they could be considered government officials," explains Thomas Sullivan, president of CME company Rockpointe and editor of news website The problem, says Sullivan, is that practices that pharma has always considered to be on the up-and-up—such as paying to fly physicians to educational meetings—can technically be interpreted as "bribery," even though there may never have been any deceitful intent. "For the most part, pharma is thinking, 'This is how we've always done it.' Now they're going to have to change their practices," he says.

For its part, the OIG has been ramping up efforts and cracking down when it comes to the FCPA and pharma. Why? "There's a lot of cooperation between governments now to settle these cases ... There could potentially be a lot of income generated for these kinds of payments back to the government," says Sullivan. "They've done the fraud and kickback rules in the U.S., but companies have introduced pretty serious compliance regulations, so they're going to run out of violations. They [the OIG] see this as the new frontier."

A New Era

By all accounts, the buzz is that pharma is not trying to push corruption under the rug or find loopholes in compliance laws. On the contrary, it seems the industry is going above and beyond to understand, comply with, and embrace compliance laws that can lead to a more ethically and financially beneficial way of doing business. In fact, it's not that rare today to find pharma using past scandals as springboards for change—not just paying settlements and putting compliance challenges out of sight and out of mind, but rather highlighting them and leveraging them as catalysts for change.

For example, when GlaxoSmithKline recently agreed to pay $3 billion to settle U.S. government civil and criminal investigations into its sales practices, the company used the publicity generated as a platform to announce newly stringent compliance and transparency policies. "This is a significant step toward resolving difficult, long-standing matters which do not reflect the company that we are today," Andrew Witty, chief executive officer of GSK, said in a statement. "In recent years, we have fundamentally changed our procedures for compliance, marketing, and selling in the U.S. to ensure that we operate with high standards of integrity and that we conduct our business openly and transparently."

Deirdre Connelly, president of North American pharmaceuticals at GSK, echoed those sentiments in a bylined column for Pharm Exec last April. "We do not sell chocolate or cars," she wrote. "We bring life-altering and life-saving medicines to patients. Society holds our interactions with our customers ... to a higher standard. We must ... create a framework and a mindset in which compliance with rules and regulations is not the ceiling, but the floor from which our organizations operate."


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