As the Compliance Net Tightens... - Pharmaceutical Executive

ADVERTISEMENT

As the Compliance Net Tightens...


Pharmaceutical Executive


Impact on Startups

The Proposed Rule purports to cover manufactures that distribute or sell covered products. The use of the word "distribution" in addition to sale in the Proposed Rule definition would seem to capture companies that are in the premarket approval stage of the life sciences development spectrum and are distributing covered drugs, devices, biologics, or medical supplies in connection with conducting clinical trials. The Proposed Rule does not clarify this particular point, although such an interpretation appears consistent with the Proposed Rule's discussion of research on new products. If CMS does intend for these regulations to apply under such circumstances, a wide range of startup companies and well-capitalized biotech companies would be affected.

Financial Relationship Management Responsibility

Life sciences companies have already established mechanisms for tracking financial relationships and ensuring that such financial relationships are for bona fide transactions consistent with fair market value. Some state laws additionally require tracking of all expenses, including things such as meals. The Proposed Rule would capture all of these financial relationships on a national basis. Moreover, the Proposed Rule's "all or nothing" approach and the proposed inclusion of foreign entity expenditures, funds that may support U.S. activities in some fashion, will exponentially add to the level of investment and tracking required. Indeed, the Proposed Rule makes clear that compliance with these state and federal anti-fraud and abuse provisions is not sufficient to meet either the letter or spirit of the Proposed Rule.

R&D and Clinical Investigation Provisions

The Proposed Rule seeks to address separately financial relationships attendant to "clinical investigations," "research," and "development." The Proposed Rule's approach to distinguishing, however, between these three categories does not easily track how such terms are used by life sciences companies and researchers. The distinctions drawn by the Proposed Rule matter, as they may affect whether a life sciences company can avail itself of the delayed publication pathway intended to protect the proprietary interests of a life sciences company for a reasonable period of time by delaying the public reporting of certain financial relationships that might reveal otherwise confidential pipeline development information. CMS notes that the ACA appears to distinguish between the scope of delayed publication rights for payments related to "research" as opposed to payments for "development" or "clinical investigations." For research, for example, the ACA extends delayed publication to new products and new applications for existing products. For development and clinical investigations, however, the ACA appears to afford delayed publication only to new products—and not to new applications for existing products. CMS's proposed solution, however, is to treat the terms "research" and "development" similarly with respect to delayed publication, but to treat "clinical investigations" as distinct from research or development. Despite CMS's conviction that clinical investigations can be consistently and meaningfully distinguished from research or development, manufacturers, in particular, may have difficulty tracking the distinctions in light of real-world operations and everyday usage.

Impact on Immediate Family Members

The ACA mandates that manufacturers and GPOs report on investment and ownership interests held by physicians and their immediate family members and transfers of value to such individuals. CMS proposes the following definitions for 'immediate family member:'

Spouse;

Natural or adoptive parent, child, or sibling;

Step-parent, step-child, step-brother, or step-sister;

Father-, mother-, daughter-, son-, brother-, or sister-in-law;

Grandparent or grandchild; and/or

Spouse of grandparent or grandchild.

Notably, the Proposed Rule would not include domestic or same-sex partners and does not specify whether same-sex couples married under state law would qualify as "spouses" for the purpose of this federal law. In any case, the inclusion of such a broad net of immediate family members will place a significant and complicated responsibility on manufacturers and GPOs to identify investors, and owners who qualify as immediate family members of physicians. This will require information-capture mechanisms beyond those which are required for typical fraud and abuse compliance. In addition, the immediate family members, who may themselves not be physicians and may have no knowledge of the Proposed Rule, may be surprised to find their otherwise private financial relationships a matter of public record.

The Proposed Rule is a genuine attempt to implement the Sunshine provisions in a balanced way. However, some of its proposals may result in an expansion of the key provisions of the ACA and should be closely scrutinized by life sciences companies. The additional expense associated with implementing the law will be great. The bigger impact, however, may be to the life sciences business model—once the people who invest in, work with, and work for the industry begin to feel its impact.

Glenn M. Engelmann is Senior Counsel at McDermott, Will & Emery. He can be reached at

Jennifer S. Geetter is a Partner at McDermott, Will & Emery. She can be reached at




Benefit from industry updates and case studies related to this article

CBI's Bio/Pharma Forum on Regulatory Policy

Where Regulatory Professionals Examine FDA Updates, Current and Pending Legislation and the Impact on Business

May 7-8, 2012
Washington, District of Columbia


ADVERTISEMENT

blog comments powered by Disqus
UPCOMING CONFERENCES

Serialization Summit
San Diego, CA
Feb. 27-28, 2014



Advances in Aseptic Processing
San Diego, CA
Mar. 10-12, 2014



ClinTech 2014
Cambridge, MA
Mar. 11-13 2014


Investigator-Initiated and
Sponsored Research (IISR)

Philadelphia, PA
Mar. 19-20 2014

See All Conferences >>

Source: Pharmaceutical Executive,
Click here