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The pharmaceutical industry devotes more of its promotional budget to samples than anything else, unless you count the army of sales representatives that delivers them. This year, the average wholesale price of samples passed out to doctors will approach $15 billion-roughly twice the value of samples five years ago. And although few in the industry have come to grips with it, the federal regulations governing this enormous investment have undergone drastic changes.
The pharmaceutical industry devotes more of its promotional budget to samples than anything else, unless you count the army of sales representatives that delivers them. This year, the average wholesale price of samples passed out to doctors will approach $15 billion—roughly twice the value of samples five years ago. And although few in the industry have come to grips with it, the federal regulations governing this enormous investment have undergone drastic changes.
Instead of just accounting for which physicians receive how many samples, companies must now be ready to explain why they give samples to specific doctors. In other words, firms must now deal with two regulations: one that requires pharmaceutical companies to keep good records, and a second that can force them to justify their intentions.
Many pharmaceutical companies have missed the magnitude of this change, perhaps because the old, familiar law governing sampling remains in effect. The Prescription Drug Marketing Act (PDMA), which was enacted in 1988, is still on the books. However, Congress has created a new level of PDMA enforcement, in addition to FDA, which monitors companies' sample-accountability programs to certify which doctors receive how many samples.
In 2003, OIG began looking at how companies distribute samples to doctors who receive state or federal reimbursements, a group that includes most doctors. Backed up by the Department of Justice, OIG released guidelines to safeguard the Medicare and Medicaid budgets. OIG's view of PDMA goes well beyond counting drug samples. OIG investigates fraud, and has fined pharma companies $2 billion in the past two years.
Ironically, many of the standard practices that conform to FDA's reading of PDMA will run afoul of OIG enforcement unless companies can demonstrate that they avoid sampling practices that OIG deems fraudulent. To use OIG's terms, companies must show that they refrain from using samples to commit inducement, enticement, kickbacks, over-utilization, and off-label uses.
This is harder than it sounds. What OIG calls enticement, for example, looks very much like good selling. Consider this pitch: "You're an allergist, Dr. Jones, and I understand that you are buying the antihistamine X and starting patients off on that medication at your own expense. If I were to give you 1,000 samples, enough for every single patient in your practice, you wouldn't have to buy X anymore, and you'd see the advantages of my product over the competitor."
Most sales managers would approve that strategy and, according to FDA, it is perfectly acceptable. The samples were counted. Dr. Jones signed for them. The correct disclosure and conditional statements were on the form. But according to OIG, the sales pitch is absolutely inappropriate. The rep is enticing Dr. Jones with free samples. By giving him samples, the company offsets Dr. Jones's expenses, subsidizes his practice, and goes beyond the generally accepted therapeutic rationale for sampling.
OIG is poised to question other long-standing sampling practices that pass FDA muster. To anticipate OIG criticisms, companies must strive for more than just transparent sample accounting. Instead, companies must see sampling as a marketing tool that aims to achieve particular outcomes. They must be prepared to say why, in each instance, they sampled in a particular way. At present, many companies will be defenseless against OIG investigations, simply because sales departments lack the data to adjust their sampling practices.
For example, OIG may ask why pharmaceutical companies regularly allot huge numbers of samples to physicians who do very little prescribing. Many of these samples may be going to senior citizens or indigent patients. FDA accepts this practice, as long as the samples are accounted for, but OIG is likely to call it overutilization.
Consider Dr. Ryan, a hypothetical physician who practices in a poor neighborhood. Pharma ABC regularly gives 1,000 samples to Dr. Ryan, even though he doesn't write many prescriptions. Instead, he's giving 90 percent of his samples to patients with no health coverage and little income. OIG could say that by giving large numbers of samples to Dr. Ryan, Pharma ABC is encouraging him to provide samples to indigent patients. Why does OIG care about that? Such patients usually stay on indigent programs for 90 to 120 days. Then, after they have begun to respond to medication, they go on Medicaid or Medicare, so the government is stuck paying for expensive single-source medication. By "overutilizing" samples at Dr. Ryan's practice, Pharma ABC raised a red flag for the government, and opened itself to an OIG investigation.
The company has better options. If it coordinated its sampling policies with the patient-assistance program, for example, it could avoid trouble with OIG and save some money as well. If Pharma ABC shared patient-assistance data with the sales representative—which few, if any, pharmaceutical companies do—the rep might discover that Dr. Ryan has never accessed the program. And why should he? Sales reps are giving him so many samples that he doesn't need a program designed for indigent people.
In this case, the company needs the patient-assistance program to keep OIG at bay. Instead of loading up Dr. Ryan with samples, his sales rep could help him enroll in the patient-assistance program, get him stock bottles of medication for free (which cost the company about 50 percent of what samples cost) and take a tax deduction on the donation. The doctor receives fewer samples and probably writes more prescriptions.
Why don't companies do this? Usually because they don't know that they can. The biggest challenge facing most companies that want to change is their own internal organizations. Data silos prevent global data integration, a critical success factor to achieving OIG compliance.
Originally, when companies needed to comply with PDMA, they created a department just for PDMA. That department gathered and warehoused information, inevitably becoming a data silo. Patient-assistance programs were insulated even more. Because companies feared that these patient-assistance programs might be viewed as a sales-leveraging tool, they went out of their way to physically separate them from sales and marketing departments. Some even established independent foundations to administer the patient-assistance programs. The intent was the same in each case: Patient-assistance data was never to be shared with sales or marketing departments.
These good intentions went so far that they now handicap companies' efforts to respond to OIG regulation. Companies maintain separate data silos that prevent marketers and sales reps from making good decisions about how to sample doctors. The silos may have served a purpose once, but they are liabilities now.
No HIPAA violations result from telling a rep whether a physician has accessed the program, or how many times. Reps who help physicians enroll are not offering a quid pro quo. Nor are they asking for specific patient information. They need information to serve the doctors' needs, and to help the company meet this new wave of regulation. Often representatives get into the bad habit of distributing samples more or less evenly to all practices. They need to tailor the number of samples to account for practice size, demographics, and prescribing behavior.
To be ready to respond to an OIG investigation, the data silos must be broken down, so the data can be integrated into a whole-systems approach to sampling physicians. Data on demographics and prescribing, for instance, which are almost always held in separate departments, need to be combined. In fact, companies will save millions of dollars if they do this.
Ironically, by embedding OIG compliance into marketing initiatives, pharma companies will help derive more accurate ROI per practitioner and better control of overall selling expenses. Five years ago the industry had about 45,000 reps. Today, the number exceeds 100,000. The population of physicians, however, has grown by just three percent. When I sold in the field in 1974, I got eight to 10 minutes with each physician. Today, the average call is 60 to 90 seconds. Samples, which were once a crucial, tactile part of the sales detail, have become expensive door openers.
Samples remain the most valued commodity offered by sales reps. But offering help to patients may be equally productive. Pitching it is worth a try: "Look, I've been calling on you for two years. I've given you thousands of samples. I've noticed you've never accessed our patient-assistance program. Are you aware we have one? How many indigent patients do you treat?"
What are the likely benefits?
That's just one pitch for one case study. Other sampling scenarios will also attract the attention of OIG. In many cases, responding to the challenge with integrated data and a whole-systems approach will enhance the promotional efforts of a company while achieving compliance under OIG.
Steve Tarnoff is executive vice president and managing director at The Franklin Group. He can be reached at email@example.com