Implementing the OIG Final Guidance for Pharma

1
Implementing the OIG Final Guidance for Pharma
An audioconference co-sponsored by FDAnews and
the Health Care Compliance Association
Joseph W. Metro, J.D., Partner, Reed Smith.
Anthony Farino, CPA, Assurance and Business
Advisory Services Partner, PricewaterhouseCoopers.
L. Stephan Vincze, J.D., LL.M., CHC, Ethics
Compliance Officer TAP Pharmaceutical Products
Inc.
Wednesday, June 4, 2003 100-230 p.m. ET
2
Overview of the Presentations

• Legal Perspective
• Areas for Evaluating Existing Practices Top
  Focus Areas
• Developing Auditable Standards and Procedures
• CPG Risk Areas
• Accounting Perspective -- Developing Control
  Processes
• The Final HHS OIG Guidance Key Points
• Overall Compliance Program Considerations
• Risk Areas Specific Control Considerations
• Final Thoughts/Questions

3
Overview of the Presentations (contd)

• Ethics Compliance Officer Perspective Putting
  Theory Into Practice Communicating with the MTV
  Generation and Making Compliance Training
  Interesting, Fun and Effective
• Know Your Audience
• Have the Right Resources/Team
• Use Effective Marketing to Brand YOUR Product
• Use Relevant Case Studies
• Use Multiple Media to Communicate/Train
• Dare to Laugh and Poke Fun at Yourself
• Create Positive Incentives

4
Legal Perspective TOP FOCUS AREAS

• Contracting
• Consulting, Service, and Grant Relationships
• Business Courtesies

5
Legal Perspective Top Focus Areas Contracting

• Relationship between pricing and non-pricing
  relationships
• Bundled pricing
• PBM/MCO Relationships
• GPO administrative fees
• Rebate transparency
• Formulary support
• Retreat on market share rebates

6
Legal Perspective Top Focus Areas Consulting,
Service, Grant Relationships

• Process separation
• Arrangements for promotional services
• Specific arrangements
• E-detailing
• Preceptorships

7
Legal Perspective -- Top Focus Areas Business
Courtesies

• PhRMA Code as evidentiary standard rather than
  compliance floor
• PhRMA Code v. Advamed Code
• State regulation of marketing practices

8
Legal Perspective -- Developing Auditable
Compliance Standards

• Take inventory of practices
• Process controls
• Systems and data
• Skill sets financial v. compliance audits

9
Legal Perspective -- CPG Risk Areas

• Integrity of data used to establish pricing under
  government programs
• Kickbacks and other illegal remuneration
• Drug samples

10
Accounting Perspective -- The Final HHS OIG
Guidance Key Points

• Provides a more detailed discussion of risk areas
  and factors to consider in analyzing sales
  marketing activities
• Retains focus on sales marketing activities
• PhRMA code compliance should reduce risk of fraud
  and abuse
• Softened language on contractual relationships
  including dropping of indirect switching and
  negative reference to market share arrangements,
  BUT heightened focus on contracting/formulary
  arrangements remains
• Retains structural language related to placement
  of CO

11
Accounting Perspective -- The Final HHS OIG
Guidance Key Points (Contd)

• Recommends separation of education and research
  funding from sales marketing function
• Continues to emphasize need to address compliance
  by third party agents and contractors
• Heavy emphasis on price reporting, including AWP
  and BP, with little additional insight on how to
  comply
• Guidance intended to apply to broader industry
  including medical device and infant formula
  manufacturers

12
Accounting Perspective -- Overall Compliance
Program Considerations

• Manufacturers should quickly ask themselves
• Do existing written policies and procedures
  reflect the underlying objectives of the OIGs
  recommendations in the guidance
• Do actual practices conform to company policies
  and procedures as adapted for the new guidance
• Guidance retains focus on policy, procedure and
  control development in risk areas
• Compliance programs should tie directly to risk
  areas
• Training on policies/procedures
• Monitoring and auditing
• Internal communication processes and procedures
  for responding

13
Accounting Perspective -- Overall Compliance
Program Considerations (contd)

• Final guidance closely aligns with original draft
  companies should not need to start anew in
  structuring compliance programs
• To the extent policies have been patterned on the
  PhRMA Code the impact in certain key areas should
  be less significant ( Gifts, Business Courtesies)
• Business practices change compliance program
  must keep pace
• Strong interaction with sales marketing
  organizations
• New tactics present new risks - particularly
  given Guidances one purpose language around
  kickbacks

14
Accounting Perspective -- Risk Areas Specific
Control Considerations

• AntiKickback Risk
• The OIGs two pronged test
• Focus on arrangements with greatest risk of
  implicating potential abuse
• Potential to interfere with clinical decisions,
  impact integrity of formulary process,
  information exchange complete and accurate
• Could the practice lead to increased costs to
  federal health care programs ?
• Would the Medicaid rebate program be implicated
  by the program ?
• Evaluation of existing practices and policies is
  warranted
• Learning and education programs which pay
  physicians for time
• Pay for detail programs ( consulting fees with no
  substantive basis paperwork arrangements,
  listening to marketing research)
• Training programs and materials should be updated

15
Accounting Perspective -- Risk Areas Specific
Control Considerations (Contd)

• Integrity of Data Used for Government Payment
  Risk
• Raises the bar on Medicaid Rebate Program
  compliance
• Focuses on AWP reporting processes and controls
• Accounting for discounts/ assessing activities as
  possible discounts is more important than ever
• Evaluation of key policies and processes around
• Information fed to government price reporting
  processes
• Assessing sales marketing activities for
  discount implications
• Define and formalize processes for reporting data
  used to set AWP

16
Accounting Perspective -- Risk Areas Specific
Control Considerations (Contd)

• Education and Research Funding Risk
• Separate grant-making functions from sales
  marketing operations consider independent
  approval process
• Establish objective criteria for making grants
  and embed in policy and related control documents
• If its educational consider independence from
  content this does not mean unrestricted
• Scrutinize research related activities
• Results transmitted to RD organization
• If its science involve the scientists
• Establish criteria for assessing need
• Establish tight process for post marketing
  activities
• Document arrangements in a contract
• Monitor and audit these activities regularly

17
Accounting Perspective -- Risk Areas Specific
Control Considerations (Contd)

• Customer Contracting Risk
• Particular focus on formulary related activities
• Managed Care contracting practices and templates
  should be revisited traditionally well
  controlled area
• Market share arrangements appear to be acceptable
  but should be reviewed on context of OIG guidance
  on formulary activities
• Language related to payments based on, or
  otherwise related to the PBM customers purchases
  suggests careful assessment of existing contract
  language is warranted
• Understand interplay of formulary requirements in
  contracting strategies

18
Accounting Perspective -- Risk Areas Specific
Control Considerations (Contd)

• Consulting and Advisory Payments Risk
• Focus on fair market value and presumes bona fide
  activities with small number of physicians
• Policies and procedures considerations
• Well defined criteria/ deliverables
• Objective process/ policies to support FMV
• Written arrangements
• Support for value received prior to payment

19
Accounting Perspective -- Risk Areas Specific
Control Considerations (Contd)

• Agents or Contractors Risk
• Third party involvement in sales marketing
  activities is growing
• Guidance would seem to imply that manufacturer
  policies should be operative
• Due diligence when selecting business partners
• Nature of control processes over activities (
  CME, speaker arrangements, learning and education
  programs)
• Ongoing reporting requirements to allow
  monitoring
• Ongoing audit procedures to assess effectiveness
  of relationship and related controls

20
Accounting Perspective Final Thoughts/Questions

• No substitute for written policies and procedures
• Detailed, with appropriate examples
• Appropriate communication and training venues
  time is of the essence
• If you believe the HHS OIG Guidance raises the
  bar then ongoing auditing is even more important
  build your program now
• The fundamentals of an effective compliance
  program remain unchanged
• The fundamentals of manufacturer/ customer
  relationships may be changing

21
Ethics Compliance Officer Perspective Putting
Theory Into Practice

• Know Your Audience
• Industry Sector
• Internal
• External

22
Ethics Compliance Officer Perspective Putting
Theory Into Practice

• Know Your Audience
• Industry Sector
• Pharma
• -- Sales Marketing
• -- Corporate Office (RD, Finance, QA, HR, Legal,
  MIS, etc.)
• Hospitals, Health Systems, Physician Practices,
  Managed Care Organizations, etc.

23
Ethics Compliance Officer Perspective Putting
Theory Into Practice

• Know Your Audience
• Internal
• Board
• Executive Management
• Functional Areas
• Senior Management
• Mid-Level Management
• Employees
• Stakeholders

24
Ethics Compliance Officer Perspective Putting
Theory Into Practice

• Know Your Audience
• External
• Government
• HHS
• OIG
• FDA
• DOJ
• Congress
• Media
• Public

25
Ethics Compliance Officer Perspective Putting
Theory Into Practice (Contd)

• Have the Right Resources/Team
• Resources
• Senior Management Support
• Time
• Money
• Technology/Systems
• People
• People
• Compliment your skill sets
• Emphasize communication skills
• Emphasize credibility
• Seek diversity

26
Ethics Compliance Officer Perspective Putting
Theory Into Practice (Contd)

• Use Effective Marketing Techniques to Brand YOUR
  Product
• Create a theme, recognizable brand, logo
• Use visual and vocal branding through color,
  sound
• Pay attention to details
• Font type, size and color
• Use of punctuation
• Apply your brand to all of your materials
• Code of Conduct
• Training Materials
• PowerPoint Presentations
• Displays and Posters

27
Ethics Compliance Officer Perspective Putting
Theory Into Practice (Contd)

• Use Relevant Case Studies
• Tailor training to real-world issues that your
  audience experiences
• Makes it real, more memorable and more effective
• Use role plays or some form of interactive
  participation
• Video vignettes
• Case study teams in live training
• Interactive computer questions
• Inject humor when possible but strike careful
  balance not to go over the top

28
Ethics Compliance Officer Perspective Putting
Theory Into Practice (Contd)

• Use Multiple Media to Communicate/Train
• Redundancy of message can be good
• Resources allowing, use
• Live training
• Computer-based training
• Voice-mail
• E-mail
• Written materials
• Web-based materials
• Audio video tapes
• Do NOT rely on any ONE medium.
• Seek to compliment and enhance different forms of
  training.

29
Ethics Compliance Officer Perspective Putting
Theory Into Practice (Contd)

• Dare to Laugh and Poke Fun at Yourself
• Be yourself
• Self-deprecating humor works
• Use seriousness and perceived negativity of
  subject to lighten tension.
• Recognize up front that this stuff can be dry and
  boring
• Openly express intent NOT to demonize or play
  Gotcha!
• Focus on service-oriented approach, partnership
• Openly seek to have fun and laugh at yourselves
• Dont overdo it strike a balance

30
Ethics Compliance Officer Perspective Putting
Theory Into Practice (Contd)

• Create Positive Incentives
• Add ethics compliance performance criteria to
  performance evaluations where achieving goals
  lead to financial rewards
• Create team contests involving functional areas,
  divisions etc. where winners will be rewarded

31
Your Presenters

• Joseph W. Metro, J.D.,
• Partner, Reed Smith
• jmetro_at_reedsmith.com
• Anthony Farino, CPA, Assurance and Business
  Advisory Services Partner, PricewaterhouseCoopers
• anthony.l.farino_at_pwcglobal.com
• L. Stephan Vincze, J.D., LL.M., CHC,
• Ethics Compliance Officer
• TAP Pharmaceutical Products Inc.
• steve.vincze_at_tap.com