Pharmaceutical Compliance Program Elements

1 Pharmaceutical Compliance Program ElementsPharmaceutical Compliance ForumSeptember 15, 2009 Bridgewater, NJJohn T. BentivoglioSkadden, ArpsMatthew D AmbrosioProstrakan, of Discussion Sentencing Guidelines HHS OIG Guidance DOJ Guidance on Compliance programs Advanced Pharma Compliance Issues DiscussionA Brief History of Corporate Federal Sentencing Guidelines1996 CaremarkDecision2001 Enron Collapse &TAP Settlement2002 PhRMACode&SOX2004 Amended SentencingGuidelines1997 OIGM odel ComplianceGuidelines(Clinical Labs)2003 OIGP harmaGuidelines&DOJ sThompsonMemoCompliance Time Line2005 Corporate Sentencing Guidelines provide reduction in fines for effective Compliance programs .

2 Seven Elements a cause of action against board members for failing to take minimal steps to achieve legal Compliance now known as a Caremark Claim .Guidelines for US Attorneys in charging on real v. paper is on creating a culture of Compliance Compliance Law2008/ 2009 New PharmaCIAs&New Sentencing Commission Guidelines Sentencing guidelines for individuals and corporations mandated by Sentencing Reform Act of 1984 Chapter 8 contains the Organizational Guidelines First issued in 1987 Included definition of an effective Compliance Program for purposes of sentencing (Section Effective Compliance and Ethics Program )

3 Set forth seven Elements of an effective Compliance Program Significant changes in 2004 Added ethics/cultural component Added periodic risk assessment (effectively an eight element) Sentencing Commission Guidelines 2004 Amendments: Broadens the goal of an effective Compliance and ethics Program to include promoting a culture of Compliance rather than just deterring wrongdoing. The carrot and stick approach. Establish standards & procedures to prevent & detect criminal conduct. Imposes increased responsibilities for Compliance on directors, officers, and other senior management Program must have adequate resources and appropriate authority.

4 Training at all levels now a requirement. Maintain and publicize a reporting system. Risk Assessment required to design, implement, modify seven (1) The organization should develop standards and procedures to prevent and detect criminal conduct.(2) The organization s governing authority shall be knowledgeable and exercise reasonable oversight of the Program and high-level person shall be assigned responsibility for Compliance Program implementation.(3) The organization shall use reasonable efforts not to include within the substantial authority personnel the organization knew or should have known has engaged in illegal activities or other inappropriate conduct.

5 (4) The organization should communicate and train employees on Compliance issues Effective Compliance Program Defined7(5) The organization should monitor and audit to detect criminal conduct; periodically evaluate Program effectiveness, and have an internal system to report misconduct(6) Compliance rules should be promoted and enforced consistently through (A) incentives; and (B) disciplinary measures for engaging in criminal conduct and for failing to take reasonable steps to prevent or detect criminal conduct.(7) Where misconduct is detected, organization shall respond appropriately, including making changes to Compliance Program .

6 The organization shall periodically assess the risk of criminal conduct and shall take appropriate steps to design, implement, or modify each requirement set forth in subsection (b) to reduce the risk of criminal conduct identified through this process. [Added in 2004] Effective Compliance Program (cont d)8 Pharma Guidance: HHS OIGHHS OIG: Roles and Activities Civil and criminal investigations involving Federal HCPs Negotiation of Corporate Integrity Agreements Anti-kickback regulations, safe harbors, and advisory opinions Compliance Program Guidances for industry sectors Program oversight & evaluation 9 HHS OIG.

7 Activities of Interest to Pharma Companies Compliance Program Guidance for Pharmaceutical Manufacturers Anti-Kickback Regulations, Safe Harbor and Guidance Corporate Integrity Agreements (CIAs) Other HHS OIG Guidance Activities10 HHS OIG Compliance Program Guidance Issued May 2003 Based on seven Elements framework in USSC Guidelines Guidance notes relevance to device manufacturers Follows guidance for hospitals, physicians, DME suppliers, labs, OIG Guidance (cont d)12 HHS OIG Guidance for Pharma B. Application of Compliance Program Guidance Given the wide diversity within the Pharmaceutical industry, there is no single best Pharmaceutical manufacturer Compliance Program .

8 The OIG recognizes the complexities of this industry and the differences among industry members. Some Pharmaceutical manufacturers are small and may have limited resources to devote to Compliance measures. Conversely, other companies are well-established, large multi-national corporations with a widely dispersed work force. Some companies may have well-developed Compliance programs already in place; others only now may be initiating such efforts. The OIG also recognizes that Pharmaceutical manufacturers are subject to extensive regulatory requirements in addition to fraud and abuse-related issues and that many Pharmaceutical manufacturers have addressed these obligations through Compliance programs .

9 Accordingly, the OIG strongly encourages Pharmaceutical manufactures to develop and implement or refine (as necessary) Compliance Elements that uniquely address the areas of potential problems, common concern, or high risk that apply to their own companies (or, as applicable, to the operations of their companies). 13 Pharma Guidance (cont d) For example, although they are not exhaustive of all potential risk areas, the OIG has identified three major potential risk areas for Pharmaceutical manufacturers: (1) Integrity of data used by state and federal governments to establish payment; (2) kickbacks and other illegal remuneration; and (3) Compliance with laws regulating drug samples.

10 The risk areas are discussed in greater detail in section below. The Compliance measures adopted by a Pharmaceutical manufacturer should be tailored to fit the unique environment of the company (including its organizational structure, operations and resources, as well as prior enforcement experience). In short, the OIG recommends that each Pharmaceutical manufacturer should adapt the objectives and principles underlying the measures outlined in this guidance to its own particular Department of Justice (DOJ) Department of Justice (DOJ)Thompson / McNulty MemorandumThompson / McNulty Memorandum Principles of Federal Prosecution Corporations: Outlines the factors considered by DOJ when deciding whether to prosecute a corporation for actions taken by employees.