Compliance Requirements for the Pharmaceutical Industry

and Impact on Marketing Practices

Timothy M. Cunniff, Pharm.D.Vice President, Global Regulatory Affairs

Lundbeck Inc.May 2009

Disclosure Statement Employee of Lundbeck Inc.

(formerly Ovation Pharmaceuticals)

Objectives Describe the various legal, regulatory

and industry compliance standards Discuss requirements applicable to

industry interaction with healthcare professionals

Summarize recent revisions to the PhRMA code and impact on pharmaceutical marketing practices

Legal Basis for Industry Compliance Programs Federal and State Laws

Food, Drug and Cosmetic Act (21 U.S.C. 301 et. seq.) Anti-Kickback Statute (42 U.S.C. & 1320a-7b[b]) Civil False Claims Act (31 U.S.C. 3729) Fraud and Abuse Investigations and Prosecutions General Criminal Fraud Statutes Whistle Blower Act (31 U.S.C. 3730)

HHS Guidance OIG FDA

Industry and Medical Organization Recommendations PhRMA AMA

Recent Industry Settlements for Compliance Violations

Bayer: $14MM TAP: $875MM Abbott: $600MM Schering–Plough: $435MM Pfizer: $430MM Serono: $704MM Eli Lilly: $1.42BB

Significant Compliance Standards for Industry

July 2002: PhRMA Code on Interaction with Healthcare Professionals

April 2003: OIG Compliance Program guidance July 2005: California Law

Required industry to adopt policies that ensure compliance with OIG and PhRMA Code guidelines

January 2009: Revised PhRMA Code

OIG Compliance Program Guidance

Stresses the importance of the development and implementation of a functional compliance program

Cautions the pharmaceutical industry in three high risk areas

Identifies exemptions or “safe harbors” for federal and state healthcare programs

Utilized to decrease the risk of fraud and abuse in federally funded health care programs

OIG Compliance Program Guidance Three Potential Areas of

Risk Accurate price and sales reporting to

government agencies

Kickbacks and other illegal remunerations

Drug samples

OIG: Potential Area of RiskAccurate Price and Sales

Reporting Accounting for price reductions, cash

discounts, rebates, coupons, etc. for purchasers

Data submitted used to calculate AMWP and Best Price

Impacts reimbursement rates under Medicare and Medicaid

Violations covered by False Claims Act Prohibits knowingly presenting to the federal

government a false or fraudulent claim, or false record, to get a payment or false claim approved

Civil monetary penalties

OIG: Potential Area of RiskKickbacks and Other Illegal

Remuneration

Anti-kickback Statute Criminal prohibition against payments

made purposefully to induce or reward the referral or generation of federal health care business

Identifying potential risk behavior Determine remunerative relationships Is any one purpose of remuneration

unlawful?

OIG: Kickbacks & Other Illegal

Remuneration Relationships of Concern

Manufacturer-Purchasers Including those using formularies and their

agents

Manufacturer-Physician Including persons and entities in a position

to make or influence referrals

Manufacturer-Sales Agent

OIG: Relationships of Concern

Manufacturer-Purchaser Relationship

Discounts Formulary Support Activities Average Wholesale Price

Pharmaceutical companies have ability to control the AWP and indirectly influence customer’s profit

Wrongfully manipulating AWP violates anti-kickback statue

OIG: Relationships of Concern

Manufacturer-Physician Relationship

Consulting

Educational Grants

Research Funding

Business courtesies and other gratuities

OIG: Manufacturer-Physician Relationship Consulting

Signed agreement for consulting services Fair market value Services pre-specified contractually

Legitimate need Service is actually provided

OIG: Manufacturer-Physician Relationship

Educational Grants

Unrestricted grant for a defined program

Independent from sales & marketing Defined criteria Awarded to conference sponsor Industry cannot select speakers or

control the agenda

OIG: Manufacturer-Physician Relationship

Research Funding

Independent from sales & marketing

Fair market value Legitimate and necessary No “seeding” trials allowed Clinical Officer conducts review of

research

OIG: Manufacturer-Physician Relationship

Business Courtesies/Other Gratuities

Determine and publicly document annual allotted amount

Meals Modest Industry representative present Venue must be conducive for education Entertainment prohibited No Guests

Gifts/Reminder Items Educational purposes only and should benefit

patients

OIG: Kickbacks & Other Illegal

Remuneration Manufacturer-Sales Agent Relationship

Compensation and Bonuses Practices Expense accounts Regular PhRMA Code training Audit and review sales force activities

OIG: Potential Area of Risk

Drug Samples Selling drug samples or submitting

claims for drug samples is unlawful Prescription Drug Marketing Act of 1987

(PDMA) False Claims Act Anti-kickback statue

Label drug samples appropriately Reconcile and account for drug

sample distribution

PhRMA CODE Originally issued in 2002 and revised in

2008 (effective January 1, 2009) Addresses industry’s relationships with

healthcare professionals with respect to marketed products and pre-launch activities

Ethical standards of conduct Compliance with legal requirements

Goal is to benefit patients and enhance the practice of medicine

“Voluntary” for PhRMA member companies (not law)

PhRMA Code

Informational Presentations

2002 Version Occasional meals

may be offered Modest Conducive venue Provide educational

value Company

representative present No guests No entertainment

2009 Revision Outside meals with

sales representatives not allowed

PhRMA CodeThird Party Educational Meetings2002 Version Financial support for

CME allowed Funding via program

sponsor Cannot control

content, faculty, materials or venue

Cannot reimburse travel for attendees

Can provide meals and receptions

2009 Revision Follow ACCME

standards or other entity that may accredit CME

Sales & Marketing cannot make grants

Industry cannot provide meals or receptions at CME events

PhRMA Code

Consultants2002 Version Reasonable

compensation for services and reimbursement for travel expenses

Written contract Legitimate need Criteria for selection Number of

consultants Venue is appropriate Social events

subordinate

2009 Revision No changes

PhRMA Code

Speaker Training Meetings2002 Version Reasonable compensation

and reimbursement for travel allowed

Must receive extensive training on product AND on compliance with FDA regulatory requirements

2009 Revision Firms to set a maximum

amount per speaker Number of speakers and

number of engagements per speaker should be limited

Training should not be at “resort” settings

Must draw distinction between speaker’s programs and CME

Healthcare professionals should disclose relationship away form podium and for at least 2 years beyond termination of relationship

PhRMA CodeEducational & Practice Related Items

2002 Version Items that primarily

benefit patients allowed

Not substantial value ($100 or less)

Occasional basis only Practice-related

items allowed Minimal value Must not provide a

personal benefit

2009 Revision Items must primarily

benefit the education of patients or healthcare providers

Not substantial value Occasional basis only

Practice-related items not allowed What, No Pens!

PhRMA Code

Potential Future Revisions

Revision of Direct-to-Consumer advertising principles DTC principles first described in 2005 Proposed revisions may cite standards

developed by outside groups (i.e., AMA)

Congressional pressure by Reps. John Dingell (D-Mich) and Bart Stupak (D-Mich) is driving reform

PhRMA Code

Impact of 2009 Revisions Corporate compliance is paramount

SOPs- Hundreds! Multiple approvals/Committee reviews Training Auditing Disciplinary action

Individuals Firms (i.e., ABPI suspension of Roche)

Many firms likely to scale back on marketing Global economic crisis Massive number of patent expirations PhRMA code provides some assurance that firms

aren’t unilaterally reducing marketing spend

State Regulation of Industry Marketing Practice- One Example Massachusetts

Code of Conduct effective July 1, 2009 Each firm must adopt a marketing Code of Conduct Submit description of training program for

appropriate employees to document knowledge of: Code of Conduct General science Product-specific information

Bans practice-related items (i.e., pens) Certify compliance with state law Adopt and submit polices for investigating non-

compliance

Lundbeck’s Corporate Compliance Program Written code of conduct and

ethical principles Certify compliance with PhRMA Code

on an annual basis (CCO and CEO) Focus on specific “risk” areas Effective training and education Established lines of communication

and processes to respond to issues

Lundbeck’s Corporate Compliance Program (cont.) Oversight and monitoring

Primary: Compliance Officer Secondary: Compliance Committee Tertiary: President and CEO Final: Board of Directors

Enforcement of standards through progressive discipline

Internal audit functions

Lundbeck Compliance Policies Lundbeck has well over 100 substantive

polices and procedures including: Meals, gifts and entertainment Consulting agreements for healthcare

providers Medical education grants Commercial program support Advertising and Promotion Dissemination of published literature Prescription drug marketing and sampling Medical Science Liaison policy Medical Information response policy

Lundbeck Compliance Committees Promotional Advertising Review

Committee Legal/Compliance, Regulatory, Medical,

Marketing Medical Grant Review Committee

Legal/Compliance, Regulatory, Medical, Finance, Marketing

Corporate Compliance Committee Legal. Regulatory, Clinical, Medical, Human

Resources, Finance, Marketing

Questions?