Healthcare Reform, Part I – The Principles of a Risk-based Compliance Program

A risk-based compliance program is a program that is built on the effective and meaningful evaluation and mitigation of risk. The establishment and maintenance of a risk-based compliance program starts with risk planning and identification. Through continued evaluation of business risk, on-going auditing and monitoring, the end result is often the need to develop policies and procedures to manage and/or mitigate these identified risk areas.

Policies and procedures are at the core of maintaining compliance within a company. Outlining a company’s interpretation and implementation of respective regulation, statute, and guidance, policies and procedures are the communication tool used to articulate the company’s commitment to, and mechanisms for, compliance. Ensuring consistent application and execution of process, policies, and procedures further assists with the evaluation of risk. By building and embedding preventative controls within business processes, and building detective controls to assess process execution, companies can proactively identify and respond to risk.

An effective risk-based compliance program will result in the identification and incorporation of updates, enhancements, and clarifications to policies and procedures on an on-going basis. Oftentimes, development and revision of policies and procedures becomes an activity associated with mitigating and corrective actions that have transpired during the execution of an assessment, audit, or monitoring program. Thereby, policies and procedures are not just a core principle to maintaining compliance, but a tool through which successful and routine risk evaluation and mitigation can also be achieved.

HEALTHCARE REFORM IMPLICATIONS FOR COMPLIANCE PROGRAMS
With the signing of the Healthcare Reform Bill (H.R. 3590), the pharmaceutical, biological, and device industries will, among other things, realize increased compliance and transparency requirements.  As suspected, promulgations with a similar intent to the previously introduced “Sunshine Act” legislation are outlined in the bill. Title VI, Section 6002 of the bill requires that pharmaceutical, device, biological, and medical supply manufacturers  report gifts and other transfers of value made to covered entities.  The Secretary of Health and Human Services is responsible for determining the process by which information will be submitted, and must promulgate procedures by October 1, 2011. Data gathering requirements will initiate with interactions as of January 1, 2010, with reporting requirements going into effect as of March 31, 2013. Thereafter the information will be required to be reported annually.

To ensure that companies are appropriately prepared for this requirement, and have the information necessary to meet reporting requirements, manufacturers should consider the following as reportable payments and track these transactions accordingly:

• Cash or cash equivalent
• In-kind items or services
• Stock, stock option, ownership dividend, profit, return on investment, or any other form of payment or other transfer of value

The nature of these transactions can take on many forms, and therefore manufacturers will need the ability to track spending across multiple areas.

As outlined by the law, the areas of consideration include consulting fees; compensation for services other than consulting; honoraria; gift; entertainment; food; travel (including the specified destinations); education; research; charitable contribution; royalty or license; current or prospective ownership or investment interest; direct compensation for serving as faculty or as a speaker for a medical education program; grant; or any other nature of the payment or other transfer of value (as defined by the Secretary).

In addition to transparency enhancements in spend reporting, manufacturers must report physicians with ownership or investment interests in their companies. Additionally, provision of sample drug distribution information to the Secretary will become a requirement rather than be a necessary component, if requested. These reporting requirements will require the name, address, professional designation, and signature of the practitioner making the request for samples be provided by April 1 of each year, starting in 2012.

With legislators’ heightened focus for increasing transparency and accountability with manufacturer’s and their relationships among healthcare professionals, this article provides considerations for enhancing procedural controls and integration of the new transparency requirements.   The recommendations contained within this article are with respect to pre-launch activities and post-launch marketed products.  Although some considerations may apply to research activities, the intent of the article is not to specifically address research-related activities.

DOCUMENTING COMPLIANCE IN INTERACTIONS WITH HEALTHCARE PROFESSIONALS

PhRMA’s Code on Interactions with Healthcare Professionals outlines guidance for pharmaceutical manufacturers on appropriate interactions with Healthcare Professionals (HCPs). It provides guidance in many areas that are considered key components of Commercial Compliance. While developed as guidance by PhRMA, the adherence to the PhRMA code is required by law in the state of California and the District of Columbia.

A pharmaceutical manufacturer’s primary objective for interacting with healthcare professionals is to ensure that patients have access to products, and that these products are utilized appropriately to maximize patient benefit.  In this way, pharmaceutical manufacturers must ensure that they are providing accurate information to the healthcare community and building customer relationships in an ethical manner.  There are key activities that pharmaceutical manufacturers engage in that are critical to communicating the product information that is necessary in meeting the primary objective previously mentioned.   These activities include, but are not limited to, the following:

1. Informing healthcare professionals about the benefits and risks of products to help advance appropriate patient use
2. Providing and exchanging scientific an educational information
3. Supporting medical research and education
4. Obtaining feedback and advice about our products through consultation with medical experts

To ensure that these activities meet or exceed the highest ethical standards, pharmaceutical manufacturer must have policies and procedures in place to standardize and integrate risk mitigating controls throughout business operations.  This control documentation is the foundation of an operational compliance program and the key to formalizing business process to mitigate risk of deviating activities that could jeopardize the company’s ability to maintain and uphold ethical relationships.   Accordingly, the OIG strongly encourages pharmaceutical manufacturers 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 U.S. operations of their companies). 

In preparing for the increased transparency requirements brought forth by H.R. 3590, manufacturers should start by ensuring that the control documentation appropriately incorporates the additional compliance requirements. 

The introduction of the federal reporting requirements through H.R. 3590 will expand transparency  reports of nature, value, and purpose of exchanges of value requirements at a federal level and will make such reporting an annual obligation.

The exact process of submitting the reporting requirements are yet to be determined. However, it is recommended that manufacturers proactively begin to consider how to ensure continued compliance and appropriately capture and track these interactions. Manufacturers who previously were tracking interactions and spend internally may wish to begin reevaluating systematic options. Additionally, manufacturers that may already have or are in the process of implementing systems should evaluate the functionality and scope of these systems as it relates to the increased transparency requirements.

The currently defined fields that will be required to be reported to the federal government include:

1. Name of Recipient
2. Address
3. National Provider Indentifier or Specialty (for physicians)
4. Amount of payment or transfer of value
5. Date on which payment or transfer of value was provided
6. Description of form (i.e. cash, in-kind items, stock, other)
7. Description of nature (certain exclusions are detailed in Sec. 1128G(e)(10)(b))
8. If related to marketing, education, or research of a covered drug, provide the name of the covered drug
9. Other information as the Secretary of Health and Human Services sees fit

Information collected from manufacturers with respect to interactions and investments will be made publically available by 9/30/2013 on a website that is to be searchable, clear, and will allow for aggregation and download of data. Further information collected will be shared with Congress and States on respective timelines; however, will preempt similar state reporting requirements. While manufacturers will be provided at least 45 days to review submitted information and make corrections as necessary before sharing the information publically, it is important that manufacturers consider how these transparency enhancements will add public scrutiny and enforcement agency awareness to overall compliance in interactions with HCPs. In the end, a company utilizing a risk-based approach to evaluating these new measures within Healthcare Reform will begin by proactively evaluating existing policy and procedure documentation related to interactions with HCPs, and evaluate existing tracking and reporting tool sets.
Stay tuned for Healthcare Reform, Part II – Policy and Procedure Definition and Considerations