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Asia Pacific Pharmaceutical Compliance Congress
Compliance best practices
Ms. Vidya RajaraoIndia Leader, Forensic ServicesSeptember 14, 2011
www.pwc.com
September 20112PwC
Agenda
Indian Pharmaceutical Market
•Overview
•Regulatory Pressure
Compliance issues & challenges
•Regulatory compliance
•Code of Marketing Practices for Indian Pharma Industry
•Anti-corruption Laws and Regulations
•Compliance Issues and challenges
Compliance best practices
•Framework for Compliance
•Compliance Focus Areas
•Best Practices
September 20113PwC
Indian Pharmaceutical market
September 20114PwC
Overview
• The Indian pharmaceutical market is set to reach USD 20 billion by 2015 and the clinical trial business is set to reach USD 1 billion by 2011 as stated by the Associated Chambers of Commerce and Industry (ASSOCHAM)*;
• India also ranks among the top 5 countries with a total of 48 mergers and acquisition in 2010;
Source: Thomson M&A database, IMAP – Pharmaceuticals and Biotech Industry Global Report, 2011
*Economic times: http://articles.economictimes.indiatimes.com/2011-04-15/news/29421955_1_clinical-trials-medicines-usd
September 20115PwC
Growing Regulatory Pressure
The FDA Amendments Act of 2007 has forced the FDA to
increase standards for approvals of new drugs, introducing
mandatory risk evaluation and mitigation strategies (REMS)
Sun Pharmaceutical unit gets FDA Warning
(Wall Street Journal, August 2010)
DA Warning: Glenmark Pharmaceuticals issued warning in connection with
marketing of unapproved drugs
(USFDA, March 2010)
Lupin Pharma sued in US over Drug Patent violation
(The Financial Express, December 2010)
September 20116PwC
Growing Regulatory Pressure (continued)
Increased Global Scrutiny of FCPA violations
Johnson and Johnson to settle charge over Drug’s marketing
(New York Times, August 2011)
US probes corruption in big Pharma companies: GlaxoSmithKline, Bristol
Myers-Squibb and Eli Lilly
(Financial Times, August 2011)
Pfizer discloses ‘potentially improper payments’ to SEC
(Wall Street Journal, August 2011)
September 20117PwC
Compliance issues & challenges
September 20118PwC
Regulatory compliance
These expanding regulatory forces are
driving an urgent need for
pharmaceutical companies to develop practical and effective solutions for meeting
the challenges of integrating
governance, risk and compliance on a
global level.
September 20119PwC
Code of Marketing Practices for Indian Pharma Industry
Pharma companies are also under the lens for their marketing practices as adapted to suit local promotional
models.
The Department of Pharmaceuticals (DoP) in the Ministry of Chemicals and Fertilizers has spelt out
marketing practices for the pharma industry. A draft voluntary Code of Marketing Practices for the
Indian Pharmaceutical Industry was released on June 2, 2011.
Highlights of the Code are discussed under the following broad categories:
• Lays down rules for manufacturers on product claims and product comparisons to other existing
products in the market;
• Provides guidance on the dos and dont’s for using textual & audio-visual promotional materials;
• Defines a medical representative and requires the medical representatives and other third parties to
adhere to a strict code of conduct;
September 201110PwC
Code of Marketing Practices for Indian Pharma Industry (continued)
• The code provides rules on the manner of distribution of and record keeping for samples;
• Prohibits pharma companies from giving gifts to secure advantages, benefits or promises;
• The Code lays down stringent guidelines on hospitality sponsorships and meetings;
• The Code also envisages a Committee for complaint handling i.e. “Committee for Pharma
Marketing Practices” and spells out its mechanism and mode of operation.
September 201111PwC
Anti-corruption Laws and Regulations
The anti-corruption challenges as illustrated below are of a special concern in the pharmaceutical
industry:
•HCPs are considered as government officials due to their potential affiliation with government
hospitals;
•Sales and marketing staff (including medical representatives) are often the public face of the company
having direct contact with the HCPs;
•Clinical trials require a government interface;
•Pharma companies are generally required to interact with the Ministry of Health officials, licensing
authorities at local, state and central Government level;
•Third parties play an important role in the supply chain and are deemed agents of the pharma
companies.
September 201112PwC
Compliance Issues & Challenges
Some of the key compliance challenges are observed in the following categories:
A. Sales and Marketing
• Fraudulent expense claims by sales force to create ‘kitty’ to make inappropriate payments to
Healthcare Providers (HCPs).
• Categorisation of HCPs based on prescribing habits and enticing them to prescribe products:
HCPs are provided inducements in form of gifts, surgical equipments, medical books,
birthday parties, etc;
Requests for gratification (in the form of gifts to be given to doctors) are initiated by sales
force at the request of HCPs;
Lack of medical necessity for prescribed treatments (promoting excessive use of medicine
for profit).
September 201113PwC
Compliance Issues & Challenges (continued)
• Depending on prescribing habits of HCPs, they are entitled to an all expense paid trip to a medical
conference/seminar, either locally or internationally or to an exotic international destination;
‘Walking around money’ given as perdiem in addition to all costs by the pharma company.
• Volume discounts given to HCPs who resell products to patients. The free products received by
HCPs are then sold at market price.
• Samples
Purchase of products by sales force from pharmacies to be distributed to HCPs. These products
are not marked as free samples and, as such, can be dispensed by the HCPs at their private
clinics at the price indicated on the product;
Sample drugs can be unpacked by HCPs from their original packing and then dispensed at their
private clinics for a fee.
September 201114PwC
Compliance Issues & Challenges (continued)
• Off-label marketing;
Salesperson indicating or implying that a drug is appropriate for treatment for children when its
use has been approved only for adults;
Selling a product outside its legally approved use (for example, an expired or expiring product
in an attempt to try to extend sales life).
• Use of Consultants by pharma companies for:
Obtaining drug/ factory/ environmental licenses;
Registration of new products involves interaction with Ministry of Health officials;
Payments for recurring visits of Government officials to warehouse or plant sites;
Clearing check post matters for inter state product movement;
Expediting sales tax and income tax assessments or to obtain favourable judgement;
Customs agents – to expedite clearance of goods or to overlook deficiencies in documentation.
September 201115PwC
Compliance Issues & Challenges (continued)
B. Counterfeiting of drugs:
• Mixing genuine and counterfeit product in the supply chain;
• Using legitimate distributors to import and sell pirated products;
• Illegal trade rings also acquire expired medicines in order to repackage it and reintroduce it in the
distribution channel.
September 201116PwC
Compliance best practices
September 201117PwC
Framework for Compliance
Control Framework
ManagementBehaviour
Values
September 201118PwC
Compliance Focus Areas
Tone/BehaviourSenior Management Regular leadership
communicationDemonstration of compliance behaviour by senior
management
Compliance Office
Gatekeeper & monitoring of compliance policies/procedures
Assess risk periodically
Ongoing training and development
Localised Policies & Procedures
Development/enhancement of code of ethics, policies and operating procedures
Business PartnersDefine/enhance structure for engagement with government
officials
TrainingDevelop & deliver training on a continuous basis &
ensure attendance
Tone at the top
WhistleblowingDevelop/enhance whistleblowing and incident
management process
Pre-engagement evaluation
RiskCompliance Risk
AssessmentRisk assessment process should be used in local decision
making & in setting up operation in high risk markets
September 201119PwC
Best Practices
Step 1 - Ensure right tone at the top
• In order to be effective, the compliance message must be embraced and driven from the Board of
Directors and executive management team down through the organization;
• It must be driven by words and by example;
• Build confidence amongst employees to do the right thing and identify clear sanctions for non-
compliance;
• Update corporate documents and communications that address key messages on anti-bribery, anti-
corruption, interaction with government officials, internal controls, etc.; and a formal communications
and certification plan (intranet access, web training, messages from senior leadership).
Tone/BehaviourManagement & Policy owners
commitmentCommunicate key messages Regular leadership communication and
demonstration of compliance behaviour
September 201120PwC
Best Practices (continued)
Step 2 – Localised policies and procedures
•To operationalise compliance at local level – need an ‘eye opener’ for local senior management via trainings;
•Customization to the local context to the extent possible since compliance its generally viewed as a foreign
concept;
•The policies must discourage perception that corruption in the local country is ‘part of everyday business’;
•An implementation “tool kit”; recommended monitoring controls, and internal reporting protocols to meet
the compliance requirements should be provided locally.
Localised Policies & Procedures
Development/enhancement of code of ethics, policies and operating procedures
September 201121PwC
Best Practices (continued)
Step 3 – Compliance function
•The role of a compliance office is to act as a gatekeeper of the compliance policies and procedures;
•Events held by Compliance office to underscore the “tone from the top” and to proactively drive
implementation;
•Perform periodic risk assessment to assess compliance with defined policy and procedures;
Providing gifts, entertainment, other hospitalities and travel to foreign public officials;
Making political and charitable contributions, community support and facilitating payments;
Identification, retention and use of third-party intermediaries;
Assess the need to update policies and guidelines on periodic basis with change in environment and
news rules and regulations.
Compliance office
Gatekeeper & monitoring of compliance policies/procedures
Ongoing training and developmentTone at the top
September 201122PwC
Best Practices (continued)
Step 4 – Risk Assessment
•In order to identify processes vulnerable to fraud and non-compliance, companies should conduct on a
proactive basis an enterprise wide assessment to identify compliance risks;
•This assessment must consider vulnerability to management override and potential schemes to circumvent
existing control activities, which may require additional compensating control activities.
•Evaluate corporate policies to ensure that they cover high-risk activities - a set of “global” standards and
expectations for controls around high-risk business activities.
RiskCompliance Risk
AssessmentRisk assessment process should be used in local decision
making & in setting up operation in high risk markets
September 201123PwC
Best Practices (continued)
Step 5 – Business Partners
1. Documented approach to assessing integrity & corruption risk
• Known connections to local government figures or bodies
• The industry and local country’s reported reputation for public corruption (e.g. use of TI or other trade indices)
• Competence and qualifications of the party for the project or activity contemplated
• Circumstances of referral
• Nature of the activities to be performed under contract
• Specific contract terms
• High-level sanctions or Politically Exposed Persons (PEP) screening
2. Integrity due diligence on higher risk entities to verify, identify and assess…
• Background, career history, commercial interests and business associates of shareholders and directors of companies or individual applicants
• Qualifications, capabilities and capacity for the role
• Reputation in the market
• Connections to government officials or bodies
• Reports or allegations of involvement in corrupt activities
• Reports of other adverse issues which may affect the proposed relationship (e.g. history of disputes with business partners or unethical or criminal behaviour
3. Business partner compliance management process and materials
• Bespoke questionnaire / application form
• Contracts with suitable anti-corruption clauses
• Policy and guidance material for dealing with third party relationships
• Reporting templates
• Database of completed due diligence and IT-based (or other) tracking tool for due diligence
• Documented approvals and sign-off process
• Process for ongoing monitoring or re- application after set period of time
Assess risk periodicallyBusiness Partners
Define/enhance structure for engagement with government officials
Pre-engagement evaluation
September 201124PwC
Best Practices (continued)
Step 6 – Compliance Training
• Promote compliance by educating local management on the key tenets of rules and regulations,
communications with regulatory agencies, expectations of international and local country “pharma
codes,” increases in local regulatory agency investigations, etc;
•Provide senior management training on the need of a robust compliance programme;
• The compliance training should also be disseminated on entity-wide basis with special focus on
interaction of employees with government touch points.
TrainingNeeds analysis/develop
strategyDevelop & deliver training Build into sustainable ‘business as
usual’ training
September 201125PwC
Best Practices (continued)
Step 7 – Whistleblowing
•Fortune 500 pharmaceuticals companies have initiated the concept of an open door policy;
•The policy also offers anti-retaliation protections to ensure that all employees have a safe mechanism for
reporting potential violations / concerns;
•Further, to encourage reporting, they have established reporting mechanisms which include a compliance
helpline available in 70 languages, allowing employees around the world to raise concerns and seek guidance.
WhistleblowingDevelop/enhance whistleblowing and incident
management process
September 201126PwC
Closing thoughts…
Compliance programmes are
at the core of companies’ best
strategies for minimising the
risk of regulatory and non-
regulatory violations
September 201127PwC
Questions, suggestions, ideas…
© 2011 PricewaterhouseCoopers Private Limited. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers Private Limited (a limited liability company in India), which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.
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