Prescriptions: Reputation at Risk – Global Sales & Marketing

In this regulatory patchwork, multinationals need to exercise vigilance and adopt clear global policies.

By Ted Acosta

Compliance with rules governing the promotion of pharmaceuticals on a global level requires astute management. Methodical planning and careful examination of each country’s ‘rules’ is essential. Corporate executives and country managers alike need to set the right tone at the top to help support those responsible for compliance, and establish robust processes which identify potential non-compliance issues early. Practical steps include: assessing operations, adopting clear policy positions and exercising vigilance.

Practices under scrutiny

Pharmaceutical companies face negative media coverage and significant criminal and civil penalties, fines and damages even for ‘minor’ instances of non-compliance with regulations and codes of practice.

Sales and marketing practices are receiving the most scrutiny from regulatory agencies and other stakeholders worldwide. Investigations and enforcement efforts are focusing on how companies sell and promote products with an emphasis on four key areas:

• Off-label promotion and usage
• Company interactions and transactions with healthcare professionals and institutions
• The role of post-marketing clinical trial activity
• Treatment of risks and reward information in promotional activities

Successful prosecutions and a mounting number of investigations are having a significant impact on the reputation of the sector and further undermining stakeholder trust.

Robust enforcement likely to continue

Multinational pharmaceutical companies know that the consequences of non-compliance can be severe based on their experience in the United States. Prosecutors have settled for hundreds of millions of dollars in cases of alleged off-label promotion and other alleged non-compliance in the United States under criminal and civil law.

One in two of the world’s leading pharmaceutical companies have been the subject of investigations in relation to sales and marketing practices since 2004; many more investigations are believed to be in the pipeline in the United States.

In most other countries, companies are susceptible to accusations of violating local promotion, corruption and competition laws, as well as the US Foreign Corrupt Practices Act (FCPA) for those companies listed in the United States. Not only do they risk penalties, fines and other sanctions, but they jeopardize their reputations and consumer confidence. In the last year, the industry has experienced well-publicized, local enforcement actions in markets such as Italy, China, Poland and Turkey.

What may have seemed like acceptable practices in the past may now be viewed differently by government agencies, politicians and consumers. The focus and criticism of pharmaceutical practices emanates not just out of the desire to address presumed corruptive practices, but many be motivated by political pressures to curb health care costs or other reforms.

Voluntary standards emerge

Compliance failures and enforcement actions in the United States have served to generate interest in voluntary industry codes. Industry trade groups including the Pharmaceutical Research and Manufacturers of America (PhRMA) and the European Federation of Pharmaceutical Industries and Associations (EFPIA), spurred to address the apparent weaknesses of marketing codes, have issues new or updated codes of conduct.

These codes are aimed at guiding behaviour that has been the focus of criticism by prosecutors and investigative agencies. Local pharmaceutical associations in many countries have developed their own codes of conduct. The myriad individual codes poses several challenges to companies operating across borders and, therefore, jurisdictions, including:

• Adding another level of standards in addition to those otherwise applicable under local laws and regulations.
• Requiring companies to maintain effective processes and controls to address the obligations imposed by local standards and the voluntary codes.
• Compelling both headquarters and local management to gain a full appreciation of the totality of standards (whether compulsory or voluntary), which exist in the markets in which the company operates.
• Understanding the cultural issues, history and the competitive environment in each locality that influence a company’s approach to compliance.

Different codes for different countries

Existing codes of conduct appear to address similar issues, including: discounts, grants, rebates, support for educational programs and sample distribution. Most codes also address other practices such as gift giving, hospitality and entertainment, which policymakers in several countries have scrutinized.

When addressing the risks associated with sales and marketing practices, executives are struggling to account for variation across the organization. Addressing differences across geographies also poses a significant challenge. In Brazil, fort example, the Febrafarma Code of Conduct only limits the distribution of free samples to professionals qualified to prescribe. Other countries limit the quantity of samples provided to physicians. This is the case in the United Kingdom, where the ABPI Pharmaceutical Code of Practice includes annual limits of no more than ten samples of a particular medicine to a single physician.

Managing compliance in the global environment requires careful planning. Sales and marketing activities at the local level may have a global effect on a company’s reputation and risk of prosecution. Mitigating surprises requires open communication across borders and a global set of processes to maintain compliance with corporate and local standards.

Building a global compliance infrastructure

The first step in developing a global sales and marketing compliance program entails a current state assessment. This includes surveying existing standards to gain an understanding of regional laws and regulations. It also involves a comprehensive review of sales and marketing operations and practices throughout the organization.

Legal advice is also important and can provide an objective assessment of the extent of non-compliance at the global, regional and local levels. This helps build the picture of an organization’s exposure to risk and identify gaps in policy and processes. Where possible, benchmarking promotional activities and governance against peers can provide further insight for corporate management, board members and shareholders.

Identifying internal weaknesses and positioning relative to best practices may help shape and guide decisions on the actions required to tighten compliance and mitigate risks. Other important elements of the global compliance infrastructure include identifying the right people to manage the global compliance system and developing a set of robust processes to flag non-compliance risks before they occur.

• Structure – a compliance framework needs to address local, regional and global aspects of compliance with codes, legal advice, training and communication of corporate guidelines and requirements.
• Process – processes should address global standards and local legal and regulatory distinctions. They need to provide adequate approval processes, monitoring and exception reporting and include effective communication protocols.
• People – the compliance function must have high quality individuals who garner the respect and authority to carry out their roles and the ability to implement change in the organization.

Companies that take proactive steps to assess operations, adopting clear policy positions, and exercising vigilance, will position them to meet the sales and marketing compliance demands an increasingly global industry.

Ted Acosta is National Leader of Health Sciences, Investigative and Dispute Services, at Ernst & Young

Prescriptions: Reputation at Risk – Global Sales & Marketing
Industry groups in many countries have established new codes of conduct for sales and marketing