Life Science Compliance Update

April 27, 2016

Novartis Korea in Kickback Investigation – Medical Journal Rebates

In a recent securities filing, Novartis alluded to future issues for the Swiss company. In their Interim Financial Report, Novartis stated, "In Q1 2016, the Seoul Western District Prosecutor initiated a criminal investigation into allegations that Novartis Korea utilized medical journals to provide inappropriate economic benefits to healthcare professionals."

This admission follows a February raid of Novartis' Korean offices. On Monday, February 22, 2016, the Seoul Western District Prosecutor's Office raided Novartis' Korean offices, taking documents and accounting books. According to The Korea Herald, at issue are allegations that Novartis Korea "handed out money and other kickbacks, known in the industry as "rebates," to local doctors."

According to an official involved in the case, the prosecution is looking to find out how the rebates were offered, though "it is too early to confirm any charges against the company, as the investigation is still ongoing."

In an emailed statement to the Wall Street Journal, Novartis stated,

Novartis is cooperating with the investigation being conducted by the Seoul Western District Prosecutor's office. Novartis is committed to the highest standards of ethical business conduct and regulatory compliance in all aspects of its work and takes any allegation of misconduct extremely seriously.

According to an anonymous industry insider, the government and the Korea Pharmaceutical Manufacturers Association have been under increasing pressure to crackdown on the rebate program through harsher punishments and insider reports. It is possible that "foreign drug makers may be stepping up their marketing activities in Korea in a bid to remain competitive amid the introduction of generics, though such moves should stay within legal boundaries."

Part of the allegation includes Novartis giving a rebate on subscriptions to medical journals purchased by Korean physicians.

Novartis' Recent FCPA Violation

This new legal trouble comes after Novartis paid the Securities Exchange Commission $25 million in March 2016 to settle charges that it violated the Foreign Corrupt Practices Act when two China-based subsidiaries bribed doctors and others to prescribe its drugs. Novartis subsidiaries allegedly gave money and gifts to doctors and other healthcare professionals as bribes, leading to several millions of dollars in sales to China state health institutions. In the March 2016 settlement, the SEC stated that Novartis "failed to devise and maintain a sufficient system of internal accounting controls and lacked an effective anti-corruption compliance program to detect and prevent the schemes."

What Does This Mean

While this probe is still in its early stages, it is likely to be closely watched for signs that global drug makers continue to have problems in their practices in various foreign markets. As we have written many times on this website and in our sister publication, Life Science Compliance Update, global pharmaceutical companies often find themselves balancing laws, regulations, and local customs, in each market they operate in. Such an operational status makes compliance extraordinarily difficult, making the need for a thriving compliance department in each regional office exceedingly important.

April 13, 2016

UK’s Version of EFPIA Disclosure: Bred with the Sunshine Act in Mind

Recently, we wrote about the transparency and disclosure changes coming to Europe, and promised a more in-depth view of the United Kingdom system. As we mentioned, beginning June 30, 2016, patients will be able to find out if their physician, pharmacist, or other healthcare professional has received payments from a pharmaceutical company. The payments include payments for attending a medical event to acting as an advisor to a company, and will be listed on a publicly searchable database, Disclosure UK. The database will be hosted by the Association of British Pharmaceutical Industry (ABPI).

While this move was prompted by EFPIA (the European Federation of Pharmaceutical Industries and Associations), thirty-three countries in Europe will apply the transparency goals and recommendations in different ways. Some countries are opting for a central platform database similar to the UK database, and others will allow for payment disclosures to be made on company's own websites. Some countries (i.e., France, Slovakia, Greece, Romania) have even passed legislation to make disclosures of payments to healthcare professionals mandatory.

ABPI believes that while the EFPIA requirement only mandates that payment information be available on the relevant Member Company's website, using a central database will make it easier for interested parties to access the information and to compare data.

In the United Kingdom, disclosures will be made by companies who pay the healthcare companies (similar to the requirements under the United States Physician Payment Sunshine Act), but payments may only be included in the public database if the healthcare professional gives their consent. Such data protection rules may help to protect physicians from some of the untoward effects we have seem stem from public disclosure of physician and pharma ties in the United States.

United Kingdom Health Secretary Jeremy Hunt, however, seems to be a fan of the Sunshine Act, because he is introducing a "sunshine rule," specific to dealings with National Health Service (NHS) personnel. If NHS staff are found to be abusing their position by taking extravagant gifts or hospitality and lobbying for unneeded or overly expensive drugs, negative consequences follow, ranging from disciplinary action to dismissal to imprisonment.

How Will the ABPI System Work?

As a broad brush overview, the system will first rely on companies to collect details of any relevant payments made to Health care providers (HCPs) or health care organizations (HCOs) and collate them into a standard template, which will be modeled after the EFPIA template. Then, the template will be uploaded through a secure system. Payment data from all companies will be consolidated and reconciled in a central location, with unique identifiers being added to all HCPs and HCOs. A third party provider will manage this aspect, ensuring the data is "clean, complete and up-to-date." The third party provider will then also maintain the centrally-hosted database where the information can be found.

ABPI will provide materials and training for Member Companies as to how the system will work as they begin to gather data. HCPs whose data will be disclosed will be personally and individually contacted throughout 2016, with notification of what data will be disclosed and when.

The very first disclosure will be available on the ABPI system by July 1, 2016, covering payments made through the entire year of 2015.

If you are an ABPI member company and you have questions, or would like more information, you may email disclosure@abpi.org.uk. ABPI members may also email disclosure@abpi.org.uk to be added to the Disclosure Network distribution list, where they will receive detailed operational updates on the project.

EFPIA Disclosure “Sunshine Act – Lite”

For the first time, on June 30, 2016, pharmaceutical companies will be forced to disclose full data on payments made to doctors across Europe. Starting then, all pharmaceutical companies will be required to publish payments they made in the previous year to physicians, nurses, and other healthcare professionals (HCPs), identifying them by name when possible. The rules will also encompass payments made to hospitals and other healthcare organizations (HCOs) across thirty-three European countries.

This move is huge for the industry's relationship with doctors, and reflects a global move toward greater transparency – for better or for worse – following in the footsteps of countries such as the United States and Australia.

What Will Be Disclosed?

The following items will be required to be disclosed: payments made to healthcare professionals (including sponsorships to attend meetings, speaker fees, consultancy and advisory boards), donations and grants paid to HCOs, and payments made for research and development. The disclosure will include full names, addresses, and specialties of each HCP. Some country regulations go a step further, requiring unique, country-specific identifiers.

Generally, if an HCP does not consent to his or her personal data being disclosed individually, their expenses shall be reported in the aggregate. If an HCP revokes their consent after the report has been published, the company is not required to remove the data from the published report, but instead, for subsequent reports, must anonymize the HCPs data and move it to the aggregate section.

However, unlike the Sunshine Act, the EFPIA Code does not require disclosure of payments made for meals and drinks below a certain value. EFPIA felt that doing so, as the United States Sunshine Act does, would create a "disproportionate administrative burden" on both industry and HCPs. A threshold for hospitality costs has been fixed in each national code of practice.

Uniformity

While the EFPIA Code lists the regulations, given the diversity of cultures and practices across Europe, the patterns and levels of disclosure are sure to vary. Andy Powrie-Smith, the head of communications at EFPIA, believes that naming HCPs in a disclosure is a large step, but also thinks it is a "natural evolution for pharma that reflects a societal shift towards ever more transparency in public life."

Powrie-Smith believes that by shedding light on the relationships between HCPs and the pharmaceutical industry will allow society to understand that the interests of patients, HCPs, and pharma are actually aligned. "We need to move from a conflict of interest to a confluence of interest, and transparency helps to do that."

Under the EFPIA agreement, companies are required to make their "best efforts" to achieve full compliance and full disclosure, but companies may sometimes have no choice but to make payments anonymous when physicians make such an above-board request. EFPIA hopes that once HCPs who prefer to remain anonymous see the system in action, they will be "won over" to the principles of transparency, and wish to participate fully, giving rising participation rates across Europe.

As previously mentioned, cultural differences will likely play a large part in the levels of disclosure achieved across Europe. There is essentially a sliding scale of openness and positive attitudes about transparency: Scandinavia is the most open to the change, whereas eastern and southern European countries tend to be more resistant to disclosure.

Different Mindsets

Association of Innovative Pharmaceutical Industry

This Czech Republic group has made it possible to make use of a legal dispensation from the obligation to obtain consent from an HCP, as long as there is an agreement between the HCP and the AIFP Member that has a provision outlining that the processing of personal data is necessary for the purposes of the agreement. If such written agreement is provided, the HCPs consent is not needed.

Spain

In Spain, there is a unique number that identifies the HCP with the DNI or CIF. In order to maintain privacy when the report is published, the number is anonymized using the same encryption procedure used by tax authorities (partially masking the number).

Australia

In Australia, authorities rely on the pharmaceutical industry to establish a process for obtaining consent. Additionally, reporting payments and transfers of value must be consistent with the Commonwealth Privacy Act 1988.

Association of the British Pharmaceutical Industry

The United Kingdom is adding a unique spin, where payments to physicians will be listed on a publicly searchable database known as Disclosure UK and will be hosted by the Association of British Pharmaceutical Industry (ABPI), the trade association of companies in the UK that produce prescription medicines. Keep your eyes peeled for a separate story on this database in the coming days.

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