We’re regulated from a lot of different angles. Pharmaceutical companies have all of the standard oversight via the FTC, the SEC, and the DOJ; however their place among US industries is unusual in that there are numerous agencies much more intensely focused on them, and legislation specifically directed at their activities, such as the FDA on the agency side and the Medicare Modernization Act and Food, Drug, and Cosmetic Act on the legislative side. This is a direct result of health care’s prominent place in the US economy, along with its unique impact on the health of each individual citizen. This makes compliance of paramount importance because there are numerous opportunities for missteps, with severe penalties, given the complexity of the landscape.
One of the oddities of our industry is that we’re heavily dependent on government financing. The government finances the purchase of our products for a large portion of our customer base through Medicare and Medicaid and now the subsidized plans offered through health-care exchanges under the Affordable Care Act. This provides incentives for oversight. Pharmaceutical companies’ dependence on these markets and the threat of exclusion from these government programs also gives the government even greater capacity to enforce regulations.
One area that gets public attention is marketing. The government wants to ensure that there is no undue influence on the prescribing habits of physicians. The easiest way to do that is to regulate the companies engaging in the promotion of pharmaceutical products. One new regulation that has expanded oversight in this arena is the Physician Payments Sunshine Act (passed as part of the ACA), which shows all physician expenditures from all pharmaceutical companies on the Centers for Medicare and Medicaid Services website. For companies such as Par, with relatively smaller numbers in terms of marketing spending, it’s not as large of an issue. But even at our level there is obvious public scrutiny of spending, and we’ve had disputes submitted by physicians. It is clear that it will have an effect on behavior, both at the corporate level as well as with prescribers.
There’s a gap between the letter of the law and the enforcement of the law. There’s a sort of quasi-regulation occurring in the form of investigations and settlements when companies have been accused of wrongdoing but no precedential court decision has been issued interpreting the relevant law, statute, or regulation. That’s where we face a lot of challenges, because we have to interpret these investigations and settlements to see what sort of practices the various branches of government may have found questionable, and alter our behavior accordingly if necessary, so we’re not setting ourselves up for a protracted, costly investigation.
We’ve set up a lot of corporate policies and procedures to regulate the behavior of employees, particularly the sales force. We want to ensure not only that sales reps aren’t violating any laws but that there isn’t even the appearance of a violation. For example, although there is no restriction on providing small gifts such as pens, we have a ban on any such items to remove the appearance of improper influence. Sales reps also have physicians sign an acknowledgment that they have received appropriate detail of the labeled indication of each of our products on every sales call, which I think is unique in our industry. I’m not aware of any other company doing that.
A compliance officer in this industry has to merge two disparate, yet key, things to be successful. The compliance officer is a little bit outside the organization, because he or she has a direct dialogue with the board of directors, and must report back that things are or are not being done in a compliant way. The second thing is equally as important to remember: compliance is not the company’s reason for being; it is a safeguard to make sure the business of the company is conducted properly. Compliance is ultimately a service to improve the business within the regulatory framework, not an extension of our regulators. We sometimes tend to miss that because we can wield significant authority within the organization.