A version of this article was published originally in Pharmaceutical Exeuctive magazine
In February 2006, local newspapers in the United Kingdom reported on disciplinary judgments made by the Association of the British Pharmaceutical Industry (ABPI) against four pharmaceutical manufacturers. The disciplinary judgments consisted of public reprimands for three companies, and suspension from the association for a period of at least six months for the fourth company.
These punishments were based upon claims that the companies violated the associations’ code of conduct, related to providing inappropriate hospitality for health professionals, distributing a leaflet deemed offensive due to a negative product comparison with a competitor’s product, aggressive marketing practices, and the misrepresentation of professional medical advice. And while the ABPI acts independently of any justice system or governmental department, their action signaled concern about marketing practices. Thereafter, the APBI revised its code of conduct to be stricter and implemented it at the beginning of 2006. To date, the ABPI has not fined companies for breaching the code, as it believes that public reprimands are sufficient punishment.
Individual countries have begun to institute voluntary conductor codes, especially in the areas of sales and marketing, to keep pharma companies in check. Enforcement actions in the United States that resulted in fines or settlements in the hundreds of millions of dollars may have served to regenerate interest in these voluntary industry codes abroad.
There are plenty of examples of countries that have recently implemented or updated these voluntary codes. At the end of 2005, the Canadian Pharmaceutical Industry Association (Rx&D) implemented new rules, which could result in probation, suspension, or expulsion of pharmaceutical companies deemed to have breached the marketing standards of the association. One large multinational pharmaceutical company was on probation in 2004 after having been accused of a series of breaches or infractions of the code) The breaches were related to the marketing of drugs to doctors by providing benefits to them. For example, the company was cited for taking doctors to a conference in the French Riviera and on an educational trip to a luxury hotel in Jamaica.
Going even further abroad, in 2004, Medicines Australia—the body representing that country’s drug industry—received a complaint from a doctor on behalf of a watchdog group called Health Skepticism. The watchdog group accused a pharmaceutical company of breaching the Medicines Australia’s Code of Conduct by misleading doctors on the safety profile of one of their drugs. In 2005, the Medicines Australia appeals committee imposed a substantial fine and ordered the company to issue a corrective letter to all recipients of its correction letter.
All these actions indicate a growing readiness on the part of industry standards-setters worldwide to review the integrity of marketing practices of pharmaceutical companies. This article seeks to provide an overview of the global trends involving the self-policing of multinational pharma companies and to offer practical advice on how best to use these efforts to boost your company’s internal compliance initiatives.
The Road to Improving Standards In the past few years, perhaps as a result of relentless enforcement by US authorities, the Pharmaceutical Research and Manufacturers of America (PhRMA) and the European Federation of Pharmaceutical Industries and Associations (EFPIA) issued new or updated codes of conduct, aimed at guiding some of the behavior criticized by prosecutors and investigative agencies.
Pharmaceutical companies, whether members of international associations or on their own, now must develop voluntary codes of conduct in even the smallest markets. They must show a willingness to "self-police" with regard to their conduct in marketing, including determining the types of hospitality they will provide to health care professionals, limits on expenditures with physicians—whether for token gifts, branded "reminders", etc.—to limits on samples and the conditions set for donations to customers. And these are just a few.
Outside the United States, it is difficult to state what local country authorities would expect of pharmaceutical companies with regard to self-policing. However, given that the companies have gone through the extraordinary effort of joining together in so many markets to issue codes of conduct, it is reasonable to expect a local country government agency would use the code as a benchmark for behavior in that market even if it is not a binding, legal requirement. Self-policing serves to improve the image of the member companies and their rapid inclination to take corrective action. It also delivers a positive message to local authorities. At a glance, the various codes address similar issues, such as discounts, grants, rebates, support for educational programs, and sample distribution. Taken at face value, all of these practices have the utmost legitimate purpose. The codes strive to define the proper context for such activities, however, so as to avoid potential conflicts of interest or the appearance thereof.
The codes also address other practices such as gift giving, hospitality, and entertainment, which have been criticized by government authorities because of the influence they can wield over a physician’s prescribing. The codes seek to limit these and thereby eliminate the potential for abuse or the appearance of impropriety. It also helps define different interpretations of what are considered acceptable gifts.
A company needs to address each country’s definition of "modest" or "reasonable." It is vital to understand how local culture and customs could drive the perception of activities in relation to their modesty and reasonableness. In Spain, any gift provided to a health care professional must not exceed 30 Euros ($36). In many other countries, the codes are not as specific. In Greece, for example, the code refers to gifts of a "modest" value without providing further guidance.
Another example deals with honoraria payments. The European Union has set standards for honoraria payments and asked each of the member countries to abide by said standards; but a doctor’s salary in Spain will differ from that of a doctor in England or Germany. For EU countries seeking to apply a truly reasonable honorarium payment, they may consider not only the European guidelines, but also local market conditions—such as using a range of salaries specific to local doctors to determine a reasonable amount.
Multiplicity of codes creates global challenge
The voluntary codes of conduct from different countries pose a tremendous challenge to companies operating across borders and therefore in different jurisdictions. First, these codes would impose another level of standards in addition to those otherwise applicable under local laws and regulations. In many cases, the codes add more-defined parameters around promotional activities. In others, they read more generally and may not expand further on local laws and regulations. In still others, they may not actually provide specific guidance. However, it’s the company’s responsibility to ensure that it has processes and controls to effectively address the obligations imposed by local standards and now, too, the voluntary codes.
More compelling is that both headquarters and local management will need to gain a full appreciation of the totality of standards (whether compulsory or voluntary) that apply in the markets in which the company operates. Also coming into play are cultural issues, history and the competitive environment present in each locality. Such knowledge forms the basis for proper controls, and senior management needs to remember that the parameters on promotional practices vary among countries.
Companies must balance voluntary codes at the same time as maximizing their legal promotional activities. However, managing compliance with such differing standards requires careful planning. In Brazil, for instance, there aren’t any limits in the Febrafarma Code of Conduct regarding free samples; the only caveat is that they are provided to professionals qualified to prescribe. Other countries allow for the distribution of samples to physicians, but limit the permissible quantity. In the United Kingdom, for example, the ABPI Code of Practice for the Pharmaceutical Industry states that no more than 10 samples of a particular medicine may be provided to an individual health professional during the course of the year.
The requirements become even stricter in countries such as Greece, where pharma companies have to endure a thorough review process. Before passing out samples, companies have to abide by the country’s conduct code, which limits the distribution of any samples unless previously authorized by the National Drug Organization (NDO), the main body in Greece responsible for the administration and supervision of the pharmaceutical sector.
Creating a robust compliance structure
When a global or regional division engages in activities involving healthcare professionals from a given market, it will most likely be subject to the local restrictions. Thus, it is imperative that the pharma company’s headquarters, even those thousands of miles away, are aware of these developments and have the proper processes to ensure compliance with local standards.
To manage this task, pharmaceutical companies are advised to put in place robust compliance structures and strategies throughout their organizations. First, they should consider having a senior compliance team at the headquarters level to provide consistent direction on management of compliance activities, company-wide policy statements and/or minimum standards, education and communication strategies, auditing, and guidance on a case-by-case basis. This approach is becoming more prevalent among multinational companies, although implementation still varies from company to company. A few companies have compliance units whose authority and integration throughout regions and into individual markets are clearly defined and funded. Most companies are still deliberating on the appropriate infrastructure for their compliance units, which now serve more a clearinghouses. The latter tend to focus on responding to allegations as well as providing "template" guidance to the market, but do not assume responsibility for implementation as yet.
A foundational step in establishing a global compliance program is to perform assessments of at least the relevant markets (or selected markets based on the perceived level of risk). These assessments will help management to determine the actual practices that occur in the market in the promotion of products, which, in turn, will shape the company standards. Eventually, companies may need to require that each market in which they do business has adopted internal compliance standards tailored to their local requirements and climate. To this end, some companies have begun to assess their operations in all markets.
In addition to establishing the internal standards or codes of conduct and having each country operation customize them, a multinational pharmaceutical company must put in place a process to implement the policies. This includes issuing detailed policies and educating all affected employees on the standards and how to document their compliance. Specific accounting processes, systems, and/or web-based or manual tracking systems must also be put in place for delegation of tasks, approval thresholds and required forms, to name a few checkpoints. This can be the most laborious of the steps, but also is where the success of the compliance efforts is determined.
Minimum Standards
At the local levels, the subsidiary or franchise should endeavor to put in place an infrastructure with similar elements and adapt the company-wide requirements to the local standards. An important emerging strategy is that of the headquarters issuing minimum standards or guidance on specific activities throughout the global markets. Indeed, these are viewed as "floors," for they become the actionable standards in the absence of a local standard or where the local standard is less defined or ambiguous. For example, in some south Asian countries, sample distribution is permitted, but there is little guidance on the amount that should be given per health care professional and how the goods may be presented and delivered. In these cases, it is incumbent upon the local company to set out limits and properly label and package the samples in a manner that minimizes the potential for abuse or misuse.
It is increasingly common for companies to seek a level of comfort by adopting clearer standards and limits at the expense of taking a more restrictive stance than competitors. The simplest example of this tactic is in the developing approach to hospitality. As of this writing, most multi-national companies have put in place internal policies that restrict the type, frequency, cost and venue for receptions, dinners and other courtesy events often provided ancillary to scientific meetings and medical congresses. Restrictions still vary, for example, in that some companies may be more inclined to allow the event to occur in aboard a cruise or in a well-known location so long as they control the cost per head. Similarly, companies now may even ban spouses and guests from attending hospitality events even at the moment of the event, whereas other companies would opt to allow it the first time, but advise the physician to refrain from bringing them in the future. All of these variations bring up sensitivities among the field force, particularly as they risk embarrassing customers or seeming discourteous. Yet this is an area where multinationals have been more vehement at issuing clear guidance and enforcing them.
In reality, because most leading multinationals have already begun to toughen up, it is not certain that such actions will cause them to lose any competitive advantages against other multinational companies with respect to these practices.
To adopt minimum standards, it is imperative that the company has, at least, a good awareness of the major markets as well as other particularities affecting the promotion of pharmaceuticals. In essence, to deliver practical, on-point standards or guidance, management needs to be informed of sufficient local practices and survey sufficient standards to get the full flavor of regional variations and needs. For example, outside of the United States, such as in France, Germany, and Thailand, physicians are commonly government employees. Having guidance that takes into consideration this status is critical as regards the FCPA and local laws on corruption of government officials. Adopting a US-centric approach may completely miss this not-so-unique characteristic of the global market.
Finally, "audit" methods and programs must be established to measure compliance with company policies, which by now should embody the requirements of local laws, local codes and the company’s own level of tolerance. Indeed, many multinational companies already perform audits that cover compliance issues to some extent. These, however, tend to be focused on more financially-oriented processes such as employee expenses, sample accountability and speaker payments, among others. The "next generation" of compliance audits may need to focus on more difficult issues. These issues would include donations and their relationship to the business (e.g., timing in relation to a tender or formulary decision, volume of past sales, recipient of the donation). They would also include the brand planning process and the permissibility of objectives and tasks under company rules (e.g., off-label marketing strategies and opportunities, promotion through post-market studies). Other issues include how to approach discounts and other price concessions to customers (e.g., the nature and form of discounts provided directly by sales personnel as well as distributors and wholesalers), and promotional activities by third parties such as contract sales organizations and distributors.
The focus on and criticism of pharmaceutical practices may emanate not just out of the desire to address presumed corruptive practices, but may well be motivated by political pressures such as curbing health care costs or reforming the health care system. Any of these can lead to investigations and unfavorable publicity. In sum, compliance with pharmaceutical promotional rules on a global level is most definitely an intricate, but necessary, management project. It requires methodical planning and careful examination of the actual practices by which subsidiaries do business. The emergence of new standards, whether driven by legislation, the industry or internal pressures, weighs heavily on both headquarters and local management. By taking proactive steps to assess their operations, adopting clear policy positions, and exercising vigilance, pharmaceutical companies will be poised to succeed and lead the corporate world in compliance just as they have in many other facets of their business.
Sidebar
In fact, one most frequently finds the local subsidiaries of the multinational pharmaceutical companies driving the process. A list of some of these associations represents the widening interest of ensuring ethical practices in countries around the globe
- Belgium: Belgian Pharmaceutical Code of Ethics
- Brazil: FebraFarma Code of Conduct
- Britain: Association of the British Pharmaceutical Industry (ABPI) Code of Practice for the Pharmaceutical Industry
- China: Code of Pharmaceutical Marketing Practices
- China: Research and Development-based Pharmaceutical Association of China Code of Conduct
- Egypt: Egyptian Code of Pharmaceutical Marketing Practices
- Greece: S.F.E.E. Hellenic Association of Pharmaceutical Companies Code of Practice Regarding the Promotion of Prescription Medicinal Products
- Italy: Farmindustria Code of Ethics
- Israel: The Joint Ethical Convention of The Israel Medical Association and Pharmaceutical Companies Operating in Israel and The Marketing Code of Ethics of The Pharmaceutical Companies Operating in Israel
- Slovakia: Slovak Association of Research Based Pharmaceutical Industry Code of Conduct
- South Africa: Code of Practice for the Marketing of Prescription Medicines in South Africa - PMA Code
- Spain: Spanish Code of Practice for the Promotion of Medicines / Code of Practice Guidelines Regarding Gifts and Inducements; Hospitality and Meetings
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.