Amanda S. Marshall Former U.S. Attorney (Local Counsel)
Lynette Byrd Former Assistant U.S. Attorney
Roger Bach Former Special Agent (OIG & DEA)
Joe Brown Former U.S. Attorney
OIG Compliance Guidance for Pharmaceutical Manufacturers
The OIG’s long-standing guidance for pharmaceutical manufacturers provides a roadmap for compliance. The OIG expects pharmaceutical manufacturers to adapt this guidance to their specific operations, and to implement compliance programs that effectively mitigate the risk of fraud and abuse.
Pharmaceutical manufacturers in the U.S. face a host of federal compliance obligations. Among these obligations are those enforced by the U.S. Department of Health and Human Services’ Office of Inspector General (OIG). The OIG is active in its efforts to enforce compliance among all entities that bill federal health care programs, and it has established clear expectations for entities in all segments of the health care industry.
The OIG’s Compliance Guidance for Pharmaceutical Manufacturers
The OIG’s compliance guidance for pharmaceutical manufacturers identifies “seven elements that have been widely recognized as fundamental to an effective compliance program.” It expects all pharmaceutical manufacturers to adopt compliance programs that incorporate these seven elements—with appropriate customization to ensure that each manufacturer’s compliance program addresses its specific compliance risks and needs. The OIG’s seven fundamental elements of a pharmaceutical manufacturer compliance program are:
Implementation of written policies and procedures
Designation of a compliance officer and compliance committee
Effective training and education
Effective lines of communication
Internal monitoring and auditing
Enforcement through well-publicized disciplinary guidelines
Prompt response and corrective action for detected problems
The OIG states that its compliance guidance, “is intended to assist companies that develop, manufacture, market, and sell pharmaceutical drugs or biological products (pharmaceutical manufacturers) in developing and implementing internal controls and procedures that promote adherence to applicable statutes, regulations, and requirements . . . .” However, it also makes clear that its guidance, “is not a compliance program,” and that its recommendations, “should not be viewed . . . as an exclusive discussion of the advisable elements of a compliance program.” As a result, while pharmaceutical manufacturers can rely on the OIG’s guidance as a starting point, they must still make their own independent determinations regarding what compliance efforts are both necessary and sufficient.
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John W. Sellers
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Joanne Fine DeLena
Former Assistant U.S. Attorney
Lynette S. Byrd
Former Assistant U.S. Attorney
Former U.S. Attorney
Aaron L. Wiley
Former Federal Prosecutor
Former Special Agent (OIG)
Former Supervisory Special Agent (FBI)
Former Special Agent (FBI & IRS-CI)
Kevin M. Sheridan
Former Special Agent (FBI)
Former Supervisory Special Agent (FBI)
Dennis A. Wichern
Former Special Agent-in-Charge (DEA)
1. Implementation of Written Policies and Procedures
The majority of the OIG’s compliance guidance for pharmaceutical manufacturers focuses on the implementation of written policies and procedures. After a brief discussion of its recommendations for a Code of Conduct (which should, among other things, “articulate the company’s expectations of commitment to compliance by management, employees, and agents”), the OIG’s compliance guidance then identifies several “specific risk areas” that pharmaceutical manufacturers need to address in their compliance documentation. These areas include:
Integrity of data used to calculate reimbursements
Kickbacks and other illegal remuneration
Relationships with sales agents
Relationships with purchasers and their agents
Relationships with physicians and others in a position “to make or influence referrals”
Discounts and other price concessions
Formularies and formulary support activities
Average wholesale prices
Compliance with laws regulating drug samples
In addition to these areas, which the OIG has identified as being specific concerns for pharmaceutical manufacturers, manufacturers must address various other aspects of federal health care program compliance in their policies and procedures as well. For example, manufacturers must implement comprehensive billing compliance protocols; and, if they rely on third-party billing administrators, they must ensure that their contracts with these third parties include appropriate requirements and protections.
2. Designation of a Compliance Officer and Compliance Committee
The OIG’s compliance guidance states that “Every pharmaceutical manufacturer should designate a compliance officer to serve as the focal point for compliance activities. . . . If the individual has additional management responsibilities, the pharmaceutical manufacturer should ensure that the individual is able to dedicate adequate and substantive time and attention to the compliance functions.” The OIG also instructs that compliance officers should have ” sufficient funding, resources, and staff” to fulfill their obligations.
According to the OIG’s guidance, pharmaceutical manufacturers’ compliance officers should have direct access to the company’s senior management, board of directors, and legal counsel (although “[o]ptimal placement” will vary between organizations). Some examples of compliance officers’ primary responsibilities include:
Overseeing and monitoring compliance program implementation
Reporting to the company’s leadership on a regular basis
Periodically revising the company’s compliance program as necessary
Developing training programs for all personnel
Ensuring that agents and independent contractors are aware of the company’s compliance obligations
Assisting with internal compliance audits
Reviewing reports of noncompliance
Independently investigating and acting on matters related to compliance
Assisting legal counsel with the reporting of any uncovered violations
The OIG also recommends the establishment of a compliance committee to advise the company’s compliance officer and assist with compliance program implementation (although it recognizes that some companies may not have “the resources or the need” for such a committee). When the compliance officer or compliance committee uncovers a potential violation, the OIG also recommends the appointment of a “task force” to assist with the compliance officer’s response efforts.
Effective training and education are crucial to the implementation of an OIG compliance program. All personnel within the company should receive training and education that are tailored to their individual roles in helping to maintain compliance. The OIG advises that, “where feasible,” independent contractors (including sales agents) working with pharmaceutical manufacturers should receive compliance training as well.
Importantly, the OIG instructs that pharmaceutical manufacturers’ training programs and materials should take into account the “skills, experience, and knowledge” of individual employees. As a result, the use of generic training programs and materials is off of the table. The OIG’s guidance also indicates that the company’s compliance officer should document all completed trainings, and that “participation in training programs be made a condition of continued employment.”
4. Effective Lines of Communication
The OIG’s compliance guidance emphasizes the importance of effective internal communication for pharmaceutical manufacturers. This extends to all aspects of compliance—from publicizing the company’s policies and procedures to encouraging employees to report suspected compliance failures. With regard to reporting, the OIG’s compliance guidance focuses on two key aspects of communication:
Access to Supervisors or the Company’s Compliance Officer – “Pharmaceutical manufacturers should consider the adoption of open-door policies in order to foster dialogue between management and employees. In order to encourage communications, confidentiality and non-retaliation policies should also be developed and distributed to all employees.”
Hotlines and Other Forms of Communication – The OIG encourages the use of hotlines, e-mails, newsletters, suggestion boxes, and other forms of information exchange to maintain open lines of communication. . . . Employees should be permitted to report matters on an anonymous basis.”
5. Internal Monitoring and Auditing
“An effective compliance program should incorporate thorough monitoring of its implementation and an ongoing evaluation process. . . . The extent and frequency of the compliance audits may vary depending on variables such as the pharmaceutical manufacturer’s available resources, prior history of noncompliance, and the risk factors particular to the company.” Pharmaceutical manufacturers should conduct both regularly-scheduled internal compliance audits as well as ad hoc audits when specific compliance concerns arise.
With regard to who should conduct a pharmaceutical manufacturer’s internal compliance audits, the OIG suggests that, “it is often effective to have internal or external evaluators who have relevant expertise.” Since most pharmaceutical manufacturers lack internal personnel with the background (and bandwidth) to handle internal monitoring and auditing, this is a function that manufacturers typically outsource to the company’s compliance counsel.
6. Enforcement Through Well-Publicized Disciplinary Guidelines
An aspect of compliance that many pharmaceutical manufacturers (and other companies) overlook is the aspect of discipline. But, the OIG makes clear that when employees make mistakes that have compliance implications, pharmaceutical manufacturers should hold them accountable. Specifically, the OIG advises that, “[a]n effective compliance program should include clear and specific disciplinary policies that set out the consequences of violating the law or the pharmaceutical manufacturer’s . . . policies and procedures,” and that pharmaceutical manufacturers should, “consistently undertake appropriate disciplinary action across the company . . . .”
However, while consistency is important, it is also important for pharmaceutical manufacturers to make disciplinary determinations on a case-by-case basis. The OIG advises that manufacturers consider “all relevant factors” in order to determine what level of disciplinary action (i.e. warning, reprimand, or termination) is warranted.
7. Prompt Response and Corrective Action for Detected Problems
The final area in which the OIG provides guidance involves what to do after identifying a compliance failure. As the OIG notes, “Detected but uncorrected misconduct can endanger the reputation and legal status of the company.” While compliance failures can have potentially-significant consequences, overlooking or ignoring such failures is viewed far less favorably by the OIG and other federal law enforcement authorities.
When responding to compliance failures, pharmaceutical manufacturers must take appropriate action both internally and externally. Internally, this involves remedying the issue that led to the failure, providing training, and imposing discipline as necessary. Externally, this may involve reporting the issue to the OIG—although pharmaceutical manufacturers must be careful and make informed decisions prior to voluntarily disclosing statutory or regulatory infractions to the OIG.
Speak with a Federal Health Care Lawyer or Former Federal Agent about OIG Compliance
If your company should be doing more with regard to OIG compliance (or if you are unclear on any aspect of your company’s OIG compliance obligations), our federal health care lawyers and former federal agents can help. To discuss your company’s needs in confidence, call 888-680-1745 or tell us how we can contact you online today.
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