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The growing number of states with laws now are joined by the “51st state”: the federal government
A headache for corporate compliance officers in pharma is now turning into a debilitating migraine: aggregate spending regulations, which seek to record and monitor the money or goods directed at prescribers and clinicians by the industry. The Patient Protection and Affordable Care Act (PPACA)—the Obama administration’s massive healthcare reform law—absorbed the Physician Payments Sunshine Act, which had been bouncing around in the halls of Congress for a couple years. Now, the reports that were to be filed with various state offices (six states have rules in place; another 20 are contemplating them) will be filed on a national basis, starting in 2012.
The federal action, however, seems at this point simply to add a 51st state to the list of potential or actual regulators. PPACA sets a minimum reporting standard, but states will be free to add to those minimums, and many of the rules already on the books vary according to minimum reporting amounts, reporting deadlines, penalties and more. It adds up to a large—and growing—body of regulation that will make a lot of work for the finance office, the compliance office, and the guidance given to both sales forces and to R&D departments (who, in some instances, need to report dollar amounts for sponsored research or consulting).
Cegedim-Dendrite (Bedminster, NJ) is one of a growing list of IT or consulting services that is stepping into the breach with solutions. A just-completed survey it performed found that 40% of respondents are tracking expenditures manually, usually with spreadsheet programs. (However, half of that number expects to migrate to automated systems soon.) And only 29% of respondents are “very confident” that they are recording and reporting the spending in a fully compliant manner.
As companies continue to struggle with the identification of data sources, consistent standards for data sources, single views of customers across data sources, and various other data anomalies, it becomes increasingly important to have a more holistic and consistent approach to aggregate spend and state reporting,” said Bill Buzzeo, VP and GM, Compliance Solutions and OneKey for Cegedim Dendrite. He adds that this holistic view now includes, in some cases, R&D departments “who have never been asked to do this type of reporting before.”
Cegedim Dendrite has recently rebranded an earlier version of an agg spend system, State Guardian, as AggregateSpend360, and built additional functionality into the tool.
John Oroho, EVP of Porzio Pharmaceutical Services (Morristown, NJ), points out that another part of PPACA includes reporting on the value of samples that have been distributed to prescribers, something that has been regulated under the Prescription Drug Marketing Act (PDMA) since the late 1980s, but will now have new reporting requirements. Departments that handle sample accountability and PDMA compliance will be brought into the process. Porzio Pharma Services has been publishing a Compliance Digest on state-level rules for several years, and has partnered with MedPro (Mt Arlington, NJ) and Synergistix (Sunrise, FL), a sales-force-automation software vendor, to provide agg spend compliance.
Mark Linver, senior principal in the Managed Markets Service of IMS Health (Valley Forge, PA), says that while agg spending is getting “high level” attention from corporate compliance officers, “this is not a situation where you can issue an edict, buy and install some software, and expect everything to work. You will need to provide extensive training to sales forces, and to review business processes regularly even as the regulations themselves are evolving.”
In addition to providing consulting services on compliance, IMS Health has partnered with an IT company, R-Squared Services and Solutions (Princeton, NJ), to offer an Aggregate Spend Compliance Service.
Other companies jumping on the agg spend bandwagon include OpenQ (Charlottesville, VA), which has experience in managing speaker bureaus for pharma companies, and the managing consulting firms Huron Consulting (New York), Polaris Management Partners (New York), and CapGemini (Cambridge, MA).
Names, rules and dollars
There are three essential ingredients to a successful agg spend system: identifying the recipients correctly; being current with reporting rules; and successfully aggregating the spending. All three have their challenges, according to industry experts.
Merely to identify who is receiving a gift from a rep, or has a consulting arrangement with a pharma company, is not a trivial task. Cegedim Dendrite bought SK&A Information Services last year, which compiles identifying data on healthcare professionals, with compliance reporting partly in mind. Porzio Pharma Services partners with MedPro, another database provider. “You want to be able to correctly tie things like the state license numbers of physicians, or to track them if they change their maiden name, or move to another location,” says Porzio’s Oroho.
Cegedim-Dendrite (which is part of the Paris-based Cegedim Group) has a healthcare-professional (HCP) service called OneKey that is widely used outside the US; the SK&A database is primarily US-based, so together, they give a global picture, says Buzzeo. “There are transparency and reporting requirements developing outside the US for the pharma industry, and global pharma companies need to be especially careful not to unwittingly cross the lines set by the Foreign Corrupt Practices Act.” (FCPA forbids payments to government officials; and since HCPs in many countries are government employees, the risks can be high.)
Keeping track of rules and their changes is arguably one of the most compelling reasons to outsource the reporting service. “Rules differ in terms of minimum reportable dollar amounts, categories of payments, stated maximums for individual HCPs, and reporting periods,” says Rebecca Fisher, director of commercial effectiveness at IMS Health. “A company’s existing internal reporting might be segmented among speaker bureaus, consulting agreements, commercial arrangements as well as promotional expenses,” she says. And the data that tracks these components might reside in a CRM system, an SFA system, or specialized systems for speaker bureaus, PDMA compliance and the like.
Yet another layering of complexity is the large number of pharma companies that are operating under a corporate integrity agreement of one form or another; while these CIAs sometimes specify the reporting of promotional expenses, their requirements are often unique to each company that they are set with. At the same time, any violation of a state-level rule could become a material item for the outside reviewer of the CIA.
Even individual healthcare centers have gotten into the act. According to a compilation developed by Porzio Pharma Services, dozens of academic medical centers have instituted restrictions on promotional interactions with industry representatives; while the downside here is not a government-imposed fine, the centers can prohibit further interactions with specific companies as a result of spending violations. It’s not inconceivable to envision a researcher conducting an extensive project with a pharma company, who happened to be visited and taken to lunch by a pharma rep, thereby jeopardizing the research project.
Even with all these complexities, the focal point of many of the state-level regulations is promotional spending with individual HCPs, which is something that sales-force automation systems are supposed to track already. Some SFA vendors, notably Veeva Systems (Pleasanton, CA), tout the ability of their systems to report out promotional spending (Pharmaceutical Commerce, March, p. 29). On the other hand, Cegedim Dendrite, which has a widely used SFA system, Mobile Intelligence, emphasizes the value of keeping the two systems separate. “One problem is that there are reporting requirements in a clinical research program that need to be kept separate from commercial activity,” says Don Soong, senior director, compliance solutions, at Cegedim Dendrite. “Another is the inherent value in having an IT system whose underlying data structure is built to handle changing regulatory interpretations, and not to be re-engineered every time there is a regulatory change.” Soong also emphasizes that Cegedim Dendrite has AggregateSpend360 clients who do not use its Mobile Intelligence SFA platform.
There is an upside to all this data-gathering and reporting: by going through the exercise of it, a company can have a much better handle on overall promotional spending—and can use that as part of a business process improvement program. Either by rule or by policy, for example, pharma companies could have dollar limits on spending for individual HCPs. Spending could also be managed by sales region, or by individual rep. “There’s a value to making individual reps aware of their own activity,” says IMS Health’s Linver.
That’s the carrot. The stick, of course, is the potential penalties for violations. “No precedents have been set yet for reporting violations, but you have to calculate the risk of that as part of the cost-justification for using dedicated reporting systems,” says Linver. “At a small company, there might be justification for compiling these data on a spreadsheet. But bigger companies need to know, ‘Am I compliant?’ Can I continue to operate as I have?’ and answering those questions needs a comprehensive, reliable system.” PC