STRATEGIC INSIGHTS
Regulatory Compliance
Prescription Drug Marketing Act violations can cost millions. To save that money, follow this program
By Barbara Depompa
January 12, 2004 | In the post-Enron era, it's clear the federal government is closely scrutinizing all potential cases of business-related fraud, which is why tracking drug samples and reporting prescription-drug marketing violations is essential to avoiding fines — and even jail time.
Billions of dollars in penalties for some major pharmaceutical companies has underscored the need to better track drug samples and avoid sanctions (see "The PDMA Penalty Box").
Signed into law by President Reagan in 1988, the Prescription Drug Marketing Act (PDMA) requires biotech and pharmaceutical manufacturers to prove they have the processes in place to prevent the diversion of drugs. Once a drug is FDA-approved and can be marketed, it's vulnerable to diversion.
While the law has faced several modifications, stays, and delays, the final regulation implementing PDMA was signed in April 2003. This may partly explain the heightened interest among biotech and pharma companies in improving regulatory compliance now.
The Meta Group, a consulting firm, reports a 40-percent increase in the number of inquiries over the past few months from all kinds of businesses struggling to meet federal regulatory requirements. And CimQuest, a provider of regulatory compliance consulting services, reports a similar up-tick in requests for assistance specifically related to PDMA, says Philip Clark, CimQuest's regional vice president of business development.
| The PDMA Penalty Box |
Pharmas and biotech firms can ill-afford to turn a blind eye when it comes to complying with prescription-drug marketing regulations
Read More  |
CimQuest recently launched a PDMA training program and offers consulting designed to mitigate risks by adding accountability, sales force automation, and assessment tools — in other words, adding technology and consulting services to reduce a company's risk of regulation-related lawsuits or fines.
But with 85,000 U.S. drug sales representatives carrying millions of drug samples worth billions of dollars, "the opportunities for those few with malevolent intent are not likely to disappear," says Jack Rubin, president and CEO of Integrated Pharma Technologies.
At the same time, complying with PDMA can be a big administrative and financial burden. The Meta Group says the cost of total regulatory compliance can run as high as 25 percent of a company's operating budget. Other industry sources say specific PDMA compliance costs can vary dramatically depending on each drug maker's needs and the regulatory processes and infrastructure already in place.
To lower these costs, compliance officers inside pharma companies must first understand each regulation's primary intent and minimum compliance requirements. Then they must balance compliance costs with the incremental reduction to business risk that each investment brings.
So, what are the PDMA's primary provisions, and what should biotech and pharmaceutical companies do to ensure compliance? Here, based on suggestions from analysts and government sources, are 12 steps to building a comprehensive PDMA compliance program:
1 Write a set of standard operating procedures (SOPs) for PDMA compliance that communicates the company's commitment — and be sure to evaluate management and employees by how well they follow the written SOP program.
2 Carefully monitor the specific sales and marketing promotions to make sure drugs aren't diverted. Perform careful auditing and monitoring of sales and promotional schemes, and remember that the "traceability" of drug samples must include information down to the individual physician, FDA officials say.
3 Focus on due diligence with customers and wholesalers. Drug manufacturers must be able to verify to whom they sell. They must conduct personnel background checks as well as business histories and audit inspections of prescription drug wholesalers.
4 Designate a compliance officer or a corporate compliance committee to develop, operate, and monitor the compliance program. Experts strongly recommend hiring a compliance officer who reports to the board of directors and president — directly — in order to avoid being blindsided.
5 Keep open the lines of communication between the compliance officer and all employees, and have a hotline or other reporting system to receive complaints and questions. Also be sure to protect the anonymity of whistleblowers.
6 Create and implement regular, effective education and training programs for all employees who participate in regulated processes.
7 Conduct regular audits and use other risk-evaluation techniques to monitor compliance, identify problem areas, and assist in the reduction of identified problems. It's important to monitor for unusual distribution patterns. If you see large amounts of charge-backs, or other types of unusual activity, the patterns may indicate fraud.
8 Develop policies and procedures to enforce disciplinary action against employees or contractors who violate company policies and procedures or applicable federal healthcare program requirements.
9 Include specific contractual details in co-promotion and license agreements about who is liable if fines or penalties are incurred in connection with drug product samples.
10 Read up on the key compliance issues of PDMA. One reference guide issued last spring is available from the Office of Inspector General of the U.S. Department of Health and Human Services.
11 Establish what constitutes a reportable loss. Upon inspection, the FDA may suggest different "loss levels," but it's better to receive advice than fines or jail time for outright noncompliance.
12 Use information technology tools and services such as customer relationship management and inventory-tracking software, personal digital assistants, and specialized data mining programs to help improve compliance. There's also a small but vibrant industry of consultants and outsourcing services focused on PDMA regulatory compliance.
One caveat: While there are several products available, it's critical to properly define business rules surrounding use of such tools. Make sure that compliance systems aren't redundant and that they capture the required information needed to adhere to PDMA.
Barbara DePompa writes on business and IT issues from Germantown, Md. She may be reached at bdepompa@comcast.net.
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