DNA inside pill.

Updated Pharma Code Now in Effect

Contact: Benjamin D. Bresnick

February 19, 2019

As of January 1, 2019, the International Federation of Pharmaceutical Manufacturers and Associations (IFPMA[i]) has released an updated version of its Code of Practice[ii] (“Code” or “The Code”).  This update, representing the sixth revision of The Code and the first update since 2012, contains two major changes.  The first notable change is the addition of an organizational Ethos which is a shift from a rules-based system of self-governance, to a focus on a values-based code[iii].  The second change is the institution of a world-wide ban on the provision of gift and promotional aids by pharmaceutical companies and their agents for all prescription-based medications[iv].  At first glance, it appears that the new Ethos and the implementation details contained within The Code are a reasonable proxy for the Office of Inspector General’s (OIG) healthcare compliance guidance and the seven elements of a corporate compliance program identified by the Federal Sentencing Guidelines (FSG).

Similarities to the Seven Fundamental Healthcare Compliance Elements

The new Ethos is centered around the creation and preservation of trust with patients, providers, and shareholders.  The Ethos focuses on Care, Fairness, Respect, and Honesty; underpinned by eight identified characteristics:  Innovation, Quality, Integrity, Accountability, Education, Privacy, Transparency, and Speaking Up[v].

Although there is not a precise match with the OIG’s or the FSG’s core elements of a Compliance Program, arguably there are many similarities between The Code and the OIG’s position on effective compliance[vi].  The OIG recommends written policies, procedures, and standards of conduct; this Ethos (along with the appurtenant Code) appears at its core to be the written policies and overarching conduct guidelines for the pharmaceutical industry.  The OIG also calls for the designation of a compliance officer and committee; within Appendix 3 of the Code, the IFPMA calls out the establishment of the Ethics and Business Integrity Committee (eBIC).  The committee is charged with preventing breaches, disseminating communications regarding self-regulation, serving as a pool of compliance experts, and creating a forum to exchange compliance best practices among other responsibilities[vii].  There appears to be a direct nexus with the OIG recommendations and the FSG requirements.  Additionally, the OIG directives of Education, and Communication closely resemble the Ethos elements of “Education” and “Speaking Up.”

The three remaining OIG/FSG elements of a corporate compliance program: internal monitoring and auditing, enforcement of standards through well-publicized disciplinary guidelines, and the prompt response/corrective actions following the detection of offenses are slightly less apparent within The Code.  In terms of monitoring and auditing, The Code (§13.2) does encourage the representative members to “adopt procedures to assure adherence…[viii]”; however, there is no call for routine or for-cause auditing to prove or disprove variance from The Code.

Further, although The Code has an entire Appendix dedicated to the enforcement, the discipline for a violation (in terms of sanctions) is nebulous; it only prescribes the cessation of the activity in violation.  If there are progressive disciplinary actions for continued violations or tiers of sanctions for different types of non-conforming activities, these penalties are not included within The Code.  Finally, Appendix 2 of The Code does spell out time frames for the complaint process (§2.4 provides 30 days for a written response from the company accused of a breach, §2.5 provides the Secretary of the IFPMA 20 days to adjudicate the complaint after receipt of the written response, and §2.7 provides 10 days for the company to provide a written statement outlining the corrective actions).  However, as previously stated, the nature of the corrective actions to be implemented remains opaque.

Overall, The Code appears to be a good step towards creating a framework for compliance for participating multinational pharmaceutical corporations that have seen billions of dollars in fines levied for False Claims Act violations, particularly related to off-label advertising and other unapproved activities.  Absent only a more clearly defined sanctions section with well-articulated and publicized progressive corrective actions, The Code aligns pharmaceutical manufacturer compliance with the expectations of the OIG.

Complete Ban on the Provision of Gifts or Promotional Aids

The second major change in The Code is the worldwide ban on the provision of gifts and promotional aids.  Although the term “promotional aid” is not demarcated in the definitions section of The Code, in an op-ed, Thomas B. Cueni, the Director General of IFPMA[ix], refers to promotional materials as “goodies” including but not limited to “post-its, calendars, diaries, etc.” that were often left at physician offices during sales calls[x].  Mr. Cueni also makes specific reference to removing a carveout for the provision of mooncakes and condolence payments.  Mooncakes are traditional gifts in Southeast Asia to celebrate lunar festivals and the Mid-Autumn harvest festival.  While most mooncakes are modest edible pastries, other more elaborate forms (such as a Malaysian version costing nearly $1000 USD and made with edible 24K gold[xi] and solid gold Chinese versions costing more than $6500 US) are becoming more common[xii].  Additionally, the Chinese custom of Condolence Money is the practice of providing sums of money in white envelopes (the Chinese color of mourning) on the day of the funeral to members of the deceased family[xiii].

It appears that the IFPMA was concerned that these traditions could be construed or were simply too close to impermissible transfers of monetary benefits or flat out bribes.  This change should not have a large impact on US and EU operations as these prohibitions have been the norm for many years.  In fact, Mr. Cueni’s op-ed specifically notes these changes as bringing “the rest of the world in line with current European and US guidance[xiv].”

The Code does permit pharmaceutical companies to provide branded pens and notepads during company sponsored events for notetaking.  Further, The Code creates a new category of materials defined as “informational or educational” which permits the provision of scientific books, medical journal subscriptions, and flash drives with educational data so the medical providers can educate themselves or their patients so long as these items do not possess an independent value.

After discussion of the IFPMA updates with professional colleagues that are current US-based pharmaceutical sales representatives for two different multinational companies, neither saw this expanded prohibition as a change from current practice.  They noted that for them, the prohibitions outlined in The Code have been in effect for many years, but the permissive stance on providing branded pens and notepads during educational seminars would represent a loosening of the current restrictions imposed by their corporate offices.

Generally, this global harmonization of the rules should be seen as a step in the right direction to eliminate the appearance or actual fraud and kickback arrangements from participating pharmaceutical companies.  However, it is interesting that The Code does not impose a duty on the participating companies to perform proactive audits to monitor compliance, and simply relies on reported complaints to reveal evidence of non-compliance.  Additionally, absent an escalating penal methodology it is uncertain if The Code, in and of itself, is enough to eliminate the undesirable behaviors that it strives to eradicate.  Time is the ultimate judge, and it will be worth following The Code to see if the next update contains the few OIG elements that are not well covered in the current version.

[i] www.ifpma.org
[ii] https://www.ifpma.org/wp-content/uploads/2018/09/IFPMA_Code_of_Practice_2019.pdf
[iii] https://www.ifpma.org/subtopics/new-ifpma-code-of-practice-2019/
[iv] Id.
[v] https://www.ifpma.org/wp-content/uploads/2018/09/IFPMA_Code_of_Practice_2019.pdf, pg. 12
[vi] https://oig.hhs.gov/compliance/provider-compliance-training/files/compliance101tips508.pdf
[vii] https://www.ifpma.org/wp-content/uploads/2018/09/IFPMA_Code_of_Practice_2019.pdf, pg. 44
[viii] https://www.ifpma.org/wp-content/uploads/2018/09/IFPMA_Code_of_Practice_2019.pdf, pg. 31
[ix] https://www.ifpma.org/who-we-are/our-experts/
[x] https://www.ifpma.org/global-health-matters/cultivating-trust-in-the-healthcare-system-patients-need-to-be-able-to-trust-between-the-interactions-between-pharma-healthcare-professionals-and-medical-representatives/
[xi] https://says.com/my/news/most-expensive-mooncake-in-malaysia
[xii] http://www.luxuo.com/lifestyle/gastronomy/gold-and-silver-mooncakes-china.html
[xiii] http://theamateursguide.com/chinese-funeral-etiquette/
[xiv] See endnote “x” supra