Removing the Silos: Promoting a Holistic Approach to Compliance

By Brian O'Rourke, Editor and PCX Product Manager
brianorourke@cis-partners.com

While most pharmaceutical manufacturers have accepted the necessity of a Compliance Department within the organization, Compliance Officers and other personnel assigned compliance-related responsibilities still face an uphill battle. Compliance personnel, who are usually legally well-informed and able to offer sound opinions regarding the legitimacy of certain business or administrative practices, find themselves undercut by rejoinders of the classical “materiality argument.” Further, the corporate culture often breeds a world of loosely-connected silos: departments within an organization operating in a compliance vacuum. To be fully-compliant, the manufacturer must remove the silos and approach compliance holistically. A compliance officer or department, with the appropriate authority, can make sure this happens.

While materiality is an important legal concept in the sales and marketing world, it is inapposite in the Government Programs and Statutory Pricing arena. Directors of Price Reporting would likely be laughed out of the courtroom if they were to testify that errors in Average Manufacturer Price, Best Price, or Average Sales Price calculations were “immaterial.” Under the False Claims Act, no such safe harbor is provided to the pharmaceutical manufacturer. Data is either correct or incorrect.

Given recent case law, which has shown that the Government and qui tam plaintiffs are increasingly relying upon the False Claims Act as the premiere theory of liability, a holistic approach to Compliance is essential to the pharmaceutical manufacturer’s success, profitability, and vitality. Considering that the pharmaceutical manufacturer is unable present the argument of materiality under the False Claims Act, this approach only makes sense—data is either correct or incorrect.

It is important to remember that business practices in one area can, and usually do, have a ripple-like effect throughout an organization. Consider the United States ex rel. David Franklin v. Parke-Davis case. Here, Parke-Davis was alleged to have been engaged in a campaign of off-label promotion. The sales force, probably entirely unaware of the price reporting ramifications, was allegedly instructed to promote off-label use. As a result, the Government argued, pharmacists were submitting claims for reimbursement for prescriptions that were or could have been for unauthorized uses, and thus, possibly not reimbursable under the various State plans. As such, the Government argued that off-label promotion was resulting in false data being submitted to the Government.

As it appears that the False Claims Act is quickly becoming the Federal Government’s drink of choice, the pharmaceutical manufacturer must approach compliance holistically. By removing the departmental silos and increasing communication and understanding among departments regarding compliance issues, the pharmaceutical manufacturer can not only protect itself better from liability, it can also make sound business decisions in a uniform, consistent manner. Such an approach bespeaks the importance of centralizing the compliance duties and commensurate authorities within one particular Department or Office. Compliance cannot be done in a vacuum.