ComplianceWatch Asia: Challenges Met and Emerging Trends That Lie Ahead

01.16.18 | By Joyce Wong

The past year has been one replete with challenges and opportunities for Life Sciences companies in the Asia-Pacific region. Several new compliance regulations and codes were enacted and the focus on anti-bribery and anti-corruption became even sharper, making the compliance landscape increasingly complex.

In 2016, as the demand for transparency continued in the region, Andy Bender and the Polaris team made the strategic decision to expand their footprint in Asia. They wanted to share not only their experience and expertise, but also the company’s innovative technology solutions. So, Polaris Asia-Pacific was born, and recently celebrated its one-year anniversary.

We want to take this opportunity to take a look back and share insights into Asia’s compliance environment and note key highlights, then take a look at the road ahead.

Transparency Reporting Takes Center Stage

We saw transparency reporting become law in the Philippines and South Korea in February and June 2017, respectively. This brings the total number of countries within the APAC region requiring transparency reporting either by law or through an industry code to five, including Japan, Australia and Indonesia.

The South Korean Pharmaceutical Affairs Act Article 47-2 and Medical Devices Act Article 13-2 became law in June 2017. Beginning in 2018, companies will be required to collect and maintain expenditure reporting. Similar to other transparency legislation, the Korean laws require pharmaceutical and medical device companies that operate in South Korea to report certain benefits provided to healthcare professionals (HCPs) and persons employed at medical institutions during a given fiscal year.

Like South Korea, the Philippines’ transparency law, Administrative Order N.2015—0053, is also applicable to both pharmaceutical and medical device companies, and has been in effect since February 2017. Under the law, companies are required to file two types of reports: Notice of meetings and Post travel.

While the Philippines law may have fewer reportable spend requirements than its South Korean counterpart, it presents its own unique administrative challenges because companies must manually enter all data into forms on the FDA’s website. The Pharmaceutical & Healthcare Association of the Philippines (PHAP) and the FDA are currently discussing alternatives to alleviate some of the burden.

Japan’s transparency reporting is the most mature in the region. In 2012, the Japan Pharmaceutical Manufacturers Association (JPMA) and the Japan Federation of Medical Devices Association (JFMDA) adopted the Transparency Guideline for the Relation between Corporate Activities and Medical Institutions, and the Transparency Guidelines for the Medical Device Industry and its Relationships with Medical Institutions and Other Organizations respectively.

In April 2017, the scope of Japan’s reporting was increased with the passing of the Clinical Research Law. It includes a mandatory disclosure clause for payments related to “specified clinical research.”

China is now beginning to address healthcare reform. The hottest topics are the two-invoice system and the mandatory registration of medical representatives. The Shanghai Medical Representative Registration Rules (draft) of August 2017 stated the following:

  • Medical representatives (MR) must act “on behalf of” drug manufacturers
  • Drug manufacturers must establish MR qualification requirements
  • MRs must be registered to promote drugs
  • MRs will be de-registered in case of bribery or other misconduct
  • All MRs of drug manufacturers or MR “home companies” will be de-registered, if the companies have “bad records.”

The intent of all these initiatives is to prevent and mitigate anti-bribery and anti-corruption risks. You can learn much more about the specifics of each of these laws and how they are affecting Life Sciences companies by reading an insightful article written by my colleague, Lisa van de Kamp.

As was the case in 2016, the Asia-Pacific region contributed the largest percentage of bribery cases in numbers and penalties: 47% of the DOJ cases, and 65% of civil resolutions by the SEC. Additionally, through August 2017, 14 healthcare & pharmaceutical industry related FCPA investigations were ongoing. So, there is obviously still much work to be done.

Given the aggressive enforcement by the U.S. DOJ and SEC against corruption that we’ve seen, coupled with an increasing internal country-specific focus on the prosecution of anti-corruption cases, we expect that companies will continue to closely monitor the anti-corruption climate and implement strong anti-corruption compliance policies and procedures. These activities should further encourage companies to investigate and leverage compliance technology that automates processes, helping to ensure that the organization has an efficient, scalable and global process in place.

Key Challenges Facing the Region

Over the past year, Polaris’ experts have identified several core challenges in the region, and observed that companies are putting more effort into improving these areas. Individual topics and their main challenges are outlined below:

Transparency Reporting:

  • Consistent collection and adjudication of data for reporting from multiple data sources
  • Accuracy and completeness of the spend data
  • Cleaning, matching and adjudication of data
  • To find a long term and scalable solution
  • Staying on top of ever-changing reporting requirements

HCP Engagements:

  • Effectively manage anywhere from 10,000 to 100,000 HCP events/activities, while ensuring that all the activities actually happened. Additionally, confirm that the events in question align with SOPs in order to reduce anti-bribery and anti-corruption risks.
  • Set up compliance controls such as needs assessments, FMV, approval, contracting and payment processes
  • Effectively use data analytics to spot risk areas, and to support auditing and monitoring

Third Party Management/Due Diligence:

  • Manage large number of third parties and deploy a methodology prioritized by risk level
  • Third Party background checks and due diligence, especially in the region
  • Create and implement a process to assess and manage risk levels of Third Parties over time, that includes a risk mitigation action plan as well as proper follow up and documentation

FMV (Fair Market Value):

  • Establish a methodology to calculate FMV rates and HCP tiering criteria
  • Ensure the appropriateness & competitiveness of FMV rates
  • Address the practical FMV rate usage:
    • Should there be daily or annual payment limits?
    • How should travel be compensated?
    • How should same day speaking engagements be handled?
    • Should fees be discounted? When?
    • Should physicians with different specialties be compensated differently at the same consulting event?
    • Can we implement exception processes? How should exception processes be managed?
    • How frequently do we need to update the FMV rate?
  • How much should we pay for a clinical study, CME program, educational meeting or sponsorship, etc.

 

So how best to address these challenges? My recommendations would be:

  • Have a full risk assessment to understand what the key risk areas are in the company, especially what are the top 3-5 risks that need to be addressed
  • Craft an effective compliance program / solution to address these risk areas
  • Apply industry best practices. Many multi-national companies are establishing a global compliance platform through technology
  • Leverage technology to:
    • Make the process consistent and efficient
    • Centralize data for analytics
    • Support on-going control and monitoring
    • Proactively identify risk area or outliers
  • Based on the compliance resources available, know what can be done in-house, and what would be more efficiently handled by an outside compliance partner

What Lies Ahead In 2018?

Companies will still focus on the four key challenges highlighted above in order to reduce their compliance risks.

Transparency reporting will continue to be front and center for many companies due to the fact that numerous countries and associations in the region are implementing regulations.

Life Sciences companies in the region are realizing how important it is to establish a proper HCP engagement and third-party due diligence process to reduce anti-bribery and anti-corruption risks. In an informative article, my colleague, Dana Liu, outlined important steps companies should take in order to do so. You can find the full article here. Additionally, you can read a piece that discusses what constitutes a robust third-party due diligence program, written by Lisa van de Kamp.

Another important trend in the region is the shifting role compliance plays within the company. Compliance is becoming a true partner to the commercial organization. This is due in part to the emergence of transparency reporting and data analytics that can be leveraged to empower ethical decision-making.

Compliance functions are going beyond transparency and policy enforcement. Teams are working closely with the business to embed compliance controls and tools across the company, providing more concise insights into various processes. This includes HCP engagement and vendor due diligence to identify HCP outliers, HCP payment limits monitoring, sales and marketing activities analysis, and vendor risk assessments.

Compliance can partner with the business to implement innovative solutions that help make compliance a good business practice, and ensures that risk management is a discipline embedded in the corporate culture.

It is important to remember that compliance is everyone’s responsibility, especially the top management team. They need to set the tone, build the compliance culture and allocate the appropriate resources to support the organization’s compliance objectives.

Sharing Insights, Expertise and Technology Solutions

The Polaris team is partnering with Life Sciences companies across the region to craft, implement and manage effective compliance programs and processes.

Our experts actively participant in compliance conferences, congresses and summits across the region, and have connected with different industry associations to share our insights and expertise. We continue to innovate and develop scalable, flexible technology that solve today’s compliance challenges.

Since 2001, Polaris has been focused solely on the Life Sciences industry and continues its commitment to be the trusted partner for pharmaceutical, biotech and medical device companies around the world. We have a reputation for providing insightful guidance, anticipating “what’s next” and delivering highly efficient technology solutions that are unsurpassed for quality and satisfaction.

To learn more about Polaris consulting and technology solutions, visit www.polarismanagement.hk or contact me @ jwong@polarismanagement.com.