The timeline is tight to meet reporting requirements of the new Ontario Life Sciences transparency law.
The new Ontario law requiring financial transparency by pharmaceutical and medical device companies operating in that province is more stringent, extensive and complicated than healthcare compliance regulations anywhere in the world. That was the core message for Life Science professionals at IQVIA’s March 21st, 2018 webinar.
Chrisoula Nikidis, Canadian Head of Compliance and Ethics Solutions at IQVIA, and Darren Jones, Senior Principal of the Global Compliance Risk Management practice of Polaris Management Partners, told those in attendance that companies impacted by the law must act immediately, starting in early 2018, if they hope to meet 2020 reporting deadlines.
Like the U.S. Physician Payments Sunshine Act and EFPIA reporting requirements in the E.U. – after which it was modeled – Ontario’s Health Sector Payment Transparency Act, passed into law in December 2017, was created to strengthen transparency involving financial relationships between Life Sciences companies and healthcare providers. However, it goes further than U.S. and European reporting obligations in that it includes payments made to patient organizations, advocacy groups, as well as such “payers” as marketing firms and continuing health education program vendors. As of 2019, the Ontario law requires Life Sciences companies to track payments, both direct and indirect, involving “transfers of value” (TOV) starting at $10 (Cdn). Reporting deadlines begin in 2020.
Nikidis and Jones pointed out that the Ontario legislation contains “serious monetary fines” for non-compliance not only at the corporate level, but also for individuals. The corporate fines range between $50,000 and $100,000 a day (Cdn), while those for individuals are between $10,000 to $25,000 daily (Cdn).
As a point of comparison, the Sunshine Act, which came into force on Aug. 1st, 2013 as part of the Affordable Care Act of then-President Barack Obama, does not call for individual fines.
Jones told attendees that based on “what we’ve seen elsewhere in the world…transparency is just the beginning: once we see regions or jurisdictions focus on transparency, the emphasis on anti-bribery and anti-corruption comes immediately on its heels.”
Complexities of the Compliance and Transparency Landscape
“Ontario’s law has the broadest definition in the world for covered recipients, with 31 different categories”, Nikidis said. By comparison, the Sunshine Act defines recipients only as teaching hospitals and “physicians” who practice medicine, osteopathy, dentistry, dental surgery, podiatry, optometry and chiropractic procedures.
The Ontario law defines what constitutes a payer, recipient and intermediary, but Nikidis said that “if you start to deconstruct what a payment would look like to some of these groups, at times some of the recipients may, in turn, be a payer, or an intermediary can turn into a recipient and a payer.” Nikidis indicated that the law has gray areas, adding that “it’s very complex.”
As for payments, the Transparency Act lists over a dozen categories with multiple sub-categories, meaning a total of about 20 different categories of spend, including travel and lodging, consulting fees, educational events and honoraria. By comparison, the Sunshine Act has about half a dozen categories of spend. Jones described Ontario’s payment categories as “very robust”, adding that implementing the spend, capture and classification of expenditures in so many categories will be challenging for the industry.
Another area of concern is that the new law does not recognize corporate social responsibility (CSR) donations from Life Sciences companies as being distinct from initiatives with commercial intent, Jones said. For example, sponsorships, grants and contributions given for purposes of educating patients and physicians – as well as the donation of medicines and therapies for patients who would otherwise not be able to afford them – is categorized under the new law as “indirect transfers of value” which must be reported although they have traditionally been considered “acts of goodwill” on the part of the industry.
As for reporting, the new law covers both “direct” and “indirect” payments. One example of an indirect payment would be an unrestricted grant made for an accredited CME event organized by a university or hospital, which, in turn, pays a physician to be its guest speaker. Due to the fact that it would be an arm’s-length transaction, there is no way that the Life Sciences company making the grant would normally know which doctor had been hired by the university or hospital to speak. But under the new Ontario law, it is the Life Sciences company – not the recipient hospital or university – which is obligated to report the TOV made to the doctor hired to speak.
“This is an implementation issue”, Jones said, which will necessitate a new kind of contract and payment schedule between payers, such as Life Sciences companies, and payees – in the example above, the university or hospital.
“What I think has to happen is [that] you have to rethink how you contract,” Jones said. “When we are making a patient advocacy contribution or we are procuring data from a clinic to support our health economic outcome research, or we are providing a CME grant – we are going to have to establish milestone payments to make sure there is an obligation on the receiving end for that party getting funds to commit to provide this data. Otherwise the obligation is on – and the penalties are on – the payor for underreporting.”
Nikidis emphasized that the strict reporting requirements of the new law should be seen by Life Sciences companies as an opportunity to shed light on their positive activities, as it relates to helping patients. “Your decision to report is a decision to engage,” she said.
Time for Change Management?
The new law stipulates that starting on Jan. 1st, 2019, Life Sciences companies operating in Ontario will have to begin tracking all TOVs in the various spend categories with data for the entire 2019 calendar year complete and ready for a 45-day review, verification and possible corrections by recipients starting on March 31st, 2020. By June 30th, 2020, all the data must have been finalized and reported to the Ontario Ministry of Health and Long-Term Care, which will subsequently post it online for public viewing.
Life Sciences companies operating in Ontario should have begun setting up systems starting in early 2018 to “prepare and assess” TOVs in anticipation of the January 1st, 2019 deadline set by the new law to begin capturing all their disclosures.
Based on IQVIA’s experience helping companies adapt to regulations in 40 countries worldwide that currently have compliance rules in place, Jones said he is confident in saying that companies operating in Ontario must start immediately to set up systems to capture direct and indirect spending in conformity with the new law because it will be too late to start such a complex process in January 2019.
What makes the reconciliation process even more complicated is that the Ontario health ministry has a different definition for certain categories of spend than do the various association codes used by Life Sciences companies. For example, the government lumps “grants” and “sponsorships” into one category.
“There is going to need to be a real accountability,” Nikidis said. “A verifiable, auditable trail that we’re going to need to have and something that needs to be put in place to follow through on all those dollars.” Setting up such auditable systems must start immediately in anticipation of the “robust” need for reconciliation on grants, contributions and sponsorships brought about as a result of the new Ontario law.
IQVIA can help make sure you and your team are compliant with legislation in Ontario, across Canada, and around the world. Learn more here. Schedule a conversation with Chrisoula Nikidis, our Canadian Head of Compliance and Ethics Solutions, by clicking here.