Alexion FCPA Violations: Lessons Learned (Part II of II)

Michael Volkov
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The Volkov Law Group

The Alexion Pharmaceutical SEC FCPA enforcement action represents another in the long line of enforcement actions against drug and device companies.  The drug and device industries have been – and will continue to be — easy marks for prosecutors to investigate and prosecute for foreign bribery.  There are a number of reason for this.

First, global drug and device depend on interactions with foreign healthcare professionals (“HCPs”).  The law is well established that HCPs are “foreign officials” under the FCPA.  As a result, drug and device companies face extraordinary risks in dealing with HCPs in foreign countries.

Second, foreign physicians are usually underpaid in comparison to private HCPs and thereby “expect” additional compensation for their services.  Foreign HCPs also demand sponsorships for foreign medical events.  Global drug and device companies are subjected to demands for such sponsorships.  Drug and device companies have to reinforce a culture of ethics and make it clear that the company will not “pay” HCPs in response to demands and for sponsorships to medical conferences.

Third, drug and device companies have legitimate reasons to engage HCPs for research, consulting and educational purposes.  There are a number of positive and beneficial services that HCPs can provide to promote drug and device products by educating other HCPs about the use of certain drugs and devices and enhance the quality of care for patients in foreign countries.

In this context, the Alexion enforcement case underscores some important lessons:

HCP Interactions: Companies have to design and implement a robust policy and related controls governing interactions with HCPs.  Such a strategy has to incorporate more than just a policy statement, which is reinforced by senior leadership.  To ensure compliance, companies have to assign compliance resources, build procedures for review, approval and monitoring protocols.

HCP Controls:  For each category of interactions (e.g. marketing, research, educational, regulatory, sponsorships), companies have to design and implement specific controls.  For example, if the company intends to sponsor an HCP to attend a medical conference there has to be a legitimate reason for the HCP to attend in connection with an existing relationship with the HCP who may be consulting, providing educational services, or research. 

If the HCP intends to speak about his/her work for the company at the medical congress, this may fall within the legitimate side of the sponsorship spectrum.  On the other hand, if the company is seeking to ingratiate itself with the HCP to induce the HCP to increase prescriptions for the company, then simply paying for the sponsorship for some flimsy reason would not pass the test.

To ensure compliance with an HCP sponsorship program, any request for sponsorship should be carefully scrutinized, preferably by an internal committee established to review such requests.

Monitoring:  An ongoing monitoring system for HCP interactions is the new and cutting-edge area for compliance programs.  In this respect, a proactive approach to monitoring HCP interactions through regular reporting, review of expense reports and related financial controls and documentation is imperative.  A robust monitoring program is critical because of the need to distinguish and confirm legitimate expenditures, such as consulting services, documentation and reports.  Drug and device companies are behind the curve on proactive programs.  They need to assign resources, monitor interactions and of course focus on financial expenditures used for illegitimate purposes.

Invoice and Service Confirmation:  The SEC’s focus on “invoice to payment” processes requires drug and device companies to scrutinize payments to HCPs and use of third parties who often assist in promoting drug and device products.  To ensure appropriate review of invoices, companies have to include contractual provisions in HCP engagements or third-party relationships that condition payments on adequate documentation and justification of the services provided.  Otherwise, HCP payments may be improper and third parties could be used to funnel illegal payments.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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