Is Euroland Following the US Disclosure Lead?

Making sense of the promotional spend and anti-corruption compliance burden is emerging as a key strategic issue for pharma—not just in the US but in the global market space as well, where regulatory safeguards are still porous. New survey research published by Cegedim Relationship Management documents this trend with a focused review of the growing pressure in Europe to follow the US with demands for a full tracking of how, where, and when pharma companies seek to influence the prescribing behavior of physicians and other healthcare practitioners.

Not only are the legal standards for disclosure becoming tougher in Europe, but distinct characteristics in local patterns of practice can make the process of compliance a daunting logistical and financial challenge. The survey concludes that failure to build internal capacity to address the new regulatory agenda can lead to costly citations and a sharp drop in trust and reputation. Because most European governments subsidize access to medicines through the tax or social insurance system, this can have a significant impact on commercial returns as well as the industry's overall "license to operate."

Findings of the Cegedim report are based on data and interviews conducted earlier this year among some 120 life sciences company executives with responsibility for compliance issues across Europe. An interesting observation gleaned from the research is that few companies in Europe at present have staff with specialized expertise in managing promotional and relationship development with health professionals from a regulatory perspective—it is still largely a function of the overall sales and marketing operation. This is going to have to change as the pressures on disclosure ratchet up.

Staff also worked with governments and other organizations to discern the regulatory horizon and assess the impact of new country-based initiatives like the UK Anti-Bribery Act, which enters into force in April 2011 and carries stiff criminal sanctions that can be applied to individual executives as well as entities. The European Union (EU) Commission's Competition Directorate and the Paris-based Organization for Economic Cooperation and Development (OECD) are also increasingly active. In addition, the decision of the US Department of Justice to accelerate application of the 1977 Foreign Corrupt Practices Act to specific pharmaceutical transactions will likely be most acutely felt in Europe, where the industry has extensive operations.

From a policy point of view, a major issue of debate is just how regulators in Europe will choose to apply this increased scrutiny. The region lacks the strong litigious tradition of the US and is more comfortable with setting broad standards that effectively allow industry to regulate itself under the leadership of trade and professional associations. What this means in practice is that regulation is likely to focus more on high-level governance, leaving it to companies to figure out how to build the right tools for compliance at an operational level. In the US, in contrast, such operational standards are dictated at a strict level of detail, with a fundamental emphasis on enforcement.

Preparing for the Deluge?

Despite this basic uncertainty, the Cegedim survey found near universal consensus—93 percent of those polled—that compliance is going to be a key strategic challenge in Europe. Some 75 percent of respondents agreed that this challenge would follow the pattern laid out in the US in terms of requirements to track and disclose promotional spend. Hence the need for better awareness and training in proactive ways to be ready for the disclosure requirements when the regulatory agenda becomes more fixed.

Figure 1: Anticipation of Level of Investment on Aggregate Spend for 2011

Nevertheless, most companies in Europe believe they are well positioned to manage the transition, with the survey noting that 73 percent of respondents claim they can handle requirements already in place or under way. There is less certainty about the future, as expressed in results (see Figure 1) that anticipate a much higher level of internal investment in meeting promotional spend mandates over time—42 percent of respondents expect their commitments to increase. Following on that metric, companies cite confusion about the very kinds of "relevant data" to collect as the most pressing issue in managing their exposure to compliance issues (see Figure 2).

Figure 2: Areas of Concern Complying with the FCPA and Anti-Corruption Regulations

Elusive Definitions

The awareness is compounded by the absence throughout most of Europe of clear definitions that can be applied to classify the status of a healthcare provider; without this, building a data set to track relations with them obviously becomes a major hurdle, a conclusion exemplified in Figure 3, where 37 percent of those surveyed see "managing disparate formats and standards" as the process point that will be most difficult to adhere to using the compliance tools companies now have on hand.

Figure 3: How Challenging are the Following Processes?

Current standard of practice in this area lags behind the US, with nearly a quarter of the survey population still relying on Excel spreadsheets to meet their data retrieval obligations. One approach that can bear fruit in Europe is expansion of the key account management (KAM) structure adopted with vendors by many companies in the US, which provides a platform for the implementation of customized software and information bases that can both define and identify transactions carrying potential compliance risks.

Not surprisingly, the most significant practical finding in the survey is the expectation that promotional spending by the industry in Europe is set to drop. Nearly two thirds—62 percent—of the group agreed this would be the outcome.

Clearly, it sets the stage for the kind of debates that have already taken place in Europe over support for patient groups: Will governments and the European Commission move in to fill the gap left by the private sector and create subsidies to fund high-profile—and highly valued—activities such as continuing medical education? As this issue evolves, expect many other ramifications that companies will be required to address. These extend well beyond data management to encompass the industry's place and positioning as providers of useful information to the healthcare community. But without building a good practice around compliance the opportunity to enhance reputation will likely be squandered.