Regulatory agencies are starting to take notice of the rise in small manufacturers with attractive pre-launch assets making the development of an effective compliance program more important than ever. Helio discusses how small and large companies alike must assess their need for compliance even pre-dating the launch of a product, and delves into the key areas that companies should allocate precious resources to.

1. ESTABLISHING AN EFFECTIVE COMPLIANCE
PROGRAM PRE-PRODUCT LAUNCH

2. ESTABLISHING AN EFFECTIVE COMPLIANCE PROGRAM PRE-PRODUCT LAUNCH
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AN EFFECTIVE COMPLIANCE PROGRAM AT THE BACKBONE OF EVERY
COMPANY
The life sciences industry is no stranger to the compliance program or the oft referenced “Seven
Elements.” The characteristics of an effective compliance program were first released in the U.S. Federal
Sentencing Guidelines (USSG) in 1991 and were later expanded by the Office of Inspector General (OIG)
in the Compliance Program Guidance for Pharmaceutical Manufacturers in 2003. Early in 2017, the OIG
released another guidance on the topic: Measuring Compliance Program Effectiveness: A Resource
Guide.1,2,3
Even though these guidelines have long been in effect, regulatory agencies continue to issue
guidelines and resources to navigate this complex and ever-evolving issue. For many companies,
especially those smaller manufacturers with limited resources and employees, developing a compliance
program may seem a daunting task and may even be avoided until federal or state law require it.
Compliance however, is no longer a ‘pie in the sky’ ideology, nor is it just a company value that sits on a
website alongside a motto. Large and small companies alike must assess their need for Compliance
structures even pre-dating the launch of a product.
DEVOTE KEY RESOURCES TO AN EARLY COMPLIANCE PROGRAM
Establishing an early compliance program, especially addressing commercial compliance prior to the
launch of a product, may seem counter-intuitive: what purpose does it serve, and does it provide a
return on investment equal to or greater than an investment in another area of the company such as
R&D or marketing? How a company chooses to conduct business is critically important, especially in the
life sciences industry, where companies face
scrutiny from both the government and public
sectors. An effective compliance program allows a
business to efficiently operate in the present while
simultaneously safeguarding the future by avoiding
activities that could lead to astronomical fines, civil
and criminal penalties, and patient deaths – all of
which can quickly put a company out of business.
Companies must also consider devoting resources
to respond to clinical and medical compliance
issues that must be addressed prior to the launch of a product. Pre-compliance challenges may include
clinical trial site compliance and fair market value payments to healthcare professionals. While not as
numerous as compliance issues that may come post-product launch, many of the challenges that
companies face pre-product will continue to be factors once the product is put on the market. Once
products are launched, companies must suddenly wrestle with a host of new issues and regulations that
need to be implemented expeditiously while also trying to address and devote resources to business
growth. Waiting until product launch to address compliance needs and requirements will prove
impractical when dealing with competing priorities.
Establishing a robust compliance program early on can also act as a type of insurance policy if the
Company ever faces an investigation or a prosecution. The ‘Culpability Score’ in the USSG is used as a
baseline for determining the severity and length of a sentence. Points are added, or subtracted, from
the Culpability Score based on factors such as tolerance of risk, cooperation, and prior history; points
“Small organizations shall
demonstrate the same degree of
commitment to ethical conduct and
compliance with the law as large
organizations.”
(USSG §8B2.1, comment. (n.2.C.iii))

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are also subtracted, from those companies who “had in place at the time of the offense an effective
compliance and ethics program” (USSG §8C2.5).
Finally, and perhaps most importantly, life sciences manufacturers are in the business of developing and
providing products for the improvement of patient health and well-being; any business with this as its
key objective should strive to act in a patient’s best interest and conduct business in an ethical manner.
COMPLIANCE EVALUATION IS NOW PART OF THE M&A AND DUE DILIGIENCE PROCESS
In other instances, some companies may never launch their product, but may seek to sell their asset or
business to another firm. Due diligence must be conducted as part of any merger and acquisition (M&A)
and those manufacturers with a pre-implemented compliance program appear that much more
attractive to potential investors. Larger manufacturers and private equity shops pursuing M&A
opportunities are becoming more attuned to Compliance and understand that it is better to inherit a
culture and tone of Compliance rather than any issues, bad press, or litigation that may arise from the
lack thereof. The US Department of Justice (DOJ) recently reported that Shire had to pay a $350 million
fine to settle false claim allegations that Advanced BioHealing (ABH), whom they acquired in 2011 for
$750 million, employed kickbacks to encourage physicians to use, or overuse, its product Dermagraft.
Shire was responsible for the allegations made against ABH, and as a result was also responsible for the
settlement even though activities predated the sale.4
Further, at the recent CBI Managed Markets Congress
in December 2017 and the Compliance Congress for
Specialty Products in September 2017, a panel of State
Attorney Generals mentioned that they may start to
look at small, specialty pharmaceutical manufacturers
who do not give priority to the creation of compliance
programs who may be focused on hypergrowth or
becoming an acquisition target. Furthermore,
regulators such as the U.S. Sentencing Commission
have made explicitly clear that being a small
organization is no excuse for non-compliance, stating that “small organizations shall demonstrate the
same degree of commitment to ethical conduct and compliance with the law as large organizations”
(USSG §8B2.1, comment. (n.2.C.iii)). Even those manufacturers seeking to become acquired must
therefore devote precious resources to managing risk and compliance.
CREATING A CULTURE OF COMPLIANCE: PREVENT, DETECT & RESPOND
So where to begin? Regardless of product status, effective compliance programs will address issues in
the future, past, and present by instituting activities that prevent, detect, and respond to any potential
risks of non-Compliance.
ACTIVITIES TO IMPLEMENT PREVENT, DETECT, & RESPOND
PREVENT: Appoint a Chief Compliance Officer and Create a Compliance Committee
The best defense is a good offense -- an effective compliance program will implement measures to
prevent non-compliant activities. Retroactively introducing a proactive approach to Compliance can be
“70% of companies report that they
ha[ve] a Chief Compliance Officer. Of
those that did not, about 70% reported
that a General Counsel or Senior
Compliance Role manages compliance.”
- PwC State of Compliance, 20165

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difficult to accomplish at an established Company; therefore, management should make a commitment
to instill a culture of Compliance as early as possible. This commitment to Compliance and ethical
behavior can be demonstrated by appointing a Chief Compliance Officer (CCO) that is responsible for
developing a compliance program. To increase exposure and further instill a culture of compliance, a
Compliance Committee comprised of individuals across the business should report to the CCO. It is
important that the CCO report directly to the Board of Directors, as this further demonstrates a
commitment to Compliance. At the preventative level, the CCO should be responsible for implementing
a Code of Conduct. All company employees and vendors should review and sign the Code of Conduct
and be held accountable for any actions out of line with how the Company chooses to operate. The CCO
should also be responsible for providing a process and method for reporting issues of potential non-
compliance with this Code.
DETECT: Conduct Auditing and Monitoring
Proactively preventing Compliance issues before they occur is an ideal that is not always possible. As a
next level of defense, companies must implement programs that proactively monitor and audit business
activities for any potential incidents of non-compliance. Companies should consider conducting these
auditing and monitoring programs on a yearly basis, at minimum, to identify issues before they balloon
into larger issues for the company. The business activities that a company chooses to monitor, and
audit will be dependent on product stage and risk profile. For example, companies with products still in
development should consider focusing attention on clinical trials. Activities may include reviewing
clinical trial contracts, patient enrollment tactics, and milestone payments for instances that may violate
the Anti-Kickback Statute (AKS) or the Foreign Corrupt Practices Act (FCPA) for those clinical trials
operating in foreign countries. Conversely, once a company has an FDA approved product, companies
should begin reviewing promotional activities and interactions with HCPs (e.g. speaker programs, call
notes, grants) with an emphasis on a review of potential violations of the False Claims Act.
RESPOND: Conduct Internal Investigations & Follow-Up
Finally, when issues of non-compliance occur, companies should have a standardized process in place to
conduct investigations and follow up with any necessary remediation and/or disciplinary actions. The
goal of this activity is to learn from mistakes and to implement any necessary actions to stop the activity
from occurring again. Internal investigations could occur because of a finding from a monitoring or
auditing activity or could occur because of a report of potential non-compliance from within, or outside
of, the business. If necessary, remedial actions could include re-training on the Code of Conduct,
developing new policies and procedures, or implementing new auditing and monitoring activities to
identify key risk areas. Disciplinary action can range from docked pay to termination.

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HOW TO BEST ALLOCATE LIMITED RESOURCES
While many companies may understand the necessity of implementing prevent, detect, and respond
activities, a common challenge facing many companies is the limited resources available to devote to
these activities. Companies may want to consider implementing a compliance program using a dual
approach. Many activities can be performed efficiently by appointed compliance personnel within the
company, while other activities may be implemented more cost-effectively if the company considers
outsourcing the activity to a vendor. According to a survey conducted by Cutting Edge, “small drug
companies and biotech firms, as well as medical device companies, averaged two (2) out-sourced FTEs
who work with their compliance teams” (Business Wire)6
. While choosing whether to conduct an activity
in-house or outsource to a vendor, companies should evaluate the knowledge, skills, and availability of
in-house resources. The following provides a high-level list of some of the areas that a Company many
want to consider conducting prior to the launch of their product to achieve their compliance goals.
➢Appoint CCO with Board Oversight and Develop Compliance Committee
➢Create Company-wide Code of Conduct and Review Need for Other Company-wide Policies
➢Establish and Socialize Compliance Hotline
➢Establish & Document Policies & Processes for Investigations and Disciplinary Actions
➢Conduct Investigations for Issues of Non-Compliance and Develop Remediation Plans (CAPAs); and Create
Disciplinary Actions for Non-Compliance
➢Conduct Compliance Risk Assessment to Establish Areas of Focus
General Compliance
➢Screen HCPs against HHS/OIG List of Excluded Individuals/Entities and GSA List of Parties Excluded from Federal
Programs
➢Create Contract Templates for Commercial Activities with HCPs including Transparency/Compliance Language
➢Establish Fair Market Value (FMV) for Site Payments & HCP Clinical Payments, HCP Medical Payments, HCP
Commercial Payments
HCP Interactions & Contracting
➢Evaluate Need for Transparency System or Manual Filing & Source Systems (i.e. Gap Assessment)
➢Select and Implement Transparency System or Manual Filing Updates Needed for Reporting
➢Create Training and Communications to internal stakeholders and external vendors
➢Build Transparency Requirements into CRM & Expense Systems & A/P System
➢Collect & Report Transparency Data
Aggregate Spend/ Transparency
➢Review Need for Company-wide Policies and Conduct Inventory Assessment
➢Create Relevant Policies & Processes (e.g. Clinical Trial Registration & Disclosure of Clinical Study Information Policy)
➢Create and Document Policies and Processes for Patient Support Service/ HUB including interactions with Patients
➢Establish Non Promotional Review Committee & Promotional Review Mateirals Committee
➢Establish Grants Committee
Processes & Policies
➢Develop Monitoring & Auditing Plans
➢Create Monitoring/ Auditing Templates & Checklists
➢Establish & Document Policies & Processes for Monitoring & Auditing Activities
➢Deploy Annual Monitoring & Auditing and Review Findings
Monitoring & Auditing

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Cutting Edge also noted that one possible advantage of outsourcing compliance activities is objectivity
(Business Wire). Therefore, companies may also consider hiring a vendor to conduct a Compliance Gap
and/or Risk Assessment, which can help target issues of critical importance.
STILL NOT CONVINCED?
Between “1991 through 2015, a total of 373 [financial] settlements were reached between the federal
and state governments and pharmaceutical manufacturers, for a total of $35.7 billion” (Almashat,
2016)7
to settle allegations of misconduct related to compliance issues. In the past, the DOJ focused its
attention on larger companies that had approved products reimbursable by the federal government,
resulting in large fines, Corporate Integrity Agreement (CIAs), and deferred prosecution agreements
(DPAs). Instances of these types of settlements are beginning to slow, as larger companies begin to
adopt much-needed compliance measures, and as small, pre-product manufacturers enter the market.
The number of small manufacturers with attractive pre-launch assets has also given rise to an increase
in M&A transactions; in 2015 there were “468 deals involving therapeutic drug assets, devices,
diagnostics and insurance companies […] a 90% increase over 2012” (BioPharma).8
As interest in these
companies continues to rise, so too will public and government interest in their acquisitions rise.
JUST THE BEGINING
The road to getting a product to market is an expensive, arduous task, but by no means does product
launch mark the end of the road. In fact, it is around this point when companies face the most risk and
have the most at stake. A prudent Board will consider the role that Compliance will play at the company
long before it is necessary, and they will work to implement programs and plans that proactively
manage risk and protect their most valuable assets: their product and the people it serves.
About Helio Health Group
Helio Health Group specializes in providing life science companies with strategic and operational
consulting in patient services and compliance operations utilizing advanced data science techniques.
Our industry experts have extensive knowledge and experience in life sciences including CRM,
operational excellence, medical, data strategy / governance and predictive modeling. For more
information, go to www.heliohealthgroup.com.
About the Author
Elise Sarda, Manager | esarda@heliohealthgroup.com
Elise is a Manager at Helio Health Group based out of the New York office. Prior to Helio, Elise
assisted pharmaceutical and medical device manufacturers with strategic and compliance-based
challenges as a Life Sciences consultant at Berkeley Research Group and Huron Consulting Group.
Elise received her Bachelor of Arts in English Literature with a double minor in in Corporate Strategy
and Leadership and Development from Vanderbilt University in Nashville, TN.

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REFERENCES
[1] United States Sentencing Commission, Guidelines Manual, §3E1.1 (Nov. 2016)
[2] Duke, Elizabeth M. “OIG Compliance Program Guidance for Pharmaceutical Manufacturers.” Federal Register,
vol. 68, no. 86, 18 Apr. 2003, pp. 23731–23743., oig.hhs.gov/authorities/docs/03/050503FRCPGPharmac.pdf.
[3] “Measuring Compliance Program Effectiveness: A Resource Guide.” United States Department of Health and
Human Services, Office of Inspector General (OIG), 27 Mar. 2017, oig.hhs.gov/compliance/101/files/HCCA-OIG-
Resource-Guide.pdf.
[4] “Shire PLC Subsidiaries to Pay $350 Million to Settle False Claims Allegations.” United States Department of
Justice, Office of Public Affairs, 11 Jan. 2017, https://www.justice.gov/opa/pr/shire-plc-subsidiaries-pay-350-
million-settle-false-claims-act-allegations
[5]“State of Compliance 2016: Laying a strategic foundation for strong compliance risk management.” Price
Waterhouse Coopers. 2016, https://www.pwc.com/us/en/risk-assurance/state-of-compliance-study/assets/State-
of-Compliance-Study-2016-Pharma-Life-Science-Insights.pdf
[6] “Top-Performing Pharma Compliance Teams Rely on Outsourcing.” Business Wire, 03 June. 2013,
http://www.businesswire.com/news/home/20130603005233/en/Top-Performing-Pharma-Compliance-Teams-
Rely-Outsourcing
[7] Almashat, S. (2016). Twenty-Five Years of Pharmaceutical Industry Criminal and Civil Penalties: 1991 Through
2015. Public Citizen.
[8] Vitez, Laura, and Richard Harrison. “Trends in Pharmaceutical Mergers and Acquisitions.” BioPharma,
BioPharma Deal Makers, 8 Dec. 2016, biopharmadealmakers.nature.com/users/9880-biopharma-
dealmakers/posts/13https://biopharmadealmakers.nature.com/users/9880-biopharma-dealmakers/posts/13880-
trends-in-pharmaceutical-mergers-and-acquisitions880-trends-in-pharmaceutical-mergers-and-acquisitions