OIG Offers Compliance Tips for Healthcare Boards, Executives

Two of the most recent settlements involving pharmaceutical
companies alleged to have engaged in off-label promotion, included corporate
integrity agreements (CIAs) with the Office of the Inspector General (OIG) for
the U.S. Department of Health and Human Services.  These recent CIAs—GlaxoSmithKline
(GSK) and Par
Pharmaceuticals—both included new provisions, which specify that company
executives may have to forfeit annual bonuses if they or their subordinates
engage in significant misconduct, and sales representatives may not be paid
incentive compensation (e.g., based on volume) for drugs that were involved in
the settlement or successor branded versions of that drugs. 

These recent CIAs created Employee and
Executive Incentive Compensation Restriction Program and Executive Financial
Recoupment Programs, which put at risk of forfeiture and recoupment an amount
equivalent to up to 3 years of annual performance pay for an executive who is
discovered to have been involved in any significant misconduct.  The
financial recoupment program applies to Covered Executives who are either
current employees or who are former employees at the time of a
Recoupment Determination.

These recent CIAs highlight the crucial role
that pharma and device executives play in ensuring compliance throughout their
organizations, particularly compliance officers and their staff.  Emphasizing the important role healthcare
boards play, OIG Chief Counsel Greg Demske recently posted a video
on the OIG website explaining guidance for health care boards, including boards
and executives of pharmaceutical and medical device manufacturers.

The video is particularly interesting given
recent decisions by OIG to exclude executives and corporate officials, such as
the executives at Purdue
Pharma, executives at Synthes, and Scott
Harkonen.  One could only speculate,
but this video may confirm opinions by OIG, FDA, and DOJ that the emphasis for
compliance will increasingly be pressed on corporate executives and board
members, and such outreach to these individuals may reaffirm the government’s
inclination to use the Park
doctrine.

Demske recognized that boards play a vital
role in health care organizations, by promoting economy, efficiency and effectiveness—common
goals that OIG shares.  “The emergence of
new payment models that reward quality, value and the reduction of waste present
opportunities and risks.”  As a result,
health care organizations going forward “will need to use new tools to collect
and analyze data and improve clinical effectiveness at lower costs.”

He referenced the two CIA roundtables held
last year (pharma
and healthcare
provider), and the feedback from stakeholders under CIAs.  Demske said the message was clear: “boards
have the power to enhance compliance through involvement in oversight
activities and by integrating compliance throughout the business.”

Regardless of the size of the company or the
size of the compliance department or staff, Demske emphasized the critical role
of boards and compliance programs.  He
listed three key roles of a health care board and board members:

1. Compliance oversight
2. Structuring your compliance program;
   and
3. Evaluating effectiveness of standards
   and processes

First, Demske noted that serving on a
healthcare board requires a “unique skill set.” Accordingly, he maintained that board members
should engage in oversight responsibilities.
He recognized several factors that make the “best boards:”

• Is the board active? Do they raise
  questions and exercise some degree of skepticism in their oversight
  responsibilities?

• Does the board have diverse experience
  in several areas of expertise, including compliance, clinical, and financial
  auditing expertise?

• Does the board stay informed on risk
  areas and compliance issues?  How does
  the organization identify, audit and monitor risk areas?  Does the board learn all significant
  compliance issues?  Is someone
  responsible for keeping the board informed?

• Is the board involved?  Do they attend compliance training and speak
  to staff about compliance, demonstrating their commitment to it?; and

• Is the board adaptble to the changing
  health care delivery system and reimbursement risks?  Does the organization evaluate new risk areas
  and develop appropriate and update safeguards?

Second, Demske emphasized the key role board
members must play in evaluating the design and implementing the compliance
program.  Demske said that board members
should ask several questions to determine how far reaching and effective the
structure of such program is:

1. Does your compliance officer have
   sufficient prominence and influence in the organization? Does the compliance
   officer report directly to the board?
2. How does your organization encourage
   communication between compliance staff and the rest of the organization?   
3. Are compliance goals periodically
   adjusted to account for payment reform and new quality standards?
4. How does the board encourage managers
   to incorporate compliance considerations in daily decision-making?
5. Does the board hold key employees
   accountable for following compliance standards and processes?

Finally, the OIG Chief Counsel discussed
evaluating whether an organization’s compliance program is effective.  Demske emphasized the need for boards to “routinely
review” compliance efforts across its organization to determine if its program
is effective.  To assess the
effectiveness of an organization’s compliance program, the board should ask:

1. What metrics are used to evaluate the
   company’s compliance with laws and regulations?
   How are those metrics selected?
2. How does your organization identify
   gaps in quality and areas for quality improvement?
3. Is the organization routinely
   conducting internal compliance audits?
4. Is the organization’s response to
   specific problems sufficient?  Does it
   track correction action plans to make sure the proposed changes are
   implemented; and
5. Has your compliance officer identified
   hurdles to promoting compliance, such as resource constraints or lack of
   management support?