A Focus on Off-Label Issues

1. A Focus on Off-Label Issues Stephen F. Mohr Deputy Compliance Officer AstraZeneca Pharmaceuticals Sheryl Vacca West Coast Practice Leader Life Science Regulatory Practice Deloitte & Touche LLP

2. Disclaimer The information presented represents the opinions of the authors and does not necessarily reflect the views of AstraZeneca Pharmaceuticals LP or Deloitte & Touche LLP

3. Topics discussed • 2005 Headlines • Off-label promotion defined • Governing Law • Key Risk Areas • The Neurontin case • Other current investigations • Serono settlement • Impact on Compliance Departments

4. 2005 Headlines From Rx Compliance Report • Lew Morris, Chief Counsel HHS OIG • Legal problems associated with off-label promotion have the potential to get even worse under the new Part D benefit • “About half the pharma companies have truly effective compliance programs in place, and half of them are just giving it lip service.” • Morris says companies may seek to put on manufacturer-sponsored conferences, get doctors to participate as medical experts, or hire them as consultants in order to push products for off-label uses, knowing that they may be reimbursed under the new Medicare Part D benefit

5. 2005 Headlines From Rx Compliance Report • Mary Riordan, Sr. Counsel, HHS OIG • With Medicare Part D looming, OIG and Department of Justice will be vigilant in their coordination concerning evaluation of off-label cases

6. What is Off-label Promotion • Marketing of a pharmaceutical product for uses not included in its FDA-approved labeling. Can include information as to unapproved: • Indications • Dosing • Route of administration • Patient population

7. Governing Laws • Food Drug and Cosmetic Act • False Claims Act • Federal Anti-Kickback Statute

8. Food Drug and Cosmetic Act • In order to obtain FDA approval to sell a pharmaceutical product, the manufacturer must demonstrate the safety and effectiveness of the product for its intended uses. Promoting a drug for uses outside of its approved indications constitutes the introduction of an unapproved new drug into interstate commerce in violation of the FD&C Act, 21 USC Sec. 331(d)

9. False Claims Act • Prohibits knowingly presenting or causing to be presented a false or fraudulent claim for payment or approval by the federal government, 31 USC Sec. 3729 • In USA ex rel. Franklin v. Parke-Davis, 2003 WL 22048255 (D. Mass.), district court held that the Relator need not prove that Parke-Davis “lied to physicians about Neurontin’s off-label efficacy” in order to state a claim under the False Claims Act. “[T]ruthful off-label marketing (ineligible for federal safe harbors) and financial incentives like kickbacks would suffice.”

10. Federal Anti-Kickback Statute • Makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive remuneration in order to induce the purchasing or recommending of any item or service that the federal government may purchase or otherwise pay for under Federal health care programs. 42 U.S.C. Sec. 1320a-7b(b). • Many cases of off-label promotion also involve allegations of kickbacks, for example consulting programs that are used inappropriately as a venue to deliver off-label messages

11. Off-Label Implications of Medicare Part D Implementation • Formulary activities • Expansion of coverage

12. Business Practices That Can Create Off-Label Risk • Sales representative activities • Field medical activities • Reprint use • Third party relationships • Pharmacy benefit manager/GPO interactions • Use of Consultants

13. Business Practices That Can Create Off-Label Risk (continued) • Use of Speakers • Clinical research grants • Continuing Medical Education • Publications • Sampling Activity

14. The Neurontin Case • Neurontin developed by Warner-Lambert (later acquired by Pfizer). Approved by the FDA in 1993 as an adjunctive anti-seizure medication for adult epileptics. • Market began to plateau, so Warner-Lambert chose to pursue more off-label sales. Percentage of off-label use grew from 15% in 1994 to 94% in 2002.

15. The Neurontin Strategic Plan (as described in the Neurontin Sentencing Memorandum) • 1997--Home office implemented strategic plan to “maximize Neurontin opportunities in emerging applications” • Elements of the plan • Educate the medical profession on emerging use areas • Expand the user base beyond those treating epilepsy • Expand communication regarding different types of uses of Neurontin • Support publications regarding expanded uses of Neurontin • Groom thought leaders for peer to peer selling in expanded use areas

16. Specific Tactics Used to Implement the Neurontin Strategic Plan (according to the Sentencing Memorandum) • Direct selling on off-label indications • Use of field medical personnel to push off-label use • Preceptorships with physicians where off-label uses were discussed • Lavish consultant meetings at which off-label uses were discussed • Frequent teleconferences at which doctors were paid to speak about off-label topics • Sponsoring allegedly independent CME events with extensive input from Warner-Lambert as to content

17. Neurontin Settlement • Settled in June 2004. $430 million settlement payment • Criminal guilty plea by Warner-Lambert to violation of the Food Drug & Cosmetic Act • Detailed Corporate Integrity Agreement signed with OIG

18. Other current investigations • Schering-Plough (May 2003) disclosed that the U.S. Attorney’s Office in Boston is investigating its sales and marketing practices in a number of areas, including possible off-label promotion • Johnson & Johnson (December 2003) disclosed that it received a subpoena from the U.S. Attorney’s Office in Boston regarding promotional activities for one of its products, including alleged off-label marketing • GSK (February 2004) disclosed that the U.S. Attorney’s Office in Colorado is investigating its sales and marketing practices for a number of its drugs; the allegations include off-label promotion • Eli Lilly (March 2004) disclosed that the U.S. Attorney’s Office in Philadelphia was investigating its US marketing and promotional practices for several drugs, including its communications to physicians • Bristol-Myers Squibb (August 2005) disclosed that it has received a subpoena from the U.S. Attorney’s Office in Boston relating to alleged off-label promotion of one of its products • Genentech (August 2005) disclosed that it is under investigation by the U.S. Attorney’s Office in Philadelphia for alleged off-label promotion

19. Serono Settlement • Case involved allegations of illegal sales and marketing activities surrounding the drug Serostim, approved for the treatment of a condition known as “AIDS wasting.” • October 17, 2005 settlement includes $704 million settlement payment, a guilty plea to criminal conspiracy, exclusion for five years from participation in federal health care programs and a comprehensive Corporate Integrity Agreement • In addition to allegations of kickbacks to physicians, the government asserted that Serono had caused the submission of false claims for reimbursement, which were based on tests developed by Serono to diagnose the condition of AIDS wasting that the government found to be inaccurate

20. Latest Views from DOJ • “Jeffrey Bucholtz, Dep. Asst. Attorney General at Department of Justice • Activities raising “red flags” • Paying doctors to attend meetings in expensive restaurants, sporting events or exotic locales to hear presentations about off-label uses • Paying large fees to “thought leaders” to give speeches touting off-label uses • Directing sales reps to market a drug to doctors who, because of their specialty, are very unlikely to ever prescribe the drug for the approved use • Using medical liaisons to recommend off-label uses • Making promotional claims that are not truthful, balanced or substantiated

21. Conclusion (Part I) • Off-label marketing remains a prime focus of government investigations of the pharmaceutical industry • Government is highly focused on cases where the generation of off-label sales is a home office approved strategy

22. Impact on Compliance Department Activities

23. Governance Compliance Professional Reporting Monitoring & Auditing Employee Training Policies & Procedures Corrective Action Compliance Program Structure

24. Compliance Perspective Code of Conduct Corporate Policies Board & Executive Committee Corporate Compliance Program Compliance Standards Financial Risk Regulatory Risk Systems/IT Risks Operational Risks Standard Operating Procedures Day-to-Day Operations Departmental Procedures

25. Designing an integrated compliance program that operates as one unit rather than many silos is challenging The business’s processes and operations often function in silos The compliance-related risks touch every aspect of the organization’s business & are difficult to “compartmentalize” The design should be based upon the organization’s business strategies The design should result in an organization-wide compliance monitoring plan Business Strategy Risk Mitigation Monitoring Business Processes The Compliance Program Design Dilemma

26. Drivers of an Effective Compliance Program

27. Primary Purpose Prevent illegal conduct related to off-label activities Protect the assets of the company Secondary Purpose Minimize adverse consequences to the company in the event illegal off-label promotion conduct is identified “Get Out Of Jail Free” Card Examining the Evidence Intentional Acts Reckless Acts Innocent Mistakes The Key Objective of the Compliance Program The ability to identify the elements in action Making sure the program works The Critical Success Factors Scaling the approach Not “biting off more than you can chew” The Role of Compliance in the Off-Label Crisis

28. Identify Business Gaps and Risks • Identify the regulations, guidelines, standards that apply to the respective process • Identify existing process from a-z, ie: sales rep makes a sales call, customer requests “off-label” information, etc. Include all business functions that relate to the activity • Once the “as is” process is outlined, identify controls that are missing in the process, ie: clearly defined roles, objective policies, systems which have controls validated throughout the process, IT/manual systems for collecting data, duplications etc. • Policies, ie: CME, Grants, Handling Off-label discussions, Med Ed, expenses, et. • Systems, ie: data integrity, function, checks and balances • Define “to be” process and identify action steps to address the gaps in the “as is” process

29. Risk Identification & Ranking Process • Identify risks • Rank risk criticality • Locate risk potential in business • Evaluate risk management status • Determine risk likelihood • Incorporate management of risk into compliance program

30. Promotional Materials Sales Calls Advisory Boards Convention Booths Third Party (CME) Grants Locate Risk Potential in Business –Product Information Dissemination Commercial Activities Standards • Food, Drug & Cosmetic Act • FDA Promotional Regulations • FDA Guidance on Industry-Supported Scientific and Educational Activities • ACCME Guidelines for Commercial Support of Continuing Medical Education • Government Investigation Settlements and Corporate Integrity Agreements • PhRMA Code on Interactions with Healthcare Professionals (2002) • HHS OIG Compliance Program Guidance for Pharmaceutical Manufacturers • Court Decisions • Food and Drug Administration Modernization Act of 1997 Reprint Dissemination There are numerous inherent risks and those risks touch aspects of every business process within the commercial organization

31. Compliance Approaches to Mitigating Off-Label Risk • Is there a committee that reviews issues related to off-label activities? • Compliance Committee • Is there an employee handbook, code of conduct or operational policies and procedures that addresses off-label activities? • Compliance Standards • Are there training programs around off-label activities? • Employee Education • Is there a hotline or reporting mechanism for off-label complaints? • Anonymous Complaint System • Is there a mechanism to review compliance with company policies on off-label activities? • Auditing & Monitoring • Is there an employee discipline system for unauthorized off-label activities? • Corrective Action

32. Getting Started - Implementing Off-Label Compliance Strategic Decisions: • Will the company prohibit all off-label communications? • Will the company allow off-label communications that meet the safe harbor requirements? • The company’s decision will impact all compliance program components

33. Getting Started - Implementing Off-Label Compliance Risk Assessment Identify the off-label risks that are potentially critical or significant and require incorporation into the formal compliance program • Rank risk criticality based on: • Risk potential in business • Risk likelihood • Status of risk management currently in the company

34. Getting Started - Implementing Off-Label Compliance • Compliance Committee • Integrate off-label-related compliance structure into the company’s enterprise-wide Compliance Program • Off-Label Compliance Standards • Develop compliance policies and procedures addressing off-label activities • Employee Education • Develop training materials which address off-label compliance • Identify participants and roll out mandatory training • Anonymous Complaint System • Build a communication channel to find out about off-label compliance-related complaints or issues • Monitoring • Conduct audits or self-assessments as part of an ongoing auditing and monitoring cycle • Corrective Action • Keep track of employee discipline that relates to a failure to comply with company policies on off-label compliance

35. Create a Compliance “Crosswalk” • Monitoring plan should be designed with the Compliance Program dilemma in mind. • Monitoring creates the crosswalk between the Business Strategies and the Risk Areas. Monitoring Quality Control and Drug Safety Vaccines will be available for the public Risk Area Apply to more than one business strategy Business Strategy Will be impacted by many risk areas Monitoring

36. Auditing and Monitoring Cycle Develop Review Criteria Define Review Scope & Assumptions Define Review Sample Reaudit Define Methodology Education, Remedial Action Review Process for Each Risk Area Test Inter-rater Reliability with Multiple Reviewers Finalize Report & Corrective Action Plan Conduct Review Obtain Management Response Validate Findings Document Observations & Findings

37. Practical Considerations Related to Auditing and Monitoring Strategy

38. Practical Considerations Related to Auditing and Monitoring Strategy • Developing your Auditing and Monitoring Plan • Deciding what to monitor • Prioritize Risk Areas • Internal Factors, i.e. any system changes, people changes, new practice, etc. • External Factors, i.e. new regulation, national and local enforcement activity • Compliance Program evaluation • Identify controls that make the process work : PROCESS AUDIT • Determine overall purpose effective: OUTCOMES AUDIT • Resources available to execute plan • Consider integration with Internal Audit Plan • Identify timeframes for audits • Communication and Commitment to Plan

39. Developing Your Audit Approach • Deciding the scope • Narrow down the purpose of the audit • Avoid scope creep before you start • Resources available to execute the audit • Methodology • Sample size determination • Communication/Reporting Results

40. What should you consider before you decide what your sample size will be? Who do you expect to share the information with and what is their frame of reference? Are you trying to figure out whether there is really a problem? What is the organization’s perspective on “fixing” problems? What resources are available to audit this area? Does Senior Management agree this risk area is important? What is the worst case scenario if this audit reflects unfavorable outcomes? Attorney/Client Privilege? Sampling Methodology

41. Continuous Monitoring Cycle Re-audit and add new audits to the cycle • Monitoring never ends… each review leads to the next, and the monitoring plan and unplanned issues drive additional monitoring activities. It is a continuous process… Define Review Scope & Assumptions Finalize Report & Corrective Action Plan Finalize Report & Corrective Action Plan Define Review Scope & Assumptions Finalize Report & Corrective Action Plan Develop Review Criteria Define Review Scope & Assumptions Develop Review Criteria Obtain Management Response Document Observations & Findings Define Review Sample Obtain Management Response Develop Review Criteria Define Review Sample Document Observations & Findings Conduct Review Document Observations & Findings Define Review Sample Conduct Review Test Interrator Reliability Test Interrator Reliability Conduct Review Re-audit and add new audits to the cycle

42. Corrective Action Plan

43. Training • Corporate compliance training • Online • Classroom • CD-ROM • Online courses include: • Code of Ethics • Code of Conduct • Interactions with Healthcare Professionals • “Now You’re A Manager” • Careful Communication • Upcoming: Marketing & Promotion Basics • 100% completion of online courses

44. Integration into Business Strategy • Use monitoring findings to develop and document ROI • Assist the business process owners to identify root cause of findings • Use corrective action to enhance efficiency and mitigate risk • Organization-wide (vs. silo) allow program leverage

45. Sample Report Card Department Risk Area Inducements Privacy Privacy Notice Employee Training Complaints Employee Discipline Authorizations Minimum Necessary Access to Records Amendment of Records Confidential Communications Facility Directory Business Associate Agreements Admissions Customer Service Marketing Medical Records Develop the Report Card Or

46. Summary • An effective Auditing and Monitoring approach provides a method to: • Assist in identifying risk to the business that may have been otherwise undetected internally • Assist by identifying if the controls developed to remediate a risk are working and have actually helped to mitigate the risk • Assist with preventing a real and/or potential risk from escalating by early detection through auditing which may help avoid additional harm to the company’s business • Provides a “good faith” organization the ability to approach their real and/or potential risk weaknesses with a reasonable, scaleable method • Auditing and Monitoring is a critical element for an effective compliance program which helps to drive compliance and behavior.

47. Sheryl Vacca, CHC West Coast Practice Leader Life Sciences and Health Care Regulatory Deloitte & Touche LLP (714) 436-7710 svacca@deloitte.com Ms. Vacca is the West coast Leader for Deloitte & Touche’s National Life Sciences and Health Care Regulatory practice. She has assisted several life science companies develop their compliance programs, investigations, perform risk assessments and develop auditing and monitoring plans for the compliance department. She has significant experience consulting with life sciences and health care organizations on compliance issues including self disclosure, writing plans of correction, implementing systems in response to plans of correction, implementing QA systems and general regulatory compliance.