Live From BIO: Biotech, Pharma are living in a fishbowl

CHICAGO - Biotech, pharma and medical device industries are facing unprecedented levels of scrutiny from Congress, individual states, medical societies, industry associations, and a whole host of other organizations that want to regulate industry interactions with physicians. Navigating those regulations was the topic of Living in the Fishbowl: Disclosure, Transparency and Compliance Issues at BIO 2010 on Wednesday.

The public perception is that biopharma is bribing doctors, said Dennis LaCroix, a lawyer for Genzyme. "Anyone who's in this industry for more than an hour and a half is not only under scrutiny, but attack," added moderator Howard Dorfman of the law firm Ropes & Gray. As a result of the scrutiny, the industry must follow all the various laws that have been put in place to regulate industry/healthcare professional interactions. So what does your company have to do to properly report payments and not run afoul of regulations, either federal or local?

LaCroix said companies should receive an appropriate service from an eligible recipient and pay for that service at a fair market value. The interaction must be adequately documented, and companies should have a process in place that allows them to demonstrate that they followed all of these guidelines. And above all: "Know the local rules!"

Why? When the Physician Payments Sunshine Act goes into effect in 2013, it won't preempt various state laws about appropriate behavior. "We have 50 sheriffs out there as each state passes separate disclosure laws," said LaCorix. Added small biotech lawyer Mark Jones, "The Sunshine Act is just a floor. If your state is more strict, those stricter laws stay in place."

The punishments for not keeping up with federal and local laws are severe. Failure to report payments will result in a $1,000 to $10,000 fine per unreported payment, up to $150,000 per physician. Improper conduct can threaten product approval, and companies run the risk of debarment, which would prevent them from providing drugs to any government agency. Pfizer, Johnson & Johnson and AstraZeneca have all announced massive settlements as the result of improper interactions with physicians. And it's not just companies that could pay the price. Executives can be held responsible for employees' misbehavior, whether or not they were aware of any impropriety. InterMune's ex-CEO, for instance, was convicted of wire fraud last year. He's still awaiting sentencing.