Managing Third-Party Relationships

Transcription

1 Managing Third-Party Relationships PCC Canada June 2017 Presented by Stephan Ekmekjian and Darren Jones

2 Looking ahead to 2017 & beyond Accountability Integration of compliance and business Business ownership of traditional compliance responsibilities Criticality Defining key cost drivers for fee-for-service activities with HCOs and Payers Establishing repeatable FMV methodologies across a wide range of service types Access Understanding the necessity of market and patient access programs to ensure therapies are accessible to patients, as well as the increased risks associated with emerging commercial strategies Complexity Mapping third-party relationships and understanding relational risk Mining strategic insight from complex, messy data 2

3 Key questions to be addressed 1. Central risks associated with Third Party interactions 2. Focus Arrangements due diligence 3. How to effectively manage high-risk Third Parties where there are limited ex-ante risk mitigation options 4. HCP due diligence and tiering 3

4 Key points to be addressed Risks associated with third parties Focus Arrangements Due Diligence Managing highrisk third parties HCP Due Diligence and screening 4

5 Bribery and corruption happen in various ways through Third Parties Forms of bribery Facilitation payments Discounts Vacations Gifts Meals Employment/Internship Product samples Free or discounted equipment Risky Third parties Distributors Suppliers (other vendors along supply chain) Travel agencies Market access consultants Event & meeting management vendors HCP/Public officials engagements Customs agents Contract sales organizations Contract research organizations Medical society / association Patient advocacy organizations Third Parties interaction with HCPs, HCOs, or government officials is high risk due diligence is key 5

6 The development of systematic anti-corruption laws enhances the need for Third party (TP) monitoring North America USA Foreign Corrupt Practices Act (1977) USA Federal Anti Kick Back Statutes South America North America Europe UK Bribery Act (2010) German Act on Fighting Corruption in the Healthcare Sector (2016) France Sapin 2 (2016) Europe APAC APAC China Anti-bribery laws (1979, amended in 2011) South Korea The Act on the Prohibition of Improper Solicitation and Provision/Receipt of Money and Valuables (2016) UAE Penal Code (1987) Brazil Clean Company Act (2014) Colombian Transnational Corruption Act (2016) Mexican National Anti- Corruption system (2016) South America Africa Africa South African Prevention and Combating of Corrupt Activities Act (2004) Note: this is a non-exhaustive list of laws in place to fight corruption 6

7 What is a Focus Arrangement? Definition of Focus Arrangements The transactions and arrangements involving individuals or entities that may purchase or make referrals for company products Why Are They Important? Focus Arrangements require sensitivity when engaging government affiliated individuals and hospital systems such as Health Canada, to guard against anti-bribery and anti-corruption (FCPA) offences Suggested Steps to Follow Establish a centralized tracking system for all Focus Arrangements Track all remuneration between parties Keep service and activity logs Monitor leased space, supplies, equipment, etc. Establish and implement a written review and approval process for all Focus Arrangements Review all Focus Arrangements by a compliance officer annually Effective responses when suspected violations are discovered 7

8 Third party oversight and management: 5 key objectives Reliability As with all compliance programs, having consistent policies and procedures is essential to ensure program effectiveness. Consistency in areas such as initial screening/risk rating criteria, riskbased due diligence and approval/denial criteria are particularly important for TP oversight. Transparency The volume and diversity of TP engagements makes it challenging to gain visibility into key TP compliance data points such as: how many TPs are we actually engaged with? What do they do for us? Who vetted and approved the engagement? Business and approval rationale? Efficiency Efficiency in execution is vital given the geographic diversity and high volume of TP vendor engagements. For this reason, having tight and scalable policies and processes and/or some form of automation is important. Responsibility Shared or diffused responsibility among various stakeholders (compliance, finance, business, etc.) is common in TP management. This potential liability can be alleviated by a clear governance model with clear lines of review and approval, as well as structured policies and SOPs. Organization Maintaining accurate records and documentation of all TP arrangements and decision-making processes is an essential component of the TP program both for internal tracking and analytics as well as for regulatory compliance purposes. 8

9 Stages of Third Party Management & Oversight Life Cycle Identification Qualification Engagement & contracting Monitoring & auditing Renewal/exit strategy Business needs/rationale Initial screening Vendor questionnaire Vendor FMV or benchmarking analysis Risk-based due diligence Contracting Business stakeholder training Vendor training (as required) Risk-based & Purposeful Criteria to decide which vendors to monitor Exercise auditing rights Consideration: Who conducts the audit legal, compliance, internal audit department Pareto Principle 80% of corruption risk comes from 20% of vendors Risk-based due diligence renewal (periodic) o o Factors for termination Risk Internal resources Opportunities to correct Document conversations with business 9

10 Polaris Fair Market Value methodology is based on four key principles 1. Pay market rate for consultant s time not for the value of the service Since paying for time, rates should not vary based on type of service 2. Assure methodology supports higher fees for higher expertise Required to pay Thought Leader higher fees 3. Create an effective process for evaluating physician expertise and determining Thought Leader status (i.e. Local, Regional, National, etc.) Required to avoid kickback allegations 4. Ensure all elements of the fee determination are grounded on objective and transparent data analysis FMV methodology designed to be: Flexible, Consistent, Objective and Auditable 10

11 There are THREE equally important elements of FMV and each are necessary FMV Rates Tiering Model Activity Fees Fair Market Value Compensation While FMV rates based on objective data are a key control in the HCP engagement process they need to be supported by robust tiering models and consistent activity fee practice Compensation data used for FMV represents national averages o Industry does not routinely engage average physicians If you compensate based on tier, without a standard methodology it is difficult to ensure consistency If you lack consistency, the control is not working Depending on your rate methodology, the overpayment could be 20% - 80% depending on country and specialty FMV as a risk control is also strengthened if companies pay similar fees for similar activities based on standard service level expectations 11

12 Polaris FMV methodology differentiates levels of payment based on HCP expertise Expert premiums designed to recognize that markets will typically compensate higher levels of expertise with higher levels of pay Polaris methodology works with three tiers, defined on level of expertise, not on level of current earnings Tier 3: associated with average to above average expertise Tier 2: well recognized in their field within their country but with only limited recognition (if any) in other countries Tier 1: top experts in their field (e.g. top 5-10% in a country) # physicians Methodology for expert premiums (KOL) FMV base rate Opinion leaders Exception process FMV rate development needs to be combined with an effective methodology for determining HCP tiers based on standard criteria for recognizing medical and scientific expertise. 12