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Pharmaceutical Sales & Marketing

Legal and Ethical Considerations



Distribution



Distribution Related Regulatory Authority

• Prescription Drug Marketing Act – 1988/92

• State licensing of drug wholesalers

• Required pedigree of drugs to trace prior sales (authorized

distributors exempted)

• Restricted importation to manufacturer

• Restricted re-sale of drugs by end-users and charities

• State Model Practice Act – model rules for licensing of

wholesale distributors

Source: FDA



Sample Tracking and Management



The Business Problem

• Approximately $6.7 billion in drug samples are distributed by

sales reps each year• Prescription Drug Marketing Act (PDMA) of 1987 - 21 CFR

203:

– FDA regulation governing the distribution of drug samples

– Impacts pharmaceutical sales reps and wholesalers

– Strict requirements on manufacturers to ensure that:1. The recipient of the samples is licensed by the state

2. Whatever is shipped to the sales reps is accounted for

3. Safety and security of the samples is ensured

4. Samples distributed to physicians are recorded and continuouslyaccounted for

5. Manufacturers are responsible for sample tracking and detectingpotential diversion, misuse or abuse

• Increased government concern about drug diversion (e.g.,Oxycontin®)

• Heavy fines and criminal penalties for PDMA violations

Source: IMS Health; FDA



PDMA Compliance Failures – The Impact

• 10 years in prison or a $250,000 fine

• $50,000 for each sales rep. violation (2 strikes

maximum and permanent barring from industry)

– Third violation is a $1 million fine to be paid by thecompany over 10 years

• $100,00 fine for failing to report a violation

• Whistle-blowers get ½ the penalty imposed by FDA




Is the FDA Serious About Monitoring Compliance?

• On December 4, 2000, FDA announced plans to hiremore than 100 investigators to focus on PDMAviolations and the diversion of prescription products

• In January 2002, President Bush asked for an 8percent increase in FDA's 2003 budget for inspection-related activities

• FDA.gov announced that this will add 600 newinvestigators just to focus on PDMA violations and

will conduct 520 additional inspections per year onPDMA-related compliance




PDMA Compliance Failures – The Experience

• 1998 – 290 convictions; $29 million in fines



• 2001 - $290 million in fines collected through theaction of whistle-blowers




PDMA Impact on Pharmaceutical Sales

• Samples must be labeled

• Samples must be properly requested and receipted

• Contents of requests and receipts must follow FDA

requirements

• Internal controls for request/receipt non-

compliance

• Inventory and reconciliation processes

• Investigation of falsified records/diversion

• Distribution of samples to charitable organizations

IN SHORT – A TREMENDOUS ADMINISTRATIVE BURDEN!




PDMA Impact on CRM

• 21 CFR 203 and 205 directly impact CRM systems as theyare used as the principal means by which pharmaceutical

samples are provided to doctors

• CRM software programs must include an audit and security

process that governs sample delivery, distribution, andtracking and must be validated to comply with PDMA

requirements

• Companies must document that all sales professionals

handling pharma products understand PDMA regulations. To

ensure that they do, companies must test reps and keep on file

a signed acknowledgement of a compliance waiver in the

event of sample diversion or an FDA audit of the sales force

Source: IMS Health; FDA, Pharmaceutical Executive



PDMA Information Requirements

Source: FDA

TOPIC CURRENT PROPOSED

Receipting Samples • Office address

• Medical designation

• Name

• Specialty

• Date

• Product description• Configuration (tablets, etc.)

• Manufacturer

• Signature

• State license number

• DEA identifier

• Name of distributor

• Bar code

Scanning Not acceptable for replacingpaper signatures

Must satisfy all securityrequirements and electronicsignature requirements under21 CFR Part 11

Lot Numbers Not required Required – including knowingwhich lot numbers have beendistributed to a specificpractitioner



PDMA Information Requirements

Source: FDA; The Franklin Group, Inc.

TOPIC CURRENT PROPOSED

Annual Inventories Annual count required

Reconciliation is notrequired

Must be conductedindependent of person indirect supervision or chainof command of therepresentative. Mustprovide last inventory,

current inventory,distributions to reps, alldistributions, transfers,returns, adjustments sincelast inventory

FDA Reporting Significant loss. Theft.Convictions.Conclusion of

investigations

All investigations while inprogress that involvesuspected diversion or

falsification must bereported to FDA in 5 days

Data Storage andRetrieval

Not mentioned Regardless of whetherelectronic, paper or both,must be linked andretrievable in 2 workingdays



Sample Management Functional Requirements

• Sample Ordering

• Order Fulfillment

• Sample Receipting

• Inventory Management

• Electronic Signature Management

• Exception Management

• FDA Reporting



Example PDMA Sample Compliance Program

1. Define all business rule requirements to identify specific performanceresponsibilities as well as to establish various thresholds

2. Follow standard operating procedures. PDMA requires written SOPs for allactivities related to sample accountability.

3. Complete training for sales reps and operating staff on regulatory requirementsfor PDMA and 21 CFR Part 11

4. Establish a baseline inventory of all samples

5. Monitor shipments. Reps must acknowledge receipt of the samples andidentify the quantity of each received

6. Sales reps must distribute samples to licensed practitioners via CRM or paperforms and must document the practitioner's signature at the time of the drop

7. Get physician validation and ensure DEA numbers are correct

8. Perform random signature audits

9. Report lost or stolen samples10. When one sales rep transfers samples to another, both parties must follow

strict protocols that document the quantity of samples transferred

11. Document sample returns

12. The law requires that field reps take a physical inventory of samples on handat least once a year

Source: Pharmaceutical Executive



15

Sample Accountability

TRACKING AND REPORTINGCHANNELS

ACCOUNTABILITY SILOS



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Sample Management Technologies

PDAs

The Internet

Bar Coding

The Sampling Process

• Sales rep arrives at practitioner office• Rep scans bar codes of samples to bedistributed using a PDA or fills in a pre-printed form

• Rep conducts detailing session• Physician signs for samples on PDA oron pre-printed form

• Signature validated with biometric scan• At end of day the rep:

Syncs the PDA with a laptop orenters data from form

Laptop connects via wireless weband updates company SFA/CRMdatabases

Inventory management recordsupdated for replenishment andPDMA compliance

Analysis of sampling patterns and

reports generated



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Sample Tracking Vendors

• Dendrite (integrated with SFA)• IMS Health (SampleTrak ™)

• Stayinfront

• Integrated Pharma Technologies

• Lscan Technologies• Triplefin (web-enabled fulfillment services)

• Siebel

• Software Associates International (SAI)

• Pyxis (subsidiary of Cardinal Health)

NOTE: Systems collecting sample distribution data mustbe compliant with 21 CFR Part 11



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Physician Detailing



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Detailing and Ethical Issues

• Negative publicity surrounding the

pharmaceutical industry’s use of gifts and

other perquisites to physicians to influence

prescribing habits

– According to the Journal of the AmericanMedical Association, pharmaceutical

companies target $8,000 - $15,000 of sales

effort per physician in an attempt to influence

the choice of drugs they prescribe for their

patients.

– 80,000 marketing and sales people in the U.S. pharma companies (75 sales people per

physician) – up from 35,000 people in 1994!



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Promotion and Prescription Linkage

• The linkage between “promotion and

prescription” has been well-documented:

– 1992 study by the Cleveland Clinic

documented a significant increase in prescriptions for a firm’s drugs that flew

doctors to Sun Belt resorts for conferences

– 1994 study published by JAMA showed that

doctors prescribing certain drugs from a

hospital formulary had recently attended firm-sponsored events or had been asked to speak at

conferences run by these firms



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PhRMA – Code on Interactions With Healthcare

Professionals

• Effective July 1, 2002

• Completely voluntary

• Dealings between sales representatives and health care professionals mustrelate primarily to patient care

– Discussing company’s products

– Providing scientific or educational materials or supporting medical research• Interactions should not take place on a golf course, at an expensive

restaurant, or at other venues that PhRMA described as unsuitable for theexchange of scientific information

• Only certain types of gifts are permitted (stethoscopes, anatomical models)if under $100

• Golf balls, sporting event tickets, show tickets are not permitted• Gifts of minimal value, such as pens and notepads, are allowed under the

code as long as the items are intended for use at the health care provider'spractice site



22

Compliance with the PhRMA Code

• Most, if not all, pharmaceutical companies have published

statements of compliance with the PhRMA code on their websites

and have incorporated it into their policies



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Off-Label Use



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• Off-label (or “extralabel”) use refers to the use by doctors of FDA-

approved drugs for purposes other than those approved by the FDA

• Off-label use is so high that most hospital inpatients receive at least

one approved drug for reasons other than those for which it wasapproved

• FDA regulations ban the promotion of such off-label uses • Drugmakers are barred from pitching doctors directly on unapproved

uses of their drugs

Off-Label (“Extralabel”)Use of Prescription Drugs



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• Food Drug & Cosmetic Act …The Pharmaceutical World’s “Bible”

– A drug or device is misbranded if its labeling is false or misleading

in any particular

– Labeling is broadly defined as including any written or graphic

material on or accompanying a drug

• 21 CFR § 201.56(c): “no implied claims or suggestions of drug

use may be made if there is inadequate evidence of safety or alack of substantial evidence of effectiveness.”

Off-Label Use: Regulatory Guidelines



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• Suggestive selling by rep to physicians when there is noFDA approval: – Propulsid: J&J

– Retinol: J&J

– Topomax: J&J

– Thalidomide: Celgene

– Neurontin: Warner-Lambert/Pfizer

– Vioxx: Merck??

• Doctor suggests medication to patient withoutpharmaceutical company approval – No supporting clinical trials performed

Off-Label Use Regulatory Issues



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• Retinol developed by Ortho Pharmaceutical – FDA Approval for the treatment of Acne

• Off-Label use marketed as Anti-Aging product – No Clinical Trials or FDA Approval for indication

– Ortho Sales Representatives and Marketing Organization promotes off-label use of product

• FDA Investigation of Off-Label promotion – Ortho Executives shred documents related to product promotional

direction

– Three J&J Senior Executive Members removed from office

– J&J Fined by FDA for Label Indication Violations and Obstruction of Investigation (Document Shredding Incident)

– J&J Pharmaceutical Sector Companies scrutinized by FDA

Off-Label Use Violations: Retinol



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• Ortho-McNeil Product:

– Topamax: Eight out of 10 prescriptions for the epilepsy drug

Topamax aren't for epilepsy

– Prescribed off-label for prevention of cluster headaches and

migraine attacks

Off-Label Use Violations: Topamax



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• Celgene Product: Thalidomide

– Thalidomide: the notorious morning-sickness drug that caused

horrible birth defects and ushered in today's FDA drug-safety

rules, even is on the market, and 99 percent of its prescriptions are

off-label – Approved for Leprosy

– Off Label Use for Multiple Myeloma Cancer

Off-Label Use Violations: Thalidomide



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• J&J product

• FDA approved for relief of Heartburn in Adults

• Pediatric Studies failed to show benefits of drug

– 1998 prescription level at 500,000

• $ 1 Billion Annual Sales by Johnson & Johnson

• Government and J&J negotiations for 5 years

– Government report of 80 deaths and 341 injuries – Propulsid pulled from market in 2000

– J&J Legal settlement of $ 90 million (300 deaths 16,000 injuries)

• Doctors Insisted on use of Medication after product pulled

Off-Label Use Violations: Propulsid



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• Warner-Lambert product (later acquired by Pfizer)

• Warner-Lambert's strategic marketing plans, as well as other evidence, showthat Neurontin was aggressively marketed to treat a wide array of ailments,including

– Bi-polar disorder

– Various pain disorders – ALS

– ADD

– Migraine

– Drug and alcohol withdrawal seizures

– Restless leg syndrome

• Neurontin was promoted as effective for use as the sole drug for epilepticseizures, even after solo use had been specifically rejected by the FDA

• Warner-Lambert also used "medical liaisons," who represented themselves(often falsely) as scientific experts in a particular disease, to promote off-labeluses for Neurontin

• Pfizer agreed to pay a fine of $430 million to FDA in July 2004

Off-Label Use Violations: Neurontin



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Voice mail transcription (to MSLs): “Medical Liaisons, this is[the northeast Associate Director]. I am calling in regard to the – you know, there‟s a Neurontin push that‟s supposed to be on.….So, what we need to do is focus on Neurontin.

When we get out there, we want to kick some ass on Neurontin,we want to sell Neurontin on pain. All right? And monotherapyand everything that we can talk about, that‟s what we want todo.

„Cause I‟m embarrassed. But I‟m embarrassed about where weare with Neurontin. We‟ve got to take it into our own hands and really kick some ass on it, all right? Let‟s do it up.”

Presentation by Boston AUSA (March 2005)

Neurontin – The Prosecution’s Viewpoint



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• Does not provide up-to date side effects or clinical researchresults on products benefits/harm to patient

• Potential for severe negative side effects

• Heightens the chance for future physician malpractice suitsfrom patient ill effects resulting from doctors decision towrite an off-label prescription

• Off Labeling means it is not approved by the FDA for theprescribed Medical Indication Treatment Usage

– Not tested and documented during product ClinicalTrials

Off-Label Use Dangers



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•Remedies – Regulatory letter (a/k/a notice of violation or untitled letter)

– Warning letter

– Other remedies:

• Immediate cessation of all materials containing violative statements orgraphics

• Dear Doctor letters

• Corrective advertising

• Pre-clearance

•Enforcement Powers: – Injunction – Seizure

– Consent decree

– Fines

– Criminal prosecution

Off-Label Use Penalties



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• Doctors are well informed about the product

• Base its use on firm scientific rationale and on sound

medical evidence

• Maintain records of the product's use and effects

• Inform patient of off-labeling usage

Allowable Off-Label Use



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• Develop policies requiring compliance with FDA rules – Materials must be consistent with approved product labeling

– May not engage in off-label promotion

– Responses to unsolicited requests for information • Consider policy requiring review of all voice mail and

e-mail messages to the field – Train appropriate personnel (Sales & Marketing) in FDA rules and

appropriate use of voice mail and e-mail

Off-Label Use: Best Practices



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Fraud and Misrepresentation



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The Able Laboratories Case

• Cranbury, NJ based pharmaceutical company (until August, 2005)• Manufactured 1.3 billion tablets, capsules and suppositories that

contained little or no product to be effective

• Supervisors and chemists actively forged records of tests and

tampered with computer data to deceive FDA inspectors

– Inexperienced and improperly trained chemists recruited from Asia andemployed on work visas

– The scientists misrepresented the strength and shelf life of products because they

were motivated to stay in the United States

• New management of QA discovered the fraud when tests of inventory

found low to non-existent levels of active compounds

– Blew the whistle on the company

• Able filed for Chapter 11 in July 2005 and FDA refused to let it

reopen in August 2005



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Misleading Promotional Materials

• Increased number of citations and Warning Letters by FDA formisleading or false:

– Journal advertising

– TV/radio advertisements

– Package inserts/labels

– Instructional materials to doctors and patients (e.g., Roche was cited in2003 for failing to reveal serious life-threatening safety-related

information in a video cassette distributed to patients through doctors of

Xeloda tablets to treat cancer)

• General issues:

– Overstatements of efficacy – Unsubstantiated superiority claims

– Minimization of safety and tolerance risks

• How does Vioxx stand up to this scrutiny?

Source: FDA.gov



Vioxx Detailing Practices

• In Congressional hearings in May 2005 Merck sales practices for Vioxx weredescribed using internal Merck sales manuals and other documents

• When asked by doctors about heart-related issues of Vioxx, Merck reps were

instructed to provide physicians with a pamphlet from Merck marketing

which stated that Vioxx was eight times safer for heart patients than similar

painkillers

• Sales reps were forbidden to discuss Merck's own 2000 study linking the drug

to heart attack risks five times greater than those with another painkiller

• Sales representatives were offered $2,000 bonuses for making Vioxx sales

goals and encouraged to compare their efforts to the struggles of historical

figures like Martin Luther King Jr.

• Those sales practices continued while Merck was resisting the FDA's effortsto include a warning on Vioxx's label about cardiovascular dangers, according

to a Congressional analysis

• According to FDA, none of this was illegal. Was it ethical?

S A S i Ch i l

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