• Recent Glaxosmithkline Global Settlements May Have Far-Reaching Compliance Implications for Medtech Companies
  • July 7, 2012
  • Law Firm: Oppenheimer Wolff Donnelly LLP - Minneapolis Office
  • GlaxoSmithKline’s $3 billion global civil, criminal and administrative settlements related to the alleged off-label promotion of its products, failure to provide certain safety data about its products to the FDA, and kickbacks to prescribing physicians, leading to allegations of violation of the False Claims Act, have been widely reported this week.  What has not been so widely reported is the very prescriptive Corporate Integrity Agreement (CIA) that GSK agreed to in late June in order to avoid being excluded from federal health care program participation.

    Under the CIA, GSK agreed to undertake compliance obligations with considerable potential effect on individuals within the company, including the Board of Directors, high-level managers and members of GSK’s sales team.  For example, board members have specific responsibilities for review and oversight of matters related to compliance with federal health care program requirements.  These include specific training requirements for directors and a requirement for adoption of resolutions during each year of the CIA’s 5+ year term, which must be signed by all board members. These resolutions must summarize the Board’s review and oversight of GSK’s compliance with federal health care program requirements, FDA requirements and the company’s obligations under the CIA.  Each resolution must also state that “[t]he Board has concluded that, to the best of its knowledge, GSK has implemented an effective Compliance Program to meet Federal health care program requirements, FDA requirements, and the obligations of the CIA.”  If the Board is unable to reach such a conclusion, the Board is required to include a written explanation of the reasons why it is unable to reach the conclusion and the steps it is taking to implement an effective Compliance Program at GSK.

    Similarly, a group of “Certifying Employees” - high-level management - must sign individual certifications that GSK is in compliance with all applicable requirements, except as specifically provided in writing, with the further warning that the certification is “being provided to and relied upon by the United States.”

    In addition, important individual compensation restrictions were agreed to. These include elimination of incentive compensation based on territory/individual level sales goals for sales representatives and their direct managers.  This is described in a required statement to health care professional and health care institution customers, as follows: “We have fundamentally changed our procedures for compliance, marketing and selling in the United States.  For example, we now compensate our medical sales representatives based on the quality of service they deliver to customers, not on sales targets.”  A two-page appendix to the CIA details an “Executive Financial Recoupment Program” that “puts at risk of forfeiture and recoupment an amount equivalent to up to three years of annual performance pay (i.e. annual bonus, plus long term incentives) for an executive who is discovered to have been involved in any significant misconduct....”  The program applies to current executives and those who are former GSK employees at the time that a recoupment is determined to be appropriate.

    Finally, there are also very extensive compliance requirements for policies and procedures relating to off-label promotions and interactions with health care professionals and the health care industry, generally (e.g. research studies, posting of study results and authorship requirements, speaker program activities, field sales personnel observations and records review, consultant arrangements and medical education grant activities), that should be of interest to medical manufacturers engaged in marketing and research related to their products.