Medical Device Companies Quick to Adopt Ethics Standards to Combat Fraud and Abuse, Finds PricewaterhouseCoopers Survey

BOSTON, March 30 /PRNewswire/ -- Recognizing the need to bolster compliance activities in an era of increasing governmental scrutiny, the nation's largest medical device companies have proactively embraced a code of ethics with nearly universal adoption of standards to combat fraud and abuse of sales and marketing practices, according to a PricewaterhouseCoopers survey released today at the Medical Device Regulatory Compliance Congress, held on the campus of Harvard University.

The survey benchmarked how large medical device companies are complying with fraud and abuse laws since introduction of the Code of Ethics on Interactions with Healthcare Professionals in 2004. The voluntary code was developed by Advanced Medical Technology Association (AdvaMed), a trade group that represents more than 1100 medical technology companies. While medical device firms legitimately collaborate with healthcare professionals, such as providing expertise in how products should be designed or participating in federally required safety studies, the AdvaMed Code distinguishes legitimate interactions from potential abuses that might undermine the private healthcare system.

"Medical device firms understand that positive public sentiment and trust are important assets they need to proactively protect," said Peter Claude, partner in PricewaterhouseCoopers Pharmaceutical and Life Sciences Advisory Practice. "It is clear that medical device firms have seized the opportunity to better integrate ethical standards into their organizations. The key will be to do this in an efficient manner and to connect their compliance obligations with broader corporate goals to improve their performance and competitive advantage."

Highlights of the survey include:

• There is nearly a 100 percent adoption rate of the AdvaMed Code.

• Approximately two-thirds of company presidents or CEOs have personally endorsed the AdvaMed Code in a written statement addressed to company employees and/or customers.

• Nine out of 10 companies apply the AdvaMed Code to all company
  professionals, regardless of title or seniority.

• Three quarters of companies surveyed have posted their compliance
  program on their company website.

• Virtually all respondents have linked sales force compensation to
  compliance with policies and procedures in some manner.

• Seven out of ten firms have put a process in place to track gifts,
  meals, travel, lodging, honoraria and other items of value that might
  be provided to healthcare professionals.

The survey was conducted by PricewaterhouseCoopers in conjunction with the law firm King & Spalding LLP, and with the assistance of Nancy Singer, principal with Compliance-Alliance, which specializes in professional development for those employed in the drug and medical device industries.

"We are impressed that medical device firms have embraced standards to govern the way they interact with hospitals, physicians, researchers and other health professionals," said John Bentivoglio, partner and co-chair FDA/Healthcare Group, King & Spalding LLP. "The question is whether the depth of their risk and control activities is sufficient, and whether they have considered the total relationship a medical device company has with its customer, which can be difficult across a large enterprise," said Bentivoglio. "The good news is that the survey demonstrates companies are developing innovative strategies to address these challenges."

The survey found that most large firms have instituted controls over the engagement of healthcare professionals. These controls include clear agreements that promote ethical behavior, and approaches for determining the fair market value of gifts, entertainment and other remuneration of services, and for ensuring that value is actually received for engagements of healthcare professionals. There continues to be varied practice on how broadly and deeply the medical device companies control these activities and the survey results will seek to present better practices for the consideration of the industry.

Survey respondents also indicated that the control model in the medical device industry around the distribution, receipt, processing and approval of grant requests is beginning to shift toward a model whereby restrictions are placed on the involvement of the sales force related to grants. At the same time, there is growing use of grants committees for approval of educational/charitable grants and research grants.

"While practices are mixed across the industry, we hope that by creating a series of compliance benchmarks, we can share 'better practices' in hopes that they will encourage more effective implementation of compliance across the industry," said Brian Riewerts, partner, Pharmaceutical and Life Sciences Advisory Practice, PricewaterhouseCoopers.

The survey was completed in March 2006 and included 20 medical device firms, including the largest medical device firms in the United States with global annual sales of greater than $1 billion.

About PricewaterhouseCoopers' Global Pharmaceutical and Life Sciences Industry Group

PricewaterhouseCoopers' Global Pharmaceutical and Life Sciences Industry Group ( http://www.pwc.com/pharma ) is dedicated to delivering effective solutions to the complex business challenges facing pharmaceutical and life sciences companies. As the global leader serving the industry, the firm has extensive experience in working with its clients on strategic, operational and financial issues. The firm also provides industry-tailored regulatory compliance, risk management, and performance improvement advisory services to support clients' processes in the areas of research and development, manufacturing, and sales and marketing. The Global Pharmaceutical and Life Sciences Industry Group is part of PricewaterhouseCoopers' larger initiative for the health-related industries that brings together expertise and allows collaboration across all sectors in the health continuum.

About PricewaterhouseCoopers

PricewaterhouseCoopers (http://www.pwc.com) provides industry-focused assurance, tax and advisory services for public and private clients. More than 120,000 people in 139 countries connect their thinking, experience and solutions to build public trust and enhance value for clients and their stakeholders.

"PricewaterhouseCoopers" refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.

About King & Spalding LLP

King & Spalding LLP ( http://www.kslaw.com ) is an international law firm with more than 800 attorneys practicing in the United States and abroad. More than 100 of the firm's attorneys are actively engaged in matters for medical device, pharmaceutical, and other healthcare technology companies. The firm's FDA/Healthcare Group, which specializes in regulatory issues for medical technology companies, includes 21 attorneys and four regulatory professionals.

Source: PricewaterhouseCoopers

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