02 December 2008
Key Points:
The trend towards increased scrutiny of the whole of the relationship between pharmaceutical manufacturer and doctor is likely to continue. In the current regulatory environment, pharmaceutical companies must be able to demonstrate that their marketing activities are conducted appropriately and do not seek to improperly influence (or have the appearance of influencing) healthcare professionals.
It is not controversial to observe that the reputation of pharmaceutical manufacturers as marketers is not held in high regard.
There is widespread community perception that pharmaceutical marketing is self-interested to the degree that it makes it a risk rather than a benefit to the public. This is a perception which is reflected in (and perhaps driven by) regular media reporting about the purported excesses of pharmaceutical marketing.
Traditionally, lawyers and regulators who focus on the marketing of pharmaceuticals have been concerned with the content of the marketing materials used by manufacturers: detail aids, leave behind pieces and so on.
However, there is a recent trend towards focusing on the entirety of the relationship between pharmaceutical manufacturers and doctors or other health professionals. This more holistic legal concern adds to the degree of care required by pharmaceutical manufacturers in their marketing activities.
Of course, it is possible to make the case for an alternative perception of pharmaceutical marketing. The complexity of the prescribing decision means that it is important that doctors' decisions are "influenced", in the sense of being properly informed. The range of potentially relevant information may be vast, and doctors need assistance to synthesise it. The relationship between manufacturer and doctor is a mutual one and advice from physicians can and does improve the quality of the information which pharmaceutical manufacturers provide to physicians. These arguments can all be put, but at present they run against the weight of public perception.
What legal risks and consequences arise from that perception?
Regulatory scrutiny
There is a trend towards increased scrutiny of marketing practices in the pharmaceutical industry.
In recent times the ACCC has, as a condition of its authorisation of the Medicines Australia Code of Conduct, imposed a number of conditions on the industry which demonstrate its concern about the advertising by pharmaceutical manufacturers. Medicines Australia publishes a quarterly report on Code of Conduct complaint outcomes because the ACCC required it to do so.
However, the most recent ACCC condition, imposed in 2006 and confirmed by the Australian Competition Tribunal in 2007 (Re Medicines Australia Inc [2007] ACompT 4), is the requirement that members provide Medicines Australia with biannual reports in relation to all hospitality provided to health professionals and that Medicines Australia then publish this information on its website. This is a condition which reflects the increasing emphasis on concerns about relationships.
During the course of hearing Medicines Australia's appeal against the ACCC's condition, the Australian Competition Tribunal heard evidence from Professor David Henry. Professor Henry is reported to have expressed (among other things) the opinion that:
"the complexity and multi layered nature of interactions between the medical profession and pharmaceutical industry has increased in the last decade. Multiple ties and open-ended evolving relationships appear to predominate particularly among medical specialists".
The Tribunal summarised one of Professor Henry's conclusions as follows:
"The conferring of benefits on doctors and the development of their relationships with pharmaceutical companies have the capacity to affect their professional judgment and prescribing practices and public discussion in relation to particular medications".
The consequent rationale for regulation of promotional activities in the pharmaceutical industry and, in particular, for these sorts of conditions is conveniently summarised in the following passage from the decision of the Australian Competition Tribunal when it rejected Medicines Australia's appeal against the hospitality reporting provision:
"In our opinion there is a significant detriment associated with the unrestricted development of non-arms length relationships between pharmaceutical companies and healthcare professionals and particularly those relationships which involve receipt of benefits by healthcare professionals. The detriment lies in the effect that such conduct may have upon the prescribing practices of healthcare professionals directly influenced by it or by the views of professional opinion leaders who have links with particular companies. If prescribing practices of healthcare professionals are influenced directly or indirectly by sympathies for particular products because of benefits derived from or links to the manufacturer or distributor of those products, patient care may be compromised. Patients in need of treatment will not necessarily be provided with that which is best for them."
This statement was made by the Tribunal in support of the proposition that there should be a Code of Conduct governing the promotion of prescription pharmaceuticals. However, it also illustrates the concerns which drive the scrutiny of pharmaceutical marketing.
In particular, there is a perceived need to protect the physician's prescribing decision from undue influence because of the importance of that decision to the patient's well being (in some cases, they are, literally, life and death decisions) and because of the patient's vulnerability. This means that those who market prescription pharmaceuticals are (appropriately) subjected to higher standards than the average advertiser of consumer products.
Further, and as the ACCC condition demonstrates, that scrutiny is no longer simply confined to scrutiny in respect of the interaction between professional representative and doctor.
Foreign Corrupt Practices Act
The focus on physician relationships is well illustrated by recent developments in the US medical device market.
In 2006 and 2007 there were a number of US medical device manufacturers who were the subject of investigations in relation to possible violations of the US Foreign Corrupt Practices Act. This legislation prohibits attempts to bribe foreign officials. This legislation has existed since the late 1970s, but its application to the medical device industry is a very recent phenomenon and reflects the theme of an increasing focus on relationships with health professionals.
In Australia, there is a very real risk that doctors who work in public hospitals will be regarded as "foreign officials" for the purposes of the legislation.
It also is clear from the interest of the US Department of Justice and Securities and Exchange Commission in the conduct of global medical device companies practices in first world markets that the US regulators regard payments which are made to health professionals in the context of a consultancy relationship as capable of amounting to bribery. In the words of one US lawyer working in this area, "it could be any action in exchange for pay, or in the hopes of gaining product sales". The penalties for breach are severe.
If these principles do apply in Australia then the consequence is that Australian pharmaceutical manufacturers with parents who have a US presence need to take a "whole of relationship" view of their interactions with doctors. Furthermore, sloppy relationship or contract administration practices may make it difficult for a company to prove a legitimate purpose for a particular relationship or payment, even when that legitimate purpose exists.
It is also worth noting that Australia is a signatory to the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions and has enacted equivalent legislation to the Foreign Corrupt Practices Act. That legislation makes it illegal for foreign companies to bribe public officials in countries other than Australia. While this legislation has no direct impact upon marketing practices in Australia it makes it clear that the Australian Government is not unsympathetic to the policy concerns which underlie the Foreign Corrupt Practices Act.
Product liability litigation
While the tort reforms of the early part of this decade slowed the pace of personal injury litigation in Australia, we remain a reasonably friendly market for litigation. Plaintiff lawyers are developing new business models which assist them to run such litigation in a cost-effective manner. We also have class action laws which are, generally speaking, favourable for use in pharmaceutical product liability litigation.
Marketers must understand that if a pharmaceutical manufacturer is subject to product liability litigation, it is almost inevitable that the manufacturer will be required to give discovery of many, many documents relating to its marketing and sale of the product in question.
This means that every marketing plan, draft or final, every internal email discussing marketing issues, and every draft of marketing materials may find its way into the hands of lawyers acting for the plaintiffs.
A common strategy of plaintiff lawyers in pharmaceutical product liability litigation is to use carefully selected marketing documents to paint a picture of the company as irresponsible and to suggest that a pharmaceutical manufacturer was selective in providing information to doctors or overemphasised the benefits or underemphasised the risk of the product.
This approach typically ignores the context in which pharmaceutical manufacturers provide information to doctors (for example, the wealth of information available to doctors from other sources). The documents which are chosen by the lawyers are often themselves taken out of context. However, this is an argument which, as we have observed above, is consistent with public perceptions of the industry's marketing practices. As a result, even setting aside questions of its effectiveness in court, this sort of argument plays well in the public sphere and can result in very real consequences to reputation.
One of the difficulties with such arguments is that, while they are relatively easy to make, relying as they do on a small number of carefully selected documents, responding to them requires careful and detailed work, identifying and collating other documents in order to place those selected by the plaintiff's lawyers in their proper context.
It is also true that hindsight is a wonderful thing. Many times a document which, in fact, accurately reflects the scientific understanding of a product at a given point in time can be painted five or ten years later as failing to have regard to some crucial detail or piece of evidence. Again, it may require careful reconstruction of the environment at the time the document was created to show that it was accurate and reasonable at that time.
In addition to these traditional plaintiff's tactics, I expect that plaintiffs and their lawyers will follow the trend towards increased regulatory scrutiny of the whole of the relationship between pharmaceutical manufacturer and doctor. They may be interested in the way in which a pharmaceutical manufacturer interacted with a doctor involved in the treatment of the plaintiff. Did that doctor attend education events sponsored by the manufacturer and, if so, what food was provided? Or they may seek to demonstrate that statements made by key opinion leaders were compromised by their relationship with the pharmaceutical manufacturer.
What can be done
In short, the threat of increased scrutiny of marketing practices requires increased diligence on the part of pharmaceutical manufacturers.
Many of the issues which I have identified become difficult for pharmaceutical manufacturers to manage because of inadequate internal documentation as to the reasons why certain documents were created or things were done. If a regulator wishes to ask questions about the propriety of a pharmaceutical manufacturer’s relationship with a given doctor or group of doctors, it is important to be able to demonstrate, from documents, that the relationship had a legitimate purpose and that the relationship was conducted in an appropriate way.
Similarly, the creation of advertising materials and the process for their approval needs to be carefully and consistently documented. Many, if not most, pharmaceutical manufacturers will have systems for the review and approval of marketing materials which track the approval process. However, in the event of a regulatory investigation or litigation, it is not just the marketing materials which will need to be disclosed. It will also include documents which relate to interactions with the healthcare profession generally, meaning contracts with advisory board members, minutes of advisory board meetings, research and consultancy agreements and corporate affairs documents.
The emails and draft documents which pass between employees will also need to be disclosed. The way in which marketers go about their business does not necessarily lend itself to the neat, ordered document set which is a lawyer’s ideal. The work, by its nature involves the generation of ideas, many of which might be inappropriate (and are therefore ultimately discarded), but which result in documents which, taken out of context, can be made to look bad.
There are, nevertheless, a number of commonsense rules of thumb which can substantially diminish the risks associated with documents. Here are four simple points which emerge from the observations in this paper. Manufacturers must:
For further information, please contact Greg Williams.
