Auditing Your Aggregate Spend Program

Written by Alexis Stroud, Director Quality and Compliance, QPharma

1. What components of the audit process need to be implemented to ensure compliance with state aggregate spend and Healthcare Reform regulations?

In order to comply with state aggregate spend and healthcare reform legislation and regulations, you need to have policies, procedures, systems, controls, and monitoring and auditing processes designed to maintain data integrity and compliance with the various state and federal reporting requirements.

Life science companies must clearly understand and interpret the regulatory challenges to comply with each States’ reporting requirements, as well as begin preparation for the Patient Protection and Affordable Care Act (PPACA) – and possibly new state legislation. Based on these interpretations, their policies, procedures, monitoring controls, and auditing steps need to be developed and implemented to ensure reporting compliance is maintained.  This becomes even more challenging for a life science company, because the necessary data and systems are generally not centrally located or maintained (i.e. a cross-functional effort). In addition, the required data elements required to comply with the current Federal reporting requirements may be incomplete or non-existent within these systems.

Using a process-based audit approach enables a company to understand all of its interactions with Healthcare Providers (HCPs) and how those interactions are performed and recorded within its existing systems.  This type of assessment delivers a detailed understanding of the current environment in which your company is operating; identifies policy and procedure gaps, control weaknesses, and opportunities to implement industry best practices; and positions your company to ensure accurate and complete state and federal disclosure.
Note: Some of the state laws (NV and MA, for example) require certification that a manufacturer has conducted audits as part of its compliance program.



What should your Auditing and Monitoring Program consider?

•  Is the process documented?  What is the process for reporting findings?
• Does the compliance auditing and monitoring program incorporate key approval points such as HCP credentialing, needs assessment, payment authorization, and reporting accuracy?
• Have you built into the formal compliance audits a degree of independence?
• Are audits performed at least annually?
• How aware are your Internal Audit teams of the requirements of the state and federal regulations.  
• When reviewing past audit reports, how comprehensive were those reviews?  Were findings investigated and closed out?

Things to consider when auditing your aggregate spend program:

• Do you have a Federal- and State-specific reporting policy?  Is it adequate and is it being followed?  How are you keeping up to date with the changing legislation and regulations and how is that information being communicated within the organization and to any third party providers?
• Do you have assessments of third party vendors?
• Third party vendors are acting as agents of a Company. Their activity is ultimately the activity of the Company.
• Monitoring/auditing should include activities of third party vendors.  Perform contract reviews.
• Third party vendors should be informed of this requirement and will have to potentially provide data and other documentation for the audit.
• Do you understand the underlying data controls?
• Process – How is data captured, approved, and updated?
• Systems – What systems are the data maintained in and what are the relevant controls and validation procedures?
• Data – What data elements are available to meet the reporting requirements?
• Procedures – What processes are necessary to capture accurate and complete relevant data?
• What are your data collection challenges? How can you improve current processes to address these challenges?
• Are there enough resources within your organization to perform various data gathering, validation, and reporting functions?
• Have you had any prior incomplete or inaccurate State reporting filings?
• What tools/procedures (checklists, sign-offs, sub-certification process) and monitoring controls are in place to address the day-to-day process designed to enhance compliant state reporting?
•  ensure accuracy of data through consistent and efficient data review
• identify and investigate outliers and compliance red flags
• Have you tested any system-based tools to ensure they are working properly?
• Is your system flexible enough to change and adapt over time with new/updated laws and are you collecting data at the most granular level?
• Has training been provided to all levels of the organization related to the current and future reporting environment requirements, company policies and standard operating procedures, and monitoring and auditing techniques?
• Is the company using the information obtained for state reporting requirements to enhance business operations, as well as overall corporate compliance?
• Do you have disciplinary actions for employees that do not comply with your procedures?

Physician Payment Sunshine Provisions in Health Care Reform – The Federal Government Becomes the 51st State

Written by Alexis Stroud - Manager, Regulatory Compliance at QPharma

 In response to growing concerns of potential conflict of interest between physicians and the pharmaceutical and medical device industries, Section 6002 Transparency Reports and Reporting of Physician Ownership or Investment Interests (commonly known as the Physician Payment Sunshine Provision) was included in the Patient Protection and Affordable Care Act (PPACA) signed into law on March 23, 2010, by President Barack Obama.

QPharma has prepared a fact sheet and guidance highlighting the key elements to help our industry better understand this provision and its requirements.

Beginning in 2013, Section 6002 requires that all manufacturers of a drug, device, biological or medical supplies report any transfers of value or payments exceeding $10 (or an aggregate of $100 or more) to physicians and/or teaching hospitals to the Secretary of Health and Human Services on an annual basis.  This information will be available on a public, searchable website.

What Information is Required to be Reported? 

• Name of covered recipient (if a payment is made to an entity or individual at the request of or designated on behalf of a covered recipient, the payment must be disclosed under the covered recipient)
• Business address
• Physician specialty
• National provider identifier
• The value of the payment or transfer of value
• Date of payment
• The name of the related drug, device, or supply, if available; to the level of specificity available
• Form of payment
• Cash or cash equivalent
• In-kind items or services
• Stock or stock option (or any other return on investment)
• Nature of payment
• Consulting fees
• Compensation for services other than consulting
• Honoraria
• Gift
• Entertainment
• Food
• Travel or trip
• Education
• Research
• Charitable contribution
• Royalty or license
• Ownership or investment interest;
• Direct compensation for serving as faculty or speaker for medical education program

Does this Law Preempt State Law?
This law does indeed preempt state law, starting in 2012.  States are prohibited from collecting the same information required to be reported under this section.  States may continue to collect other types of data not captured or excluded from reporting (with the exception of threshold limits), as well as data for public health purposes or legal proceedings.

Federal preemption would not occur for State or local laws that are beyond the scope of this section.  Currently, 8 states have enacted unique laws regarding the financial arrangements between drug and/or device companies and healthcare professionals and as of Jan 2010, there are 14 states with pending disclosure bills and 8 states with pending bills that prohibit or restrict health care professionals from accepting certain items of value.

Other states, such as CA, MA, and NV, require companies to adopt a marketing code of conduct, which is not addressed at all in the PPACA.  There are also state laws on representative licensing (e.g. - DC) and lobbying laws (e.g. - FL (Dade County), CO, LA).  This means that companies will have to continue to report certain expenditures and ensure compliance to state authorities.

Vermont Disclosure of Free Samples - What Will Be the End Result?

written by Alexis Stroud - Manager, Regulatory Compliance at QPharma

On May 27, 2010, Vermont Senate Bill 88, An act relating to health care financing and universal access to health care in Vermont (S.88) became law, without the Governor’s signature. Among other things, S.88 amends Vermont's Pharmaceutical Marketing Disclosure Law by requiring manufacturers of prescribed products to disclose to the Vermont Attorney General's Office all free samples of prescribed products provided to health care providers during the preceding calendar year. The bill authorizes the Vermont Attorney General to publicly report aggregated sample distribution information.

Who is Required to Report?
Each manufacturer of prescribed products shall disclose to the office of the attorney general all free samples of prescribed products provided to health care providers during the preceding calendar year.

“Sample” is defined as a unit of a prescription drug, biological product, or medical device that is not intended to be sold and is intended to promote the sale of the drug, product, or device. The term includes starter packs and coupons or other vouchers that enable an individual to receive a prescribed product free of charge or at a discounted price.

What Information is Required to be Reported?
This bill requires manufacturers to identify for each sample the product, recipient, number of units, and dosage.

When is the First Report Due?
The first report is due on April 1, 2012 for the previous year's sampling activity.This section will not apply to samples of prescription drugs required to be reported under Sec. 6004 of the Patient Protection and Affordable Care Act (refer to the white paper “Physician Payment Sunshine Provisions Health Care Reform” for additional information on Sec. 6004), if as of January 1, 2011, the office of the attorney general has determined that the U.S. Department of Health and Human Services will collect and report state- and recipient-specific information regarding manufacturer distribution of free samples of such prescription drugs.

What are the Penalties for Noncompliance?
Failure to Disclose - A civil money penalty of no more than $10,000 per violation. Each unlawful failure to disclose shall constitute a separate violation.

Will the Information Submitted be Available to the Public?
This bill authorizes the Vermont Attorney General to publicly report aggregated sample distribution information. Public reporting will not include information that allows for the identification of individual recipients of samples or connects individual recipients with the monetary value of the samples provided (i.e. including the names or license numbers of individual recipients).

Current Controversy over Sample Disclosure
With the passing of this bill, Vermont has become the first state to enact sample disclosure reporting requirements. This bill was passed without Governor Douglas’ signature. He states, “… the drug sample reporting provision adds burdensome new regulations that are unnecessary and could make it difficult for low-income Vermonters to receive needed medications. These sections do not represent meaningful reform; rather they detract from the serious work ahead.” Although S.88 includes these provisions, Governor Douglas decided to allow the bill to become law because it includes a critical expansion of the innovative Vermont Blueprint for Health.

This provision was initiated over concerns that there is a correlation between the distribution of samples and the prescribing patterns of doctors who receive them. A number of senators objected to the sample disclosure requirements. Rutland senator Kevin Mullin argued that the bill would have a chilling effect on the use of free samples in Vermont.


Do you think the disclosure of this information will deter practitioners from accepting or requesting products? Should manufacturers be required to report the distribution of free samples and is there a benefit to making this information available to the public? Please share your opinions here...