Device manufacturers typically lack ways to measure the effectiveness of compliance training programs and industry ethics codes, though most firms use those tools to guard against misconduct, according to an AdvaMed-commissioned survey.

"The vast majority of companies have not yet figured out how to have key performance indicators or metrics" to track compliance levels over time, McKinsey & Co. Associate Principal Brian Salsberg observed at the AdvaMed annual meeting in Dana Point, Calif. March 3.

Salsberg continued: "There are some obvious things like percentage of employees trained, but that doesn't really get to the heart of the issue. You almost need a [regular] survey or something to do this."

Supported by the Washington, D.C. law firm King & Spalding, McKinsey polled 48 AdvaMed member companies in January to benchmark compliance activities and adoption of the trade group's code of ethics.

At AdvaMed's annual meeting two years ago, board members approved the code, which became effective in January 2004 (¹ Also see "Golf Ball Gifts, Spouse Travel Funds Prohibited By AdvaMed Ethics Code" - Medtech Insight, 24 March, 2003., p. 6).

Salsberg's cautionary remarks came as he presented findings showing that of all survey respondents, 55% have few or no formal key performance indicators (KPI) in place to monitor compliance programs. Another 23% have "many KPIs covering [the] most important areas," and 21% have "some KPIs, but do not cover all important areas," McKinsey's analysis notes.

Furthermore, "no one responded that they had any sort of compliance survey, which can be an interesting tool to use every year to test the attitude and climate of the business, of the employees and what they're feeling," Salsberg said. "Some of your counterparts in the pharma industry do that on an annual basis."

The survey indicates that roughly 51% of responding firms' compliance officers report directly to their CEOs. Although the majority (63%) routinely interact with the firm's board, 53% said the board lacked "oversight responsibilities for compliance."

Those findings caused McKinsey to conclude that manufacturers "need to adopt a more enterprise-wide approach to risk generally." The firm is exploring whether a more detailed survey is needed to incorporate feedback from sales and marketing execs, and not just legal and regulatory staff.

Approximately 90% of companies reported having a formal compliance program, though most of them were larger firms.

Of the 48 manufacturers surveyed, 15 have annual revenue of more than $1 bil.; 14 are in the $100 mil.-$1 bil. range. Another eight do $10 mil.-$100 mil. in yearly sales, and 11 more draw less than $10 mil.

King & Spalding Partner John Bentivoglio stressed that referencing corporate compliance programs often is insufficient to satisfy federal investigators should an ethical problem area arise. "The government is very sophisticated about these types of issues," Bentivoglio, a former Department of Justice special counsel for healthcare fraud, warned.

"If you pull your compliance program off the shelf to try to convince a prosecutor not to" pursue criminal charges, "they're not going to look at the program and say, 'well, this looks very sophisticated.'" Bentivoglio added: "They're going to want to see" hotline logs and "results of audits. They're going to want to see that people were disciplined and appropriate corrective actions were taken."

Guidant VP & Chief Compliance Officer Kathleen Lundberg moderated the session. She attested: "From our standpoint, one of the things we would like to know about is how do you put a great internal investigation program in place where you are [tracking] issues that come to your attention, either through a hotline" or other methods.

As Guidant prepares to integrate with Johnson & Johnson, another regulatory aim will be to ensure that the two firms' compliance programs are closely in synch (² [A#01300520006], p. 16).

Although 92% of survey respondents said they are familiar with AdvaMed's code of ethics, with many firms subsequently changing their policies, Bentivoglio explained that the code "does not address all of the risk areas that companies face."

AdvaMed's code, while "a first-grade product," focuses mainly on sales and promotional activity, and not good manufacturing practices, FDA regulatory violations, educational and research grants and some CME issues, he said. Bentivoglio called the document a "good first step" that firms should augment with their own policies.

Advertising/promotion, FDA/GMP, Medicare and pricing, good clinical practices and import/export topics ranked among the top five concerns of device corporate compliance officers surveyed.

Washington, D.C.-based attorney Kevin McAnaney singled out unreasonable payments to physicians as a practice likely to motivate prosecutors. Here, "device companies are much more vulnerable" than pharmaceutical firms, because no single physician or group can control the market for drugs - unlike the scenario for some devices, he suggested.

Acorn Cardiovascular VP-Corporate Assurance Steven Anderson commented that the AdvaMed session on fraud and abuse seemed to contain advice directed primarily at large manufacturers, and not "emerging-growth" companies.

The survey findings reveal, for example, that only 32% of the 25 participating companies with 1,000 or fewer employees have an employee hotline for whistleblowers, whereas the 23 larger firms surveyed all maintain the service.

Those outlets become useless if they are not publicized, Bentivoglio noted. On the one hand, "if you have very high-level awareness that a hotline exists, that they know where to go, and you have a low number of calls, I think you can take comfort in that."

On the other hand, "if you have very low level" of employee awareness coupled with "a low number of calls," a hotline "may look nice on paper, but isn't really achieving results," he said.

Medrad CFO and Senior VP Michael Howard quipped that smaller firms would do well to "rip off the bigger folks." His presentation described Medrad's "total performance excellence" program, which merges the manufacturer's regulatory and business functions. Medrad earned the U.S. Commerce Department's Malcolm Baldrige National Quality Award in 2004.

Overall, 58% of AdvaMed-surveyed firms specialize in med-tech, and 11% are diversified healthcare companies. Another 31% are diversified, but include non-health-related businesses.

AdvaMed Ethics Compliance Survey Suggests More Analysis May Be Needed

More from Archive

More from Medtech Insight