© huron consulting services llc. all rights reserved. aggregate spend 101 march 5, 2009 l i f e s c...

© Huron Consulting Services LLC. All rights reserved.

Aggregate Spend 101

March 5, 2009L I F E S C I E N C E S A D V I S O R Y S E R V I C E SL I F E S C I E N C E S A D V I S O R Y S E R V I C E S

Manny TzavlakisDirector

Life Sciences Advisory ServicesHuron Consulting Group

[email protected](312) 532 1504

Marci JuneauManager

Life Sciences Advisory ServicesHuron Consulting Group

[email protected](312) 912 1379

Life Sciences Advisory Services 2

Current Regulatory Landscape

Industry relationships with healthcare professionals (“HCPs”) and healthcare organizations (“HCOs”) are under significant scrutiny by both Federal and state enforcement agencies.

Numerous life sciences companies have been investigated for matters related to their interactions with HCPs, including communications regarding the use of products, provision of gifts and hospitality, and compensation arrangements for services.

Several states have passed laws requiring the tracking and reporting of marketing and promotional spending on HCPs. Several additional state legislatures are discussing passing laws mandating manufacturer disclosure of spending and payments to HCPs, as is the Federal government with the proposed Physician Payments Sunshine Act.

With specific requirements by the FDA regarding financial disclosures for clinical investigators and numerous public inquiries into manufacturer relationships with HCPs, the simple perception of an inappropriate relationship could significantly harm a manufacturer’s reputation and market presence.

Result: the need for organizations to develop robust processes and systems to track and monitor spending on HCPs is a significant compliance requirement and a critical business need.

Background on Aggregate Spend Tracking


Enacted Legislation by State, as of 1/1/09

Gift Disclosure Laws:MA (Pending Final Rule), ME, MN, VT, WV, and DC

• File a report identifying the value, nature, and purpose of any gift, fee, payment, subsidy, or any other economic benefit greater than $25 (greater than $50 in MA)

Prohibition & Disclosure Law:MN

• Prohibits certain gifts over $50 to any one HCP per year• Requires disclosure of compensation and

reimbursements valued at more than $100

Comprehensive Compliance & Reporting Laws:CA

• Establish annual, per-physician limits on gifts, promotional marketing materials and other items or activities (limits established by each company)

• Compliance with PhRMA Code and OIG GuidelinesMA (Pending Final Rule), NV

• Adopt a written marketing code of conduct, a training program, identify a compliance officer, conduct annual audits of compliance with marketing code, and adopt policies for investigating non-compliance with the marketing code

MN has Pending Legislation to Expand Current Law to Medical

Device Manufacturers

9 states have enacted spend tracking / reporting laws; multiple state laws and the Sunshine Act are pending



• Congressional Activity– Physician Payments Sunshine Act (pending)– Medicare Payment Advisory Commission (MedPAC) Recommendations to Congress – Senator Grassley (R-IA) and Senator Kohl (D-WI) inquiries

• Voluntary Disclosures– Charitable Donations and Grants

• Senator Grassley requested that several companies post their charitable donations and grants to medical organizations.

• Many of these companies have begun posting these transactions and others have stated they will begin posting in the near future.

– Payments to Physicians• Several companies will begin voluntarily posting payments to physicians in 2009.

• Corporate Integrity and Deferred Prosecution Agreements

– Corporate Integrity Agreements (“CIAs”)• Some recent CIAs require companies to publicly disclosure all customer payments.

– Medical Device Deferred Prosecution Agreements (“DPAs”)• DPAs mandate public disclosure of customer payments.

Other Needs for Aggregate Spend Tracking



These aggregate spend tracking requirements necessitate the development of processes and systems to track aggregate spending at an enterprise level.

This is a significant business challenge for most life sciences companies, since very few organizations have systems and processes that are interoperable at the enterprise level.

Most systems are designed and implemented to meet very specific functional needs or departmental requirements (e.g., sales force automation, grants management, T&E, etc.). As a result, capturing all data necessary for state reporting represents a significant challenge for most life science organizations.

So What Does this Mean for My Company?

Aggregate Spend Reporting and Tracking


Aggregate Spend Assessment – Getting Started

Status of Current Disclosure Activities– Who in your organization is currently making disclosures/certifications under the state laws?– Is the disclosure being made by each division of the company or for the entire company?– How is spend versus the declared cap being monitored under the California requirements?

Monitoring Efforts Regarding New State Disclosure Requirements– Is anyone within the company monitoring the status of current and pending state legislation to

understand what is mandated by the existing and new disclosure laws?– Is there a Company-wide process for interpreting and implementing new state compliance or

disclosure requirements?– Has the impact of the pending Federal Sunshine Act regarding payments to physicians that

may ultimately preempt individual state laws been measured?– What is the Company’s plan to begin tracking for the Massachusetts law beginning 7/1/09?

Identification of HCP/HCO Spend– Which functions within the organization provide payments, gifts, or other items of economic

value to healthcare professionals or healthcare organizations?– What systems are used to process or track these payments, gifts, or other items of economic

value?

Tracking of HCP/HCO Spend – What is the Company doing to track spend in accordance with the existing state laws?

Key Questions to Ask of Your Organization


Aggregate Spend Assessment

Due to the previously mentioned issues, companies should consider evaluating individual aggregate spend situation.

To prepare for full compliance with state and pending federal disclosure requirements, companies should consider undertaking the following activities:

IMPLEMENTATION PROCESS

Customer Master Gain

understanding of systems and processes

Determine all channels where payments may occur

Systems and Processes

Identify touch-points with HCPs and HCOs across all key functional areas

Develop complete inventory of activities and expenditure types

TouchPoints

Map the touch-points to the current Business Systems and processes

Mapping

Identify notable gaps between the current process assessment and inventory

Develop a vision for the company’s tracking

Analysis

Update/Acquire Customer Master so all HCPs can be uniquely identified and aggregated

Customer Master

Aggregate Spend Tracking & Reporting Activities


Data Capture Issues for Honoraria PaymentsAggregate Spend Assessment – Customer Master

As part of the aggregate spend assessment, your company’s ability to allocate items to an individual HCP must be examined.

This often includes reviewing the company’s existing customer master, or determining that one does not exist.

– What is a customer master?

• A consolidated list of all HCPs, their credentials and their contact information.

• This includes a unique identifier for each HCP.

– Why is this important?

• The goal of a company level customer master strategy is to identify unique HCPs at the time of the transaction or at a later time in order to facilitate tracking and reporting.

• The customer master allows the company to individually identify the actual recipient of spending.

– Integration into Enterprise Systems

• Integrating an enterprise customer master into individual source systems will present unique challenges.

Data is Key to a Successful Aggregate Spend Solution


Aggregate Spend Assessment – Systems and Processes

Companies must understand all of their systems and processes through which HCPs or HCOs could receive value.

Each functional area within a company has a different need for tracking activities with physicians (e.g., sales, marketing, medical affairs, clinical, public relations, etc.).

Since the systems that support each of the functional areas tend to be developed for a specific need and do not generally interface with other systems across the company, capturing all data necessary represents a significant challenge.

HCP

ERP System SFA System T&E SystemGrant

ManagementKOL

TrackingClinical Trial

Activity

Designed for enterprisefinance and logistic

functions

Designed to tracksales force contacts

Designed to accuratelyreimburse employeesfor expenses incurred

Designed to trackMedical Affairs contacts

w/ KOLs and investigatorsDesigned to track

milestones and paymentsfor investigator studies

Designed to trackgrant payments andactivity milestones

HCO

Understanding Technical Requirements and Business Processes


Aggregate Spend Assessment – Touch Points

Field Sales(Non-Distributor)

Field Sales(Non-Distributor)

Medical & Clinical Affairs

Medical & Clinical Affairs MarketingMarketing Third-Party

Vendors

Third-Party Vendors

MealsMeals

GiftsGifts

GrantsGrants

Practice AidsPractice Aids

Advisory BoardsAdvisory Boards

Consulting ServicesConsulting Services

Publications & SpeakingPublications & Speaking

Medical EducationMedical Education

Meals/GiftsMeals/Gifts

Peer to Peer MeetingsPeer to Peer Meetings

Advisory BoardsAdvisory Boards


Travel & HospitalityTravel & Hospitality

Service Fee PaymentsService Fee Payments


Sa

mp

le F

oc

us

Are

as

Identifying HCP Spending Across CompanyIdentifying HCP Spending Across Company

To fully comply with disclosure requirements such as those required under state marketing laws, manufacturers must first identify all of the circumstances under which healthcare entities are given payments, gifts or other economic benefits.

Manufacturers may find, however, that HCP spending is widely spread across the organization and is tracked in a variety of systems and manually updated spreadsheets by a multitude of departments.

HCP/HCO Touch points


Aggregate Spend Assessment – Mapping

After identifying all payment systems and spending types, companies should map the spending type touch-points and other spend identified to the current systems and processes in order to ensure that all necessary data is being captured.

ERP System

SFA System

T&E System

Grant Management

KOL Tracking

Clinical Trial Activity

Payments

Meals

Travel

Grants

Lodging

DTC Ads

Salary &Benefits

Mapping Systems and Spend Types


Aggregate Spend Assessment – Analysis

After completing all prior steps to understand the existing systems and processes, companies should identify notable gaps between the process assessment and activity inventory.

Companies must determine what their gaps are and how these can be filled in to complete the company’s aggregate spend tracking processes.

Aggregate Spend Data

Store

Understanding Gaps in the Processes


Aggregate Spend Assessment – Spend Reporting Implementation

Spend Reporting Process/Tool Implementation

Using the aggregate spend assessment described in previous slides, companies can begin implementing a spend reporting process.

Addressing the key “front-end” processes and systems is critical to gathering the appropriate level of data necessary for aggregate spend tracking and reporting (including value, nature, and purpose of spend).

Without a robust data capture process for the “front-end” systems at the “point-of-entry”, organizing the data and structuring the transactions on the “back-end” will be a nearly impossible task.

Moreover, no aggregate spend tracking and reporting system will be capable of resolving issues of data completeness and accuracy related to “front-end” systems and processes.

Ultimately, the company may chose to either modify their existing processes and systems to capture and efficiently report on all necessary spend, or to purchase a comprehensive third-party software solution.

Several system vendors have developed wide-ranging solutions to capture, analyze, and report on expenditure data to HCPs. Your company will need to gain a thorough understanding of the current landscape of solution providers to select an appropriate technology solution if such a system is deemed appropriate.

IMPLEMENTATION PROCESS


Data Source 1

Data Source 2

Data Source 3

Data Source 4

ET

L P

rocess

OperationalData Store

CustomerMaster File

TransactionData Store

w/ De-dupingFunctionality

Ru

les En

gin

e

State Reporting Data Store

Ad Hoc Reports

Reporting Functionality

State Disclosure Reports

Company SystemsS

amp

le A

gg

reg

ate

Sp

end

Sys

tem

s A

rch

itec

ture

Implementation of an Internal Tracking Mechanism

Developing a Longer Term Vision for the Aggregate Spend Tracking System

Whether the company builds an aggregate spend tracking system or chooses a technology partner to build such a system, the development of business requirements to meet the requirements of tracking aggregate spend at an enterprise level will be necessary.

Note: the aggregate spend assessment described in the previous slides will allow companies to understand how their systems and processes fit into this picture.

Whether the company builds an aggregate spend tracking system or chooses a technology partner to build such a system, the development of business requirements to meet the requirements of tracking aggregate spend at an enterprise level will be necessary.

Note: the aggregate spend assessment described in the previous slides will allow companies to understand how their systems and processes fit into this picture.


Proactive Compliance Management

As-Is / To-Be Strategy

Gap Analysis to determine issues across various division / functions in an organization

Roadmap created to blueprint next steps

Most effective use of commercial budget

Promotional Mix Optimization with rich “Reporting” data

PHASE I:PLANNING

“How do we determine spend?”

PHASE II:REPORTING

“How do we report spend?”

PHASE III:

PREDICTIVE

“How do we spend more effectively?”

Business Process Analysis

Customer Touch Point Identification

Customer Master Integration

Aggregate Spend Reporting Tool Implementation

Sales & Marketing Decisioning

Commercial Data Center of Excellence (CoE)

STEPS

OUTCOMES

Transparency and Visibility for Ethics & Compliance

Seamless integration of tools needed for reporting processes

Scalability of solution to handle pending and future state and federal legislation

An Aggregate Spend Reporting Roadmap

Life Sciences Advisory Services 16L I F E S C I E N C E S A D V I S O R Y S E R V I C E SL I F E S C I E N C E S A D V I S O R Y S E R V I C E S

© huron consulting services llc. all rights reserved. aggregate spend 101 march 5, 2009 l i f e s c...

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