Pharmaceutical and medical device companies have enough to worry about when it comes to enforcement risks.  It is only in the last ten years that FCPA enforcement has been added to their list of worries.

With the increase in FCPA enforcement, pharmaceutical and medical device companies have to worry about a number of interactions between their staff and foreign doctors, and foreign healthcare officials.  Drug and device companies have to monitor a number of interactions, including clinical trials, travel sponsorships, consulting arrangements, medical device equipment trials and other types of interactions.

Clinical trials are a particular risky area.  Pharmaceutical and medical device companies often enlist foreign doctors and medical institutions to conduct, or assist in conducting, clinical trials.  These foreign healthcare providers are all deemed “foreign officials” under the FCPA.

Clinical research can be designed: (1) to generate the clinical data required in order to obtain FDA approval; or (2) to generate clinical data about an FDA approved product in order to develop marketing programs.  Clinical trials are risky enough but when you add a layer of FCPA risks and compliance, you have a recipe for disaster.

Drug and device companies have steadily been increasing the number of foreign clinical trials.  The primary motivation for moving clinical trials overseas is to save on costs.   Almost 75 percent of clinical trials investigating FDA-regulated products are conducted in foreign countries.  Approximately 80 percent of the participants in all clinical trials were enrolled at foreign locations.

In many cases, drug and device companies contract with Clinical Research Organizations (CROs), academic and health care facilities, and foreign physician investigators.  CROs are used to manage clinical trials with foreign medical institutions, and act like a third-party agent for a company and interact directly with foreign physicians and medical institutions.

Companies using CROs have to conduct due diligence review of the CROs like any third-party agent and negotiate appropriate contractual provisions to minimize foreign bribery risks.  The Department of Justice and SEC have focused on the significant risk that companies may pay bribes to foreign physicians and healthcare officials to generate favorable clinical data.  Such bribery can mask serious health risks to ultimate consumers.

Some companies retain foreign physicians to assist a clinical trial as individual investigators.  Prosecutors are suspicious of such arrangements since they fear that the individual physicians will attempt to “influence” the clinical trial contrary to an objective scientific analysis.

Drug and device companies will continue to conduct clinical trials in foreign locations.  The economics and regulatory environment is favorable.  As a result, compliance officers face a real challenge in navigating these risks.  Compliance officers have to design and implement a robust compliance program which includes detailed due diligence and internal controls to make sure they do not run afoul of the FCPA.