When Corporate Governance Creeps into Canada

June 9, 2016

A new era of corporate governance has infiltrated the pharmaceutical industry within the last few years. In addition to corporate integrity agreements with the US Department of Justice and the Foreign Corrupt Practices Act, there is now, of course, the US’ Sunshine Act, which was designed to increase the transparency of financial relationships between health care providers and pharmaceutical manufacturers. The Act requires prescription drug and medical device manufacturers to report direct or indirect payments and transfers of value to physicians or teaching hospitals.

Given this new landscape of corporate governance, a parent company may be applying global or US regulations and procedures to Canadian affiliates. When some of these policies spill into Canada, they may limit the ability of these affiliates to compete in our marketplace.

A recent benchmarking survey, carried out by The Pangaea Group, revealed that, in over one-third of companies surveyed, the medical department reports directly to the global or US office and indirectly to the Canadian CEO. Could this structural alignment be influencing the transfer of corporate policy and procedures, with respect to governance and compliance, to Canadian affiliates?

For example, policies and regulations related to continuing health education (CHE), other learning activities (OLA), and promotional speaker events may include restrictions from the parent company that differ from those in place in Canada. The process for permitting grants and sponsorships may not align between various jurisdictions as well.

In addition to following the Innovative Medicines Canada (formerly Rx&D) Code of Ethical Practices, a framework that embodies each member’s ethical principles to provide health care providers, stakeholders, and governments with accurate, balanced, and objective information, all Canadian companies must also abide by Health Canada’s Food and Drugs Act and Food and Drug Regulations.

These Acts contain drug advertising provisions. It is essential that companies are familiar with Health Canada’s policy, The Distinction Between Advertising and Other Activities, to determine whether or not the message in question falls within the confines of advertising.

If the purpose of the message is one of a promotional nature, it is subject to the advertising provisions of the Food and Drugs Act and Food and Drug Regulations and would need to be reviewed by one of Canada’s advertising preclearance agencies, such as the Pharmaceutical Advertising Advisory Board (PAAB) or Advertising Standards of Canada (ASC), depending on the audience in question.

In this process, it is critical to determine whether the purpose of the message is grounded in advertising or not. Health Canada lists several factors to help the industry make this important distinction, including guiding questions, such as “Who is the audience?” and “Who delivers the message?” One key factor that must be considered is the answer to the question, “What influence does a drug manufacturer have on the message content?”

###So, how is this relevant to corporate governance?

Although certain activities may be non-promotional in nature, they can be classified as advertising. For example, if corporate policy calls for all materials to be reviewed and edited internally and new content is added that has not been specifically requested, this could be viewed as “influencing the message,” and, as such, the activity would be deemed as advertising and subject to the advertising provisions of the Food and Drug Regulations.

In the wake of this heightened governance, the industry is also taking a closer look at how information is shared internally between commercial and medical groups. Customer relationship management (CRM) tools have firewalls in place, and some companies are rethinking the use of free text when inserting information into their own databases. Another new Pangaea Group survey, completed in November 2015, showed that 57% of companies surveyed were not sharing customer reports between medical and commercial groups within their respective CRM tools.

There has also been a shift in responsibilities between medical and commercial within the last few years in light of this new governance, and, in some companies, a wedge has been driven between these two functional groups.

Whether it’s sharing information internally, defining a process for grants and donations, or sponsoring CHE or OLA programs, all individuals participating in customer-reaching activities must understand their roles and responsibilities and coordinate all activities accordingly.

Originally published in Canadian Pharmaceutical Marketing Feb/ Mar 2016

For further information, please contact Marla Weingarten, Consultant, The Pangaea Group