2012 US Trends in Aggregate Spend and Disclosure Reporting

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2012 US Trends in Aggregate Spend and Disclosure Reporting

2012 US Trends in Aggregate

Spend and Disclosure Reporting

Results from an Industry Survey

March 2012


Exclusive Survey Results From

Life Sciences Executives on

Regulatory Compliance Trends

in the US...

COMPLY


Executive Summary

The onset of 2012 marks great change in the US, as the

sunshine provision of the Patient Protection and Affordable

Health Care Act (PPACA), known as the Sunshine Act, will

require in-depth reporting on payments and transfers of value

to physicians and teaching hospitals for 2012 in the spring

of 2013. The federal US agency responsible for implementing

the regulations of the Sunshine Act, Centers for Medicare

& Medicaid Services (CMS), anticipates publishing final

regulations during the first half of 2012, with the expectation

that data would be required to be collected at some point

during the second half of 2012. In essence, these new federal

obligations add to a complex network of existing state laws

that already regulate pharmaceutical, biotech, and medical

device organizations’ marketing, sales, employee, and R&D

expenditures.

The responsibility of the Sunshine Act has undoubtedly set the

US apart in terms of transparency. This involves implementing

transparency initiatives at all levels of the business structure

and ensuring compliance by monitoring each possible aspect

of reportable spend data. Moreover, the solutions required to

meet these strict standards are creating valuable synergies in

the US through increased collaboration and communication –

and, in turn, enabling companies to achieve inherently better

commercial productivity.

In addition to the federal law, global transparency regulations

are coming to the forefront of the issue, as most companies

do business across borders, further necessitating full expense

disclosure.

To determine how companies are dealing with these demands,

Cegedim, for a third year in a row, surveyed the industry

to identify current practices and expected trends around

transparency, aggregate spend, and disclosure reporting and

compliance.

Reproduction and distribution of this report is allowed

only with the written authorization of Cegedim.

The following report includes responses from 61 companies

from the Life Sciences industry, including pharmaceutical,

biotech, and medical device companies. This year, the Medical

Device industry had a much larger representation (25%) than

in past years (7% in both 2011 and 2010) (see Figure 1).

Figure 1: Index - pg.23

Breakdown Please tell of us company the type of types company of respondents.

for which you work

Medical

Device

25%

Biotech

10%

Pharmaceutical

Manufacturer

65%

All individuals who participated in the survey are either

somewhat or very involved in ensuring that their company

complies with aggregate spend and disclosure laws and

regulations, with 80% indicating they are very involved and

20% indicating they are somewhat involved. Seventy-five

percent of respondents are also somewhat or very involved in

ensuring that their company complies with sample reporting

for Vermont or federal 6004 (see Figure 2).

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Figure

How

2: Index - pg.23

involved are you in ensuring your company

How

complies

involved

with

are

sample

you in

reporting

ensuring

for

your

VT

company

or federal 6004

complies with sample reporting for VT or federal 6004?

Not very

involved

10%

Somewhat

Involved

36%

Not at all involved

15%

2012

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Very

Involved

39%

Respondents are responsible for a range of activities related

to ensuring that their company complies with aggregate

spend and disclosure regulations, including tracking legislative

updates, gathering data, generating reports, and managing

vendors (see Figure 3). This breakdown of responsibilities is

mostly similar to previous years, though this year’s respondents

report slightly more responsibility for report review and

approval. Respondents indicate that their responsibilities

around report generation are down slightly from last year,

possibly because more companies are utilizing automated

systems versus manual, so fewer people are required to be

involved in the process.

Figure In which 3: of the following ways are you Index involved - pg.24

Responsibilities with ensuring of respondents your company pertaining complies to with

aggregate state spend and federal and disclosure mandated compliance aggregate in spend their

company. and disclosure requirements?

50%

40%

30%

20%

10%

0%

Gathering and/or Entry of Data

Processing of Data

Report Generation

Report Review and Approval

Vendor Management

Vendor Selection

2010 2011 2012

Tracking Legislative Updates

2012

Other

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only with the written authorization of Cegedim.

Respondents work in a variety of departments within their

company, with compliance making up 38%. Respondents in

the other category included mostly Regulatory Affairs, Medical

Affairs, and IT. Compared to last year’s survey, marketing,

sales, and finance have slightly less representation (see Figure

4).

In which department do you currently work?

Figure 4: Index - pg.24

Department in which respondents work

40%

35%

30%

25%

20%

15%

10%

5%

0%

Compliance

Sales

Finance

Legal

Operations

2010 2011 2012

Marketing

While almost half of respondents are from smaller companies

with less than $1 billion in annual revenue, large companies

still have some representation in this year’s survey, with 20%

of respondents indicating that their company has over $10

Billion in revenue. (see Figure 5).

Figure 5: Index - pg.25

Annual

Please

revenue

tell us the

of respondent’s

annual revenue

companies

of your company

60%

50%

40%

30%

20%

10%

0%

Under $1 Billion

$1 Billion - $4.99 Billion

$5 Billion - $9.99 Billion

$10 Billion - $19.99 Billion

$ 20 Billion or more

Other

2010 2011 2012


Key Findings

Most people (over 75%) expect to comply using either an

internal or third-party solution, as more requirements are

implemented.

There is a slight decrease this year in companies

wishing to implement their own internal system,

possibly due to the vast amount of resources

to comply and stay current with all the different

regulations if done internally.

While over 44% of respondents currently report

manually or with spreadsheets this year, less than

16% say that practice will continue as more laws are

enacted.

The Sunshine Act will prompt many companies to look

for outsourced help in dealing with their reporting

compliance.

Of respondents who currently use a manual/

spreadsheet solution to satisfy disclosure reporting

requirements, 67% plan to move to an automated

solution in response to the federal law.

Moving to an internal automated solution (vs. third

party) is down from 28% in 2011 to 13% this

year, indicating that companies are realizing the

efficiencies of outsourcing.

Over three-fourths of respondents indicate that global

aggregate spend and transparency initiatives originate

in US offices, while about 14% originate from local or

regional offices.

Europe, Asia Pacific, Australia, etc. - seem to be

following the US lead about disclosure and compliance

issues.

In fact, Cegedim’s recent survey in Europe found that

Europe defers to the mature US enforcement model

for insights into their regulatory future, with nearly

two-thirds (64%) of respondents anticipating that

promotional spend tracking in Europe will reach US

levels in one to three years.

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only with the written authorization of Cegedim.

Slightly more respondents indicate in 2012 that it’s

a necessity to implement an aggregate spend and

transparency solution that can be used in other countries

across the world.

Only 13% of respondents don’t see this as a factor in

choosing a solution

While most respondents acknowledge its importance, the

majority of respondents have not defined when they will

move forward with a global solution for aggregate spend

and transparency reporting.

Within Europe, respondents were most concerned

with the UK (33% of respondents) and France (28%

of respondents) with Germany not too far behind

(20% of respondents).

In Asia Pacific, respondents indicated mostly focusing

on China and Japan for their compliance efforts.

87% of respondents

consider global capabilities when

choosing an aggregate spend

solution.

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How Are Companies Complying

Interestingly, more respondents (44%) report using manual

spreadsheets to satisfy reporting requirements this year than

in the past two years (see Figure 6). This finding may be

partly due to the increase in medical device respondents in

this year’s survey and the large amount of respondents from

smaller companies. In fact, half of respondents who currently

use spreadsheets to satisfy requirements are from companies

with under $1 Billion in revenue. We’ve found that the medical

device industry overall tends to be slower adapters in setting up

automated processes and systems for tracking and reporting

on aggregate spend; 33% of respondents who reported using

spreadsheets were from medical device companies. Some

respondents indicated again this year that they were either

not satisfying requirements or avoiding promotional spend

where disclosure is required. With the federal report due in

2013, this will likely have to change if they plan to do any

promotional campaigns with values over $10.

Fifty-one percent of respondents also indicate that they

are using the same system for sample reporting vs spend

reporting. With samples now being part of the required

transparency reporting, there are some significant advantages

and efficiencies that can be realized by having this information

all in one place, particularly if the data is being fed into an

automated system for consolidation and validation.

51% of respondents

indicate that they are using the

same system for sample reporting

vs spend reporting.

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50%

40%

30%

20%

10%

0%

Manually / with spreadsheets

Internal software system

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only with the written authorization of Cegedim.

Figure 6: Index - pg.25

How are you currently satisfying the various state and

How respondents are currently satisfying reporting

federal aggregate spend and disclosure requirements?

requirements

Third party solution

We are not satisfying them

We avoid promotional spend in

states requiring disclosure

2010 2011 2012

The respondents who reported using a third-party solution

for aggregate spend and disclosure reporting indicated a

wide range of investments in that solution. While 46% of

respondents report spending less than $1 million, there was

in increase (15% compared to 8% in 2011) in respondents

spending over $5 million to implement a solution (see Figure

7). The level of spending for implementation is more than

likely directly linked to the type of solution implemented – for

example, software as a service vs. a custom solution.

What costs have you incurred from your third party

Figure system 7: implementation for your aggregate Index spend - pg.26

Costs incurred

and

from

disclosure

third party

reporting?

system implementation

for your aggregate spend and disclosure reporting

50%

40%

30%

20%

10%

0%

Under $500K

$500K-$999,999

$1M-$1,999,999

$2M-$4,999,999

Other

2011 2012

$5M or more


Most people (over 75%) expect to comply using either an

internal or third-party solution as more requirements are

implemented. There is a slight decrease this year in companies

wishing to implement their own internal system. This could

be due to the fact that with the increase in legislation and

the federal law due in 2013, companies are finding that it

takes a vast amount of resources to comply and stay current

with all the different regulations if done themselves. Thirdparty

systems can actually be more cost efficient with SaaS

solutions that are updated automatically according to the

latest requirements. While over 44% of respondents currently

report manually or with spreadsheets this year, less than 16%

say that practice will continue as more laws are enacted (see

Figure 8). About 6% of respondents say they are still working

on a plan for how they will comply in the future, all of them

being from smaller companies (less than $1 Billion in revenue).

How respondents plan to satisfy reporting

Figure 8: Index - pg.26

requirements as more legislation is passed

How respondents plan to satisfy reporting

requirements as more legislation is passed

60%

50%

40%

30%

20%

10%

0%

Manually / with spreadsheets

Internal software system

Third party solution

2010 2011 2012

Not satisfy them

The majority of respondents, (62%) have 1-5 dedicated

full time employees (FTEs) to support aggregate spend and

disclosure compliance (see Figure 9), a similar pattern that

we’ve seen in the past. Very few companies indicate having

more than 10 resources, possibly reflecting the fact that most

companies outsource at least part of the compliance process.

Eighty-nine percent of respondents who indicate not having

dedicated FTEs to support aggregate spend and disclosure

compliance are from smaller companies – less than $1 Billion

in revenue.

80%

70%

60%

50%

40%

30%

20%

10%

0%

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only with the written authorization of Cegedim.

Figure How many 9: dedicated full time employees (FTEs) Index in - pg.27 your

Number company of dedicated have specic full job time responsibility employees (FTEs) to support who

have specific your state job and responsibility federal aggregate to support spend state and and

federal aggregate disclosure spend reporting and disclosure and compliance? reporting and

compliance in respondent’s companies

None

1-5 FTEs

6-10 FTEs

11-15 FTEs

2010 2011 2012

16-20 FTE's

20+ FTEs

The majority of respondents expect investment in aggregate

spend and disclosure compliance to increase over the next

year (see Figure 10). The most notable reason for the

expected increase in investment was dealing with the federal

requirements and global transparency trends. A notable reason

for a decrease was that the biggest cost of putting in place a

solution (implementation) was already done in many instances

and that a new system would make previously manual process

more automated… saving time, money, and resources.

Over the next year, do you anticipate your investment

Figure 10: Index - pg.27

(solutions and resources) in aggregate spend and

Expected change in investment (solutions and

disclosure reporting and compliance to

resources) in aggregate spend reporting and

decrease, increase or stay the same?

compliance over the next year

80%

70%

60%

50%

40%

30%

20%

10%

0%

Decrease

Stay the same

2010 2011 2012

Increase

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While 57% of respondents currently manage their aggregate

spend and disclosure reporting and compliance solution fully

in-house, 21% of those people would prefer to outsource part

or all of that activity based on their resources (see Figure

11). Reasons for this could include the enormous effort

and expertise required to ensure build, host, and update an

internal system while also ensuring that the company is always

up to date with ever-changing transparency and disclosure

requirements.

Figure 11: Index - pg.28

How respondents currently manage their aggregate

spend and disclosure reporting and compliance

solution How do based you currently on resources manage vs. your how aggregate respondents spend

would prefer and disclosure to manage reporting their aggregate and compliance spend and

disclosure solution reporting based and compliance on your resources? solution based on

resources

60%

50%

40%

30%

20%

10%

0%

Fully in-house

Outsourced/third party solution

How respondents currently manage aggregate spend solution

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A combination of third party solution

and in-house

How respondents would prefer to manage aggregate spend solution

While the majority of respondents are still using internal

resources to monitor new and pending legislation, a slightly

greater number of people are reaching out to third parties

to help them handle this (see Figure 12). This is probably

due to the fact that there is an increase in regulations to

track with the federal law and global transparency regulations

coming into effect. Additionally, most companies report that

the compliance or legal department holds this responsibility

internally (see Figure 13). Similar to previous years,

respondents continue to use a mix of resources for legislative

updates, including webinars/web events (87%), industry

conferences (84%), and state/federal websites (87%).

80%

70%

60%

50%

40%

30%

20%

10%

0%

Internal resource/team

Third party consultant

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only with the written authorization of Cegedim.

How are you researching and monitoring

Figure new 12: and pending legislation that impacts Index the - pg.28

How respondents life sciences currently industry monitor today? new and pending

legislation

80%

70%

60%

50%

40%

30%

20%

10%

0%

Compliance

Finance

We do not do any

research or monitoring

Legal

Operations

2010 2011 2012

Don't know

What department in your company is responsible

Figure for 13: tracking current and pending legislation? Index - pg.29

Departments responsible for tracking current and

pending legislation

Don't know

Other

2010 2011 2012

Other


HCP Spend Data Collection

Capturing HCP spend and samples data is an essential part

of aggregate spend and transparency disclosure reporting.

Without complete, accurate data on HCP’s and their

affiliations, a company’s reporting can not be compliant. This

can be a complicated process when the necessary data must

be gathered from many sources and is in a variety of formats.

This year there was an increase in the number of respondents

having less than 10 data sources (76% vs 58% in 2011) (see

Figure 14). This could be due to our respondent base including

more Medical Device companies and smaller companies that

may have less comprehensive spend data sources. In fact,

86% of respondents with over 10 data sources were from

pharmaceutical companies (vs biotech or medical device), and

only 14% of respondents with more than 10 data sources were

from smaller companies with less than $1 billion in revenue.

How many sources (including suppliers) does your

Figure 14: Index - pg.29

company have that capture HCP and Organization

Number of data sources (including suppliers) that

spend information?

capture HCP and Organization spend information

50%

40%

30%

20%

10%

0%

0

1-5

6-10

11-15

16-20

21-25

2010 2011 2012

26-30

More than 30

Of the number of data sources mentioned, almost half of the

respondents indicate that less than a quarter of them are

coming from third parties (See Figure 15). This means that

they are likely coming from varying internal systems, which

stresses the importance of a company’s aggregate spend

system being flexible and fully integrated with a wide variety

of systems.

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only with the written authorization of Cegedim.

Figure 15: Index - pg.30

What percentage

What percentage

of those

of

data

those

sources

data sources

are from

are

a third

party?

from a third party?

51-75

15%

26-50

24%

76-100

14%

0-25

47%

2012

Over the past three years, there has been a continual decline

in respondents using solely spreadsheets to obtain spend data

from vendors, with only 20% indicating that response in 2012

(down from 37% in 2010). This is likely due to the fact that

more companies are using automated systems that have data

feed uploads and/or vendor access for data entry. Threefourths

of the companies who report only using spreadsheets

are still ensuring compliance with manual or spreadsheet

solutions. Over half of respondents report using a combination

of two or more methods (up from 44% in 2011 and 23 % in

2010), indicating that companies are continuing to get more

flexible in how they integrate third-party vendor spend data

(see Figure 16).

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Figure How do 16: Index - pg.30

you currently obtain event and spend data

How respondents

from

currently

your vendors?

obtain event and spend

data from vendors

10

60%

50%

40%

30%

20%

10%

0%

Spreadsheets

Data le transfer

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Use an application to which the vendor

has access to enter their data manually

2010 2011 2012

Use a combination of 2 or

more of the above methods

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only with the written authorization of Cegedim.


Customer Data Management

For large, complex companies with multiple business

units, a big issue we have seen is not having a centralized

listing of their customers, i.e., a true customer master

with unique identifiers covering all of their business areas.

While smaller companies typically operate from a single

customer list, large-company business units may use

different healthcare-provider reference databases. Many

larger companies also don’t have a true customer master

data management strategy that links all units to the same

data hub. An effective aggregate-spend solution should

be able to accommodate all segments of the healthcare

market and offer a centralized customer data access

point, and it should be able to address all levels of data

capture, from manual to advanced ERP system entry, and

seamlessly integrate disparate data sources. So we asked

survey respondents to tell us more about what they were

doing to set up their data for compliance reporting.

Almost a quarter of respondents have a custom solution in

place to manage their customer data (see Figure 17). More

than 15% of respondents report not having a customer

master in place at their company. Three quarters of those

people are from companies with less than $500 million in

revenue, and half of them are still reporting manually with

spreadsheets.

35%

30%

25%

20%

15%

10%

5%

0%

Custom solution

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only with the written authorization of Cegedim.

Within your aggregate spend and disclosure solution,

Figure 17: Index - pg.31

which of the following do you use as

Respondents’ customer master within their aggregate

your customer master?

spend and disclosure compliance reporting solution

Oracle

Siperian

IMS

HMS

2010 2011 2012

Cegedim

Our company doesn’t have

a customer master

When US physicians travel abroad on behalf of foreign

affiliate(s), most respondents report that they do capture

those payments/expenses for reporting under US Federal

law (see Figure 18).

Figure 18: Index - pg.31

When a a US US physician travels abroad on on behalf of of your

foreign affiliate(s) foreign aliate(s) do you capture do you capture those payments/ those

expenses payments/expenses for reporting for under reporting US Federal under US law? Federal law?

No

26%

2012

Other

Yes

74%

2012

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About eight out of 10 respondents pay HCPs in the US (and

in US dollars) for any work done abroad on their behalf

(see Figure 19). This could be due to system shortcomings

around currency conversion or the lack of integration with

foreign affiliates.

Figure 19: Index - pg.32

How How respondents handle handle reporting of of US US Physicians

that travel abroad that travel on their abroad behalf on their behalf

12

Pay them in the

country that the

activity occured

in foreign

currency

18%

2012

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Pay them in the US

in US dollars

82%

2012

Companies continue to feel more comfortable in identifying

all data sources and have been able to be more successful

in applying standards to data formats. The challenges

in consolidating spend data from multiple sources have

remained fairly consistent over the past couple years

with establishing unique Identification of an HCP and

Organizations and incomplete spend information being

ranked the most challenging by respondents (see Figure

20). Other issues mentioned by respondents include

data quality issues and dealing with either organization

changes or global issues.

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only with the written authorization of Cegedim.

On a scale of 1 to 10 with 10 being “the most

Figure challenging” 20: and 1 being “not at all challenging”,

Index - pg.32

Challenges please tell us in consolidating how challenging spend each data of the from following multiple are

sources (scale for you of 1 in to consolidating 10, with 1 being spend the data least

challenging and 10 from being multiple the most sources. challenging)

8

7

6

5

Identifying all data sources

Matching and establishing unique

Identication of an HCP and Organizations

from all the expense data sources

Incomplete spend information

2010 2011 2012

Disparate formats and standards


Confidence in Compliance

This year, respondents report about the same level

of confidence that their company is compliant with

current disclosure requirements, with still under a third

being very confident (see Figure 21). The lack of full

confidence could be due to the fact that the landscape is

still changing and companies are still trying to prepare

for the federal law requirements that will take effect

What is your level of condence that your company’s

next year. disclosure reporting is fully compliant

with current regulations?

Figure 21: Index - pg.33

Confidence that reporting is fully compliant

50%

40%

30%

20%

10%

0%

Very condent

Somewhat condent

Not sure

2010 2011 2012

Not very condent

Not at all condent

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only with the written authorization of Cegedim.

System/process shortcomings and lack of policy

understanding are reported as the top causes of

compliance issues (see Figure 22). Poor record keeping

and/or data entry seems to be slightly less of an issue

this year.

Figure

What do

22:

you feel is the primary root cause of any lack

Index - pg.33

Primary

of compliance

root cause

to

of

promotional

any lack of

spend

compliance

regulations?

with

promotional spend regulations

35%

30%

25%

20%

15%

10%

5%

0%

Poor record keeping and/or

data entry errors

Lack of understanding of policy

System/process shortcomings

No lack of compliance seen

Shortage of human resources

2010 2011 2012

Lack of budget

Low priority

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Physician Payments Sunshine Act -

Issues and Impact

The Patient Protection and Affordable Care Act - Section

6002 (Sunshine Act) will take affect in 2012, with the

first report due in 2013. This is adding an extra layer of

complexity to current aggregate spend and disclosure

compliance. Much of the industry has been following

the legislative process closely to determine how it will

impact their activities.

When asked about five key issues - proper identification

of spend recipients, collecting all relevant spend data,

data integrity, certification of spend before posting, and

handling inquiries after spend is posted - respondents’

level of concern with the Sunshine Act is about the

same On a as scale last of year 1 to (see 10 with Figure 10 23). being “very concerned”

and 1 being “not at all concerned”, please tell us your

Figure

level of

23: Index - pg.34

concern with each of the following in complying

Confidence

with the

that

Physician

reporting

Payments

is fully

Sunshine

compliant

Provision.

14

8

7

6

5

4

3

2

1

0

Proper identication of spend recipients

Collecting all relevant spend data

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Data Integrity - having accurate,

complete, and timely data

2010 2011 2012

Handling inquiries after spend is posted

Over half of respondents are planning on a “presubmission

review” by covered recipients (providing

covered recipients relevant spend information prior to

report submission) as suggested in the draft regulations

from CMS. When setting up such a system, make sure

that you allow HCPs a private, secure portal for them

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only with the written authorization of Cegedim.

to review information, as well as a way for them to

dispute/ask questions.

Figure 24: Index - pg.34

Respondents planning a a “pre-submission review”

by

by covered covered recipients as suggested as suggested in the in the draft draft regulations.

regulations

No

37%

2012

Yes

63%

2012

The Sunshine Act will also prompt many companies to

look for outsourced help in dealing with their reporting

compliance. Of those respondents who mentioned

that they currently use a manual/spreadsheet solution

to satisfy various state promotional and marketing

disclosure reporting requirements, 67% plan to move

to an automated solution in response to the federal

law (see Figure 25). Moving to an internal automated

solution is down from 28% in 2011 to 13% this year,

indicating that companies are realizing the efficiencies

of outsourcing such a complex task.


You mentioned you currently have a manual solution

and/or use a spreadsheet solution to satisfy various

state and federal aggregate spend and disclosure

Figure

reporting

25:

requirements. In response to the

Index - pg.35

Physician Payments Sunshine Provision,

67%

In response to the Sunshine Act, will you migrate to an

automated

will you

solution?

migrate to an automated solution?

80%

70%

60%

50%

40%

30%

20%

10%

0%

Yes, to an internal solution

Yes, to a purchased or

outsourced solution

No, we will enhance our current

manual/spreadsheet solution

2010 2011 2012

Don't know

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only with the written authorization of Cegedim.

of respondents who

report with spreadsheets plan to

move to an automated solution in

response to the federal law.

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16

Global Issues and Trends

With the trend towards global transparency and the

increase in regulations that have impact outside of

the US, we wanted to find out how it would impact

respondents’ compliance activities.

Slightly more respondents indicate in 2012 that

it is a necessity to implement an aggregate spend

and transparency solution that can be used in other

countries across the world (see Figure 26), and only 13%

of respondents don’t see this as a factor in choosing

a solution. As global transparency and regulations

continue to come to the forefront of this issue, we

expect that compliance departments may work closer on

some issues across the globe. Consequently, this may

become a more important factor for many companies

over the coming years.

Figure

With

26:

the trend toward global transparency, how

Index - pg.35

Importance

important is

of

it

implementing

for you/your organization

an aggregate

to

spend

implement

and transparency

an aggregate

solution

spend and

that

transparency

can be used

solution

in other

countries

that can

across

be used

the

in other

world

countries across the world?

60%

50%

40%

30%

20%

10%

0%

It's absolutely a requirement.

It would be nice but it's not necessary.

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2011 2012

I don't see a need for this. It's not a

factor at all in choosing a solution.

Western Europe and Asia Pacific are reported as major

priorities in respondents’ consideration of implementing

a global aggregate spend and transparency solution,

which is aligned with recent developments in regulatory

Reproduction and distribution of this report is allowed

only with the written authorization of Cegedim.

and / or industry transparency requirements in these

regions (see Figure 27). Within Europe, respondents

were most concerned with the UK (33% of respondents)

and France (28% of respondents), with Germany not too

far behind (20% of respondents) (see Figure 28). In

Asia Pacific, respondents indicated mostly focusing on

China and Japan for their compliance efforts.

Figure 27: Index - pg.36

Regions that are/would be be a a priority in in consideration

of implementing of implementing a global a global aggregate aggregate spend spend and and

transparency solution transparency solution

Eastern Europe

7%

Latin-America

8%

Middle-East

3%

Asia-Pacic

21%

35%

30%

25%

20%

15%

10%

5%

0%

Brazil

Mexico

Italy

2012

Netherlands

China

Japan

Germany

Western Europe

61%

Figure

Countries

28: Index - pg.36

that are/would be a priority in consideration

Countries

of implementing

that are/would

a global

be a priority

aggregate

in consideration

spend

of implementing

and

a global

transparency

aggregate

solution

spend and

transparency solution (open text).

France

UK

2012


Over three quarters of respondents indicate that global

aggregate spend and transparency initiatives originate

in US offices, while about 14% originate from local or

regional offices (see Figure 29). Since the US was the

first region to enact specific, detailed disclosure laws

in regards to HCP expenditures, other regions – Europe,

Asia Pacific, Australia, etc - seem to be following the US

lead, and discussions about disclosure and compliance

are increasing in many regions across the globe. In

fact, in Cegedim’s recent survey in Europe, we found

that Europe defers to the mature US enforcement

model for insights into their regulatory future, with

nearly two-thirds (64%) of respondents anticipating

that promotional spend tracking in Europe will reach

US levels in one to three years. But in keeping with the

sea of cultural differences that separate Europe from

the US, respondents hint that they will most likely not

follow the US model entirely, but rather pave their own

way to operational compliance.

From where do the decisions for your company's

Figure 29: Index - pg.37

From

global

where do

aggregate

the decisions

spend

for

and

your

transparency

company’s

global aggregate initiatives spend and originate? transparency initiatives

originate?

80%

70%

60%

50%

40%

30%

20%

10%

0%

United States oces

Local country oces

Regional headquarters

2011 2012

Not sure

Only one-third of respondents indicate having some

responsibility for their company’s compliance with

FCPA (Foreign Corrupt Practices Act) (see Figure 30).

However, as global transparency requirements increase,

responsibilities of compliance teams across the globe

will likely merge and this number will increase.

Reproduction and distribution of this report is allowed

only with the written authorization of Cegedim.

Figure Do 30: you have responsibility for your company's Index - pg.37

Do compliance you have with responsibility FCPA (Foreign for your Corrupt company’s Practices Act)?

compliance with FCPA (Foreign Corrupt Practices Act)?

No

67%

Yes

33%

Very few respondents are leveraging their aggregate

spend solution to help 2012 comply with FCPA/anticorruption

regulations. This could be explained by many companies

not yet fully embracing a global integrated solution in

their company for internal transparency and internal

auditing, or by the fact that they are still catching up

with local US regulations and have not yet turned their

attention fully to the global issues.

Figure Are you 31: leveraging your aggregate spend Index solution - pg.38

Are to help you leveraging comply with your FCPA/anticorruption aggregate spend solution regulations? to

help comply with FCPA/anticorruption regulations?

No

85%

2012

Yes

15%

2012 2012

The majority of respondents indicate that the UK bribery

law, which took effect in April 2011, will change how

they comply with current anti-bribery laws (i.e. FCPA)

(See Figure 32).

White Paper 17


PLY

Will the UK anti-bribery law, which took eect in

Figure 32: Index - pg.38

April 2011, change how you comply with

Effect of UK bribery law on current anti-bribery law

current anti-bribery laws (i.e. FCPA)?

activities

18

60%

50%

40%

30%

20%

10%

0%

Yes

White Paper

2011 2012

While most respondents acknowledge the importance

of one, the majority of respondents have not defined

when they will move forward with a global solution

for aggregate spend and transparency reporting (see

Figure 33). Less than 1 out of 10 respondents report

already having a global solution in place. Still, more

companies are at least starting to work this into their

long term plan, with the number of respondents that

have not defined a timeframe down to 41% in 2012

from 59% in 2011

.

Figure 33: Index - pg.39

What What is your is your timeframe timeframe for moving for moving forward forward with with a a

global solution global for solution aggregate for spend aggregate and transparency

spend

reporting? and transparency reporting?

Not dened

41%

We already have one

8%

2014

7%

2012

No

2013

13%

2012

31%

2012

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only with the written authorization of Cegedim.


Final Thoughts

Some large, global pharmaceutical companies have

begun to voluntarily disclose their transactions with

healthcare providers. Many others, however, have been

waiting for final implementing regulations from the

Centers for Medicare & Medicaid Services (CMS) before

they begin capturing the data needed for the aggregate

spend disclosures required by the Physician Payments

Sunshine Act (Section 6002 of the Patient Protection

and Affordable Care Act, or PPACA). Although companies

will not have to report these transactions until March

2013, it is still recommended that their data-collection

procedures and systems be in place now. For many

organizations, this undertaking will demand extensive

time and financial resources.

Compliance must be achieved by 2013, and the recently

published CMS proposed regulations provide adequate

direction on what data needs to be captured and

tracked. The future final regulations probably will not

significantly change how organizations do this. The

law and the proposed regulations are already very

specific on the types of data that need to be captured

and reported—including the nature and purpose of

spend and recipient types. While we don’t expect the

final regulations to differ much from the proposed

regulations, companies should be ready to capture

and report on any and all payment or transfer-ofvalue

transactions with any healthcare provider or

organization.

Some organizations have still not fully prepared for

compliance with these new regulations. They have

many reasons: One group is sitting on the sidelines

because they haven’t budgeted enough money to build

the compliance infrastructure. They’re waiting for final

CMS regulations before they start. This is not the

most effective approach. Compliance is not merely

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only with the written authorization of Cegedim.

about disclosure; it is also about capturing the source

of spend, accurately and promptly. Smaller, emerging

companies tend to be somewhat behind the curve —

not because they do not wish to comply with the law,

but because they think they can wait and tackle the

issue after final regulations appear. Another group

includes enterprises that aren’t sure whether the law

even applies to them. For example, distributors of

medical devices need to disclose transfer-of-value

payments for original manufacturer products that they

re-label. Some organizations are completely unaware

of the law, because they have neither a significant

compliance operation nor a proactive culture. Others

believe (wrongly) that they don’t have to do anything

until 2013.

Companies that have not yet taken the steps face

financial penalties for missing federal and state

disclosure deadlines. Making compliance investments

now will not just avoid penalties—it will also head off

potentially deeper impacts on the company’s reputation.

No one can afford to have internal and external

stakeholders, including the media, perceive them as

violating the law. It will be critical for this data to be

accurate from point-of-capture to point-of-disclosure.

In addition, global issues and regulations will play a

greater role in how companies handle their compliance

across the globe. While many regions are taking the

lead from the US offices right now, the future may

see compliance departments coming together globally

to follow a more consistent plan for all company

expenditure tracking.

As the burden grows to comply, companies must adopt

a holistic approach to tracking and reporting that

includes a focus on high quality healthcare practitioner

and organization reference data to ensure accurate

White Paper 19


eporting and disclosure. This approach needs not only

to encompass all internal departments, third parties,

and systems in the US, but should take into account

global affiliates so that the entire company is aware of

disclosure and transparency initiatives.

Companies should also be preparing—now—for how

they will manage relationships with their customers,

the media, patient associations, and special interest

groups once the federal government publicly details

of financial interactions between them and HCPs/

organizations on the internet. Healthcare practitioners

and organizations should not be viewed as just

recipients, but rather be involved in the process – i.e.,

given the ability to review transactions for accuracy on

an ongoing basis. Communications and public relations

action plans should reinforce the benefits of legitimate

interactions between life science companies and

healthcare practitioners/organizations.

Finally, as companies become more confident in

their ability to meet aggregate spend reporting

and disclosure requirements, they will begin to

expand processes and solutions to include

more proactive compliance controls prior

to a spend transaction occurring, which

will enhance overall internal transparency

and compliance levels.

20

White Paper

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only with the written authorization of Cegedim.


KNOW PERFORM PROMOTE COMPLY EVALUATE SUPPORT

Cegedim Relationship Management is the leading global provider of Regulatory Compliance solutions for the Life

Sciences industry. The company provides the most comprehensively packaged offering, enabling companies to meet

present and future business requirements and objectives, and to achieve rewarding and lasting relationships with

customers. Solutions include:

• Regulatory Compliance

• Customer Relationship Management

• Customer Data Management

• Support Services

• Marketing Services

• Analytics

Contact Cegedim Relationship Management today for more information.

www.cegedim.com/rm

info@cegedim.com

Authors:

Bill Buzzeo

Vice President & General Manager,

Global Compliance Solutions

Cegedim Relationship Management

william.buzzeo@cegedim.com

1425 U.S. Highway 206,

Bedminster, NJ 07921, USA

Tel: +1 908.443.2000

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only with the written authorization of Cegedim.

White Paper 21


Conclusion

Recommended Reading

2011 European Trends in Aggregate Spend, Transparency and Disclosure

February 2012

http://crm.cegedim.com/Docs_Whitepaper/Compliance/2011_European_Trends_Compliance_Report.pdf

2011 European Trends & Challenges in Customer Data Management within the Life Sciences Industry

June 2011

http://crm.cegedim.com/Docs_Whitepaper/Data/EU_Cust_Data_Mgmt_Survey_Rpt_June_2011.pdf

2011 IDC: Aggregate Spend Compliance - The Next Frontier of Pharmaceutical Sales and Marketing

April 2011

http://crm.cegedim.com/Docs_Whitepaper/Compliance/IDC_AggregateSpend_Cegedim_Feb2011.pdf

2011 US Trends in Aggregate Spend and Disclosure Reporting Compliance

March 2011

http://crm.cegedim.com/Docs_Whitepaper/Compliance/Aggregate_Spend_Trends_Disclosure_Reporting_Whitepaper_May2011.pdf

2010 European Trends in Aggregate Spend, Transparency and Disclosure

November 2010

http://crm.cegedim.com/Docs_Whitepaper/Compliance/2010_European_Trends_Compliance_Whitepaper.pdf

22

White Paper

Reproduction and distribution of this report is allowed

only with the written authorization of Cegedim.


Chart Index

Please tell us the type of company for which you work

Figure 1:

Breakdown of company types of respondents

Medical

Device

25%

Biotech

10%

Pharmaceutical

Manufacturer

65%

How involved are you in ensuring your company

Figure 2: complies with sample reporting for VT or federal 6004

How involved are you in ensuring your company complies with sample reporting for VT or federal 6004?

Not very

involved

10%

Somewhat

Involved

36%

Not at all involved

15%

2012

Very

Involved

39%

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only with the written authorization of Cegedim. White Paper 23


24

Chart Index

Figure 3:

White Paper

In which of the following ways are you involved

with ensuring your company complies with

state and federal mandated aggregate spend

and disclosure requirements?

Responsibilities of respondents pertaining to aggregate spend and disclosure compliance in their company. (*Multiple

responses allowed) .

50%

40%

30%

20%

10%

0%

Gathering and/or Entry of Data

Processing of Data

Report Generation

Report Review and Approval

Vendor Management

Vendor Selection

2010 2011 2012

Tracking Legislative Updates

In which department do you currently work?

Figure 4:

Department in which respondents work

40%

35%

30%

25%

20%

15%

10%

5%

0%

Compliance

Sales

Finance

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only with the written authorization of Cegedim.

Legal

Operations

Marketing

Other

2010 2011 2012

Other


Chart Index

Figure 5:

Annual revenue of respondent’s companies

Figure 6:

Please tell us the annual revenue of your company

60%

50%

40%

30%

20%

10%

0%

50%

40%

30%

20%

10%

0%

Under $1 Billion

Manually / with spreadsheets

$1 Billion - $4.99 Billion

Internal software system

$5 Billion - $9.99 Billion

Third party solution

We are not satisfying them

$10 Billion - $19.99 Billion

2010 2011 2012

We avoid promotional spend in

states requiring disclosure

$ 20 Billion or more

How are you currently satisfying the various state and

federal aggregate spend and disclosure requirements?

How respondents are currently satisfying reporting requirements

2010 2011 2012

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only with the written authorization of Cegedim. White Paper 25

Other


26

Chart Index

What costs have you incurred from your third party

system implementation for your aggregate spend

Figure 7:

and disclosure reporting?

Costs incurred from third party system implementation for your aggregate spend and disclosure reporting

50%

40%

30%

20%

10%

0%

60%

50%

40%

30%

20%

10%

White Paper

0%

Under $500K

Manually / with spreadsheets

$500K-$999,999

Internal software system

$1M-$1,999,999

Third party solution

$2M-$4,999,999

Reproduction and distribution of this report is allowed

only with the written authorization of Cegedim.

2011 2012

$5M or more

How respondents plan to satisfy reporting

requirements as more legislation is passed

Figure 8:

How respondents plan to satisfy reporting requirements as more legislation is passed

2010 2011 2012

Not satisfy them


Chart Index

How many dedicated full time employees (FTEs) in your

company have specic job responsibility to support

your state and federal aggregate spend and

Figure 9:

disclosure reporting and compliance?

Number of dedicated full time employees (FTEs) who have specific job responsibility to support state and federal

aggregate spend and disclosure reporting and compliance in respondent’s companies

80%

70%

60%

50%

40%

30%

20%

10%

Over 0% the next year, do you anticipate your investment

(solutions and resources) in aggregate spend and

disclosure reporting and compliance to

Figure 10: decrease, increase or stay the same?

80%

70%

60%

50%

40%

30%

20%

10%

0%

None

Decrease

1-5 FTEs

6-10 FTEs

Stay the same

11-15 FTEs

2010 2011 2012

16-20 FTE's

Expected change in investment (solutions and resources) in aggregate spend reporting and compliance over the next

year

20+ FTEs

2010 2011 2012

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only with the written authorization of Cegedim. White Paper 27

Increase


28

Chart Index

Figure 11:

White Paper

How do you currently manage your aggregate spend

and disclosure reporting and compliance

60%

50%

40%

30%

20%

10%

0%

solution based on your resources?

How respondents currently manage their aggregate spend and disclosure reporting and compliance solution based on

resources vs. how respondents would prefer to manage their aggregate spend and disclosure reporting and compli-

80%

70%

60%

50%

40%

30%

20%

10%

0%

Fully in-house

Outsourced/third party solution

A combination of third party solution

and in-house

How are How you respondents researching currently manage aggregate spend and solution monitoring

How respondents would prefer to manage aggregate spend solution

new and pending legislation that impacts the

Figure 12:

life sciences industry today?

How respondents currently monitor new and pending legislation

Internal resource/team

Third party consultant

We do not do any

research or monitoring

Don't know

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only with the written authorization of Cegedim.

2010 2011 2012

Other


Chart Index

What department in your company is responsible

for tracking current and pending legislation?

Figure 13:

Departments responsible for tracking current and pending legislation

80%

70%

60%

50%

40%

30%

20%

10%

Compliance

Finance

Legal

Operations

2010 2011 2012

0%

How many sources (including suppliers) does your

company have that capture HCP and Organization

Figure 14:

spend information?

Number of data sources (including suppliers) that capture HCP and Organization spend information

50%

40%

30%

20%

10%

0%

0

1-5

6-10

11-15

16-20

21-25

Don't know

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only with the written authorization of Cegedim. White Paper 29

26-30

More than 30

Other

2010 2011 2012


30

Chart Index

Figure 15:

White Paper

What percentage of those data sources are

from a third party?

What percentage of those data sources are from a third party?

51-75

15%

50%

40%

30%

20%

10%

0%

26-50

24%

Spreadsheets

76-100

14%

Data le transfer

Use an application to which the vendor

has access to enter their data manually

0-25

47%

Figure 16:

How do you currently obtain event and spend data

from your vendors?

How respondents currently obtain event and spend data from vendors

60%

2010 2011 2012

Use a combination of 2 or

more of the above methods

Reproduction and distribution of this report is allowed

only with the written authorization of Cegedim.


Chart Index

Within your aggregate spend and disclosure solution,

which of the following do you use as

Figure 17:

your customer master?

Respondents’ customer master within their aggregate spend and disclosure compliance reporting solution

Figure 18:

35%

30%

25%

20%

15%

10%

5%

0%

Custom solution

Oracle

Siperian

IMS

HMS

2010 2011 2012

Cegedim

Our company doesn’t have

a customer master

When a US physician travels abroad on behalf of your

foreign aliate(s) do you capture those

payments/expenses for reporting under US Federal law?

When a US physician travels abroad on behalf of your foreign affiliate(s) do you capture those payments/expenses

for reporting under US Federal law?

No

26%

2012

Yes

74%

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only with the written authorization of Cegedim. White Paper 31

Other


32

Chart Index

How respondents handle reporting of US Physicians

Figure 19:

that travel abroad on their behalf

How respondents handle reporting of US Physicians that travel abroad on their behalf

Figure 20:

White Paper

Pay them in the

country that the

activity occured

in foreign

currency

18%

8

7

6

5

Identifying all data sources

Matching and establishing unique

Identication of an HCP and Organizations

from all the expense data sources

Incomplete spend information

Pay them in the US

in US dollars

82%

On a scale of 1 to 10 with 10 being “the most

challenging” and 1 being “not at all challenging”,

please tell us how challenging each of the following are

for you in 2012 consolidating spend data

from multiple sources.

Challenges in consolidating spend data from multiple sources (scale of 1 to 10, with 1 being the least challenging and

10 being the most challenging)

2010 2011 2012

Disparate formats and standards

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only with the written authorization of Cegedim.


Chart Index

What is your level of condence that your company’s

disclosure reporting is fully compliant

with current regulations?

Figure 21:

Confidence that reporting is fully compliant

50%

40%

30%

20%

10%

0%

30%

25%

20%

15%

10%

5%

0%

Very condent

Somewhat condent

Not sure

2010 2011 2012

What do you feel is the primary root cause of any lack

of compliance to promotional spend regulations?

Figure 22:

Primary root cause of any lack of compliance with promotional spend regulations

35%

2010 2011 2012

Poor record keeping and/or

data entry errors

Lack of understanding of policy

System/process shortcomings

No lack of compliance seen

Shortage of human resources

Not very condent

Lack of budget

Not at all condent

Low priority

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only with the written authorization of Cegedim. White Paper 33


34

Chart Index

Figure 23:

White Paper

On a scale of 1 to 10 with 10 being “very concerned”

and 1 being “not at all concerned”, please tell us your

level of concern with each of the following in complying

with the Physician Payments Sunshine Provision.

Level of concern with issues in preparing for the Sunshine Act (scale of 1 to 10, with 1 being the least concern and 10

being the most concern)

8

7

6

5

4

3

2

1

0

Proper identication of spend recipients

Collecting all relevant spend data

Data Integrity - having accurate,

complete, and timely data

2010 2011 2012

Respondents planning a “pre-submission review” by

covered recipients as suggested in the draft regulations.

Figure 24:

Respondents planning a “pre-submission review” by covered recipients as suggested in the draft regulations

No

37%

Handling inquiries after spend is posted

Reproduction and distribution of this report is allowed

only with the written authorization of Cegedim.

2012

Yes

63%


Chart Index

Figure 25:

You mentioned you currently have a manual solution

and/or use a spreadsheet solution to satisfy various

state and federal aggregate spend and disclosure

reporting requirements. In response to the

Physician Payments Sunshine Provision,

will you migrate to an automated solution?

In response to the Sunshine Act, will you migrate to an automated solution?

Figure 26:

80%

70%

60%

50%

40%

30%

20%

10%

0%

Yes, to an internal solution

60%

50%

40%

30%

20%

10%

0%

It's absolutely a requirement.

Yes, to a purchased or

outsourced solution

It would be nice but it's not necessary.

No, we will enhance our current

manual/spreadsheet solution

2010 2011 2012

I don't see a need for this. It's not a

factor at all in choosing a solution.

Don't know

With the trend toward global transparency, how

important is it for you/your organization to implement

an aggregate spend and transparency solution

that can be used in other countries across the world?

Importance of implementing an aggregate spend and transparency solution that can be used in other countries

across the world

2011 2012

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only with the written authorization of Cegedim. White Paper 35


36

Chart Index

Figure 27:

White Paper

Regions that are/would be a priority in consideration

of implementing a global aggregate spend and

transparency solution

Regions that are/would be a priority in consideration of implementing a global aggregate spend and transparency

solution

35%

30%

25%

20%

15%

10%

5%

0%

Eastern Europe

7%

Latin-America

8%

Middle-East

3%

Asia-Pacic

21%

Brazil

Mexico

Italy

2012

Netherlands

China

Japan

Germany

Western Europe

61%

Countries that are/would be a priority in consideration

of implementing a global aggregate spend

and transparency solution

Figure 28:

Number of data sources (including suppliers) that capture HCP and Organization spend information

France

Reproduction and distribution of this report is allowed

only with the written authorization of Cegedim.

UK


Chart Index

From where do the decisions for your company's

global aggregate spend and transparency

initiatives originate?

Figure 29:

From where do the decisions for your company’s global aggregate spend and transparency initiatives originate?

80%

70%

60%

50%

40%

30%

20%

10%

0%

United States oces

Local country oces

Regional headquarters

2011 2012

Do you have responsibility for your company's

compliance with FCPA (Foreign Corrupt Practices Act)?

Figure 30:

Do you have responsibility for your company’s compliance with FCPA (Foreign Corrupt Practices Act)?

No

67%

2012

Yes

33%

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only with the written authorization of Cegedim. White Paper 37

Not sure


38

Chart Index

Figure 31:

White Paper

Are you leveraging your aggregate spend solution

to help comply with FCPA/anticorruption regulations?

Are you leveraging your aggregate spend solution to help comply with FCPA/anticorruption regulations?

Figure 32:

60%

50%

40%

30%

20%

10%

0%

No

85%

Yes

2012

Yes

15%

Will the UK anti-bribery law, which took eect in

April 2011, change how you comply with

current anti-bribery laws (i.e. FCPA)?

Effect of UK bribery law on current anti-bribery law activities

2011 2012

Reproduction and distribution of this report is allowed

only with the written authorization of Cegedim.

No


Chart Index

Figure 33:

What is your timeframe for moving forward with a

global solution for aggregate spend

and transparency reporting?

What is your timeframe for moving forward with a global solution for aggregate spend and transparency reporting?

Not dened

41%

We already have one

8%

2014

7%

2012

2013

13%

2012

31%

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only with the written authorization of Cegedim. White Paper 39


2012 US Trends in

Aggregate Spend and

Disclosure Reporting

Results from an Industry Survey

March 2012

For more information, please contact

compliance@cegedim.com

www.cegedim.com/eucompliance

Cegedim SA - Cegedim Relationship Management Business Unit - RCS Nanterre B 350 422 622 - 137 rue d’Aguesseau - 92100 Boulogne Billancourt - France - WP-2012-03-USCOMP-GL-L

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