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SEC Disclosure: Managing information at FDA-regulated companies. ...continued from page 53
information that a company may need to
disclose, particularly if the company has
previously disclosed information regarding
a clinical investigation or trial. Significant
changes or results from investigations previously
discussed with the public will likely
warrant prompt and accurate disclosure.
Again, in order to accomplish this efficiently,
the creation and implementation of an SOP
regarding clinical investigation developments
may be beneficial.
For each ongoing clinical investigation,
create a distribution list which includes at
least one member from the regulatory affairs
department, the General Counsel’s office and
the corporate communications or investor
relations department. Use this distribution list
to promptly communicate any new and significant
developments so that people outside
the clinical investigation group are not only
informed of the new information, but can
make an assessment regarding whether or not
disclosure is necessary. Consider including
as part of this SOP a procedure for calling
meetings among the distribution list on short
notice, thus allowing for discussion about the
new information across various segments of
the company.
SEC filings
Creating SOPs for the drafting, review, and
filing of any SEC filings is also an important
component for disclosure policies and
procedures. For each periodic filing on Form
10-K or 10-Q, implement an SOP that not
only sets forth the timeline for drafting the
filing, but also includes the necessary sign-offs
for each section. Of particular importance for
many FDA-regulated companies, including
medical device developers and manufacturers,
is a section appearing in each periodic
report called management’s discussion and
analysis of financial conditions and results of
operations (MD&A). This section requires
management to discuss information that may
cause the current financial condition to not
be indicative of future financial condition.
For medical device companies, this may
include indications from the FDA regarding
status of a pending application or events
from a clinical investigation. Consequently,
an SOP regarding the drafting and review of
periodic filings needs to allow for review by
members of the regulatory affairs and clinical
investigation divisions to ensure that information
pertinent to those divisions is included
and accurately described.
Similarly, SOPs for Forms 8-K and registration
statements can be drafted to allow for
review by relevant divisions at the company.
These SOPs, however, may need to be streamlined
because often time is of the essence
when filing a disclosure on Form 8-K or a
registration statement for an equity offering.
In August 2004, revisions for the filing of
Forms 8-K became effective, requiring that
companies file disclosures regarding specified
information within four business days. And,
although registration statements can integrate
prior filings, a company must still ensure that
it describes “any and all material changes in
the registrant’s affairs” that were not previously
reported on a Form 10-Q or 8-K.
Regulation Fair Disclosure
Finally, because many FDA regulated companies
are frequently communicating with
the investing public, particularly institutional
investors, developing an SOP that covers
Regulation Fair Disclosure (Reg FD) may
be useful. Under Reg FD, companies are
prohibited from selectively disclosing material
nonpublic information to certain parties,
such as securities market professionals, institutional
investors, and investment companies.
If material nonpublic information is disclosed
to a select party, Reg FD requires that the
information be simultaneously disclosed to
the public or if the disclosure is inadvertent,
the information must be disclosed to the
public as soon as practicable after discovering
the disclosure. SOPs regarding communications
with the investment community can be
a valuable way to prevent running afoul of
Reg FD. For example, an SOP to assist with
Reg FD compliance might require that:
n All staff who interact with the investment
community complete regular training
about FD.
n All communication with investors be
logged into a central system, which includes
the date of the communication and
a description of the information provided
to the investor.
n All “road show” materials be reviewed and
approved by specified personnel.
Conclusion
SEC disclosure requirements may not always
be given the necessary attention at developing
public companies that are regulated by the
FDA. However, the cooperation between the
FDA and the SEC, as well as the risk of civil
suits, suggest that FDA-regulated companies
need to take care when disclosing information
to the investing public because the potential
damage from making inaccurate disclosures
can be significant. Using SOPs, a familiar
format of control at FDA-regulated companies,
is one possible way to make disclosure
policies and procedures functional for these
dynamic companies. n
1 See “SEC and FDA Take Steps to Enhance Inter-Agency Cooperation,”
SEC Press Rel. 2004-13 (Feb. 5, 2004) and “FDA and SEC Work to
Enhance Public’s Protection from False and Misleading Statements,”
P04-15 (Feb. 5, 2004).
2 See SEC v. Shashikant C. Shah, Lit. Rel. No. 20034 (March 8, 2007)
(“The staff acknowledges the assistance and cooperation of . . . the FDA
in the investigation of this matter”).
3 See Backmun v. Polaroid Corp., 910 F. 2d 10, 13 (1st Cir. 1990) (en
banc).
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October 2008