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Industry Leader FCPA Compliance For CMOs Practices Act (FCPA). The FCPA was also recently the cause for a potential SEC investigation of Teva Pharmaceutical. This recent increase in charges and fines against life sciences companies is evi- dence that the SEC and the DOJ are work- ing alongside the U.S. Attorney's Office to uncover violations of the FCPA. It hence behooves life sciences organizations and their contractors, including CMOs, to be compliant with these organizations. I 54 IMPACT ON CMOs Violations of the FCPA can arise in mul- tiple ways for a CMO. Specifically, CMOs, their employees, contractors, and/or agents are routinely required to deal with U.S. and non-U.S. governmental agencies. These interactions may occur in multiple ways, including (1) requiring routine for- cause or pre-approval inspections, and (2) working with politicians and/or gov- ernment employees to obtain routine approvals. Potential violations of the FCPA can occur during these visits. INSPECTIONS CMOs often work on tight margins. Inspections by U.S. and non-U.S. gov- ernmental organizations can mean the difference between a large contract and shutting down business. As a result, dur- ing these governmental inspections, indi- viduals within the companies may feel pressured to ensure a clean and clear record for a favorable decision. In foreign countries, where "facilitation payments" are part of doing business, bribes may be exchanged. In such situations, life sci- ences companies and their CMOs may The CMO Leadership Awards 2012 n recent months, Pfizer and several medical device com- panies, including Johnson and Johnson, Orthofix, Biomet, and Smith & Nephew, were fined mil- lions of dollars for viola- tions of the Foreign Corrupt unwittingly expose themselves to FCPA fines and penalties. It is critical to recog- nize that the actions of the CMO and its contractors and agents can expose not only the CMO but also its clients to fines and penalties under the FCPA. ROUTINE APPROVALS Working with government officials is often a routine part of doing business in several developing countries. Opportunities to work with these officials vary from the relatively innocuous (e.g. getting an "occupancy certificate" for a building) to getting approvals for drug products that were deemed safe and effective. These governmental officials are often the "oil" that prevents the machinery of government bureaucracy from slowing down business. Being "welcoming" to these govern- ment officials is hence often treated as a usual cost of doing business. Such "welcoming" behavior varies from the minor — getting tea and small talk — to grander gestures like gifts during festi- vals and special occasions such as birth- days of not only the government offi- cials, but also their family and friends. It is critical for CMOs that work glob- ally to recognize that these behaviors, though "normal" for the country they do business in, may, without appropri- ate controls, expose their customers to potentially multiple millions in fines and penalties. POTENTIAL INADEQUACIES OF CURRENT PROCESSES Companies that are working overseas are now becoming wise to the potential violations of these laws and are begin- ning to require their contractors and affiliates to ensure that individuals who work with them do not violate FCPA requirements. These assurances are typically obtained via language inserted into contracts that are routinely signed Darshan Kulkarni Darshan Kulkarni is a pharmacist and attorney at the Kulkarni law firm in Philadelphia. He holds a doctor of pharmacy degree, a master of science in quality assurance/regulatory affairs, and a juris doctorate degree. He works with a variety of small and large life sciences companies to assist them in meeting not only their FDA regulatory needs, but also their clinical, legal, cross agency, and/or compliance needs. by the contractors. Unfortunately, while this language may serve as a "brick" in the wall of taking appropriate preventa- tive steps to avoid FCPA violations, it does not constitute the wall itself. A full compliance program requires not only mere language in a contract, but also the development of policies and pro- cedures, including appropriate training programs, program audits, and appro- priate corrective action mechanisms. CMOs must take the threat of FCPA violations seriously. CMOs who under- take such an FCPA compliance program may be able to advertise such compli- ance and hence market themselves to potential life sciences clients as an "ethical" and compliant organization. Explaining the potential cost savings associated with such compliance could be lucrative for CMOs. DISCLAIMER: The opinions stated in this article are the sole and present opinions of Dr. Kulkarni as of the time of writ- ing of the article in question. Such opinion(s) may change over time. This article does not constitute legal advice, and does not create an attorney-client relationship, and should not be construed as such. Please contact your attorney for legal advice that is appropriate for you. INDUSTRY LEADER