PwC Medical Device Compliance Survey Discussion of Survey Results March 30, 2006

Presenters Peter Claude Brian Riewerts John Bentivoglio Partner, Pharmaceutical and Life Sciences Advisory Practice, PricewaterhouseCoopers LLP Partner and Co-Chair FDA/Healthcare Group, King & Spalding LLP

PricewatherhouseCoopersKing & Spalding LLP3 Survey Background PwC decided to conduct an in-depth benchmarking survey on industry compliance practices. Together with King & Spalding and Compliance-Alliance, PwC: Worked with an advisory committee of device company compliance personnel to ensure survey questions were relevant. Invited 30 medical device companies to participate in the 35- question survey, 20 agreed to participate Analyzed the data to identify the better practices in the industry

PricewatherhouseCoopersKing & Spalding LLP4 Survey Demographics Distribution of 2004 Global Sales for the twenty firms that participated in the survey:

PricewatherhouseCoopersKing & Spalding LLP5 General Compliance Environment Survey Results The industry has overwhelmingly adopted the AdvaMed Code Nearly 100% adoption rate of AdvaMed Code among companies surveyed. Express endorsement by company leaders About two-thirds of companies’ presidents or CEOs have personally endorsed the AdvaMed Code in a written statement addressed to company employees and/or customers. Included AdvaMed Code in written business practices, company Code of Ethics, company website.

PricewatherhouseCoopersKing & Spalding LLP6 General Compliance Environment, continued Survey Results Companies are requiring that all employees follow the AdvaMed Code Nine out of 10 companies apply the AdvaMed Code to all company professionals, regardless of title or seniority. Website disclosure 75% of companies surveyed have posted their compliance program on their company websites. Website hits range from 1,000 to 20,000 but have generally resulted in less than 100 inquiries.

PricewatherhouseCoopersKing & Spalding LLP7 General Compliance Environment, continued Survey Results The general impression among the companies surveyed is that compliance with the AdvaMed Code varies depending on company size, market presence, and geography. “Emerging or niche companies” do not “seem to follow” or are “slow to adopt” the Code. Larger companies are “generally good” but “have occasional lapses,” typically from “rogue sales people” who do not abide by the Code. Some “egregious” violations are committed by “non-U.S. companies doing business in the U.S.” Practice is mixed – but there are “better practices” to highlight.

PricewatherhouseCoopersKing & Spalding LLP8 Gifts, Meals, and Entertainment Survey Results Companies have implemented controls over gifts for HCPs to varying degrees: Practice is mixed as to whether pre-purchase approval occurs centrally or locally. Value of individual gifts vs. Frequency of gifts. Restriction of the types of interactions in which gifts can be given. Variability in definition of “reasonable”/”modest” meals and entertainment. Quantified measures cluster around $100. Some geographical flexibility allowed.

PricewatherhouseCoopersKing & Spalding LLP9 Gifts, Meals, and Entertainment, continued Better Practices There is a list of pre-approved gifts from which reps can purchase. Gift-giving is only permitted for specified interactions. Quantified measures of “reasonable”/”modest”. Gift/meal/entertainment limitations are applied to all employees, regardless of title. Tracking process to monitor the volume of gifts received by reps for distribution. Gift/meal/entertainment expenses are tracked by HCP in aggregate spend analyses.

PricewatherhouseCoopersKing & Spalding LLP10 Engagements of Healthcare Professionals Survey Results Most companies have instituted robust controls over the engagement of healthcare professionals, including: -Approach to determining Fair Market Value (FMV). -Ensuring value is received for engagement of HCPs. There is varied practice on the use of limits on the frequency of engagements or the total value of compensation an HCP can receive in a given period of time. FMV determined via a variety of methods (most common are use of MGMA Survey, external consultants/benchmarking, relevant experience).

PricewatherhouseCoopersKing & Spalding LLP11 Engagements of Healthcare Professionals, continuedu Better Practices Contracts for each engagement that include language addressing anti-kickback risks. Articulated standard for consistent determination of FMV that includes objective measures such as MGMA survey, hourly rates, evaluation of CV, written justification that is reviewed and approved) Limits on frequency and value of engagements Domestic coach travel, International business travel Evidence obtained of services received and used Establish annual limits on total value of compensation paid for engagements. Reduce involvement of sales force in selecting participants.

PricewatherhouseCoopersKing & Spalding LLP12 Preceptorships Survey Results Preceptorships continue to be used by some companies to train sales representatives through planed interactions with HCPs Participants include: -New sales representatives -Sales reps detailing a new product -Sales reps detailing a new indication of an existing product There are restrictions over the number of preceptorships a rep can do in a year, but not for the physician.

PricewatherhouseCoopersKing & Spalding LLP13 Preceptorships, continued Better Practices Preceptorships treated as an external training course: Physician retained as consultant Approved in advance, including program approval by Legal or Compliance Address an identified knowledge or training deficit or need, Specific training protocol used Programs run by the company’s Sales Training Departments Post-training skills and knowledge assessment. Physician compensation determined based on FMV, typically standard across HCPs. Restrictions over the number of preceptorships an HCP can do in a year.

PricewatherhouseCoopersKing & Spalding LLP14 Grants Survey Results Companies continue to place restrictions around the involvement of the sales force for the distribution, receipt, processing, and approval of grant requests.

PricewatherhouseCoopersKing & Spalding LLP15 Grants, continued Survey Results There is growing use of grants committees for approval of educational/ charitable grants and research grants. Participants include: # of Companies at which the Functional Area is represented on the Grant Committee

PricewatherhouseCoopersKing & Spalding LLP16 Grants, continued Survey Results At the companies that use grant committees, budgets are being moved out of Sales:

PricewatherhouseCoopersKing & Spalding LLP17 Grants, continued Survey Results Charitable Contributions Most companies have established controls over charitable grants, with articulated selection and giving criteria. The sales force is excluded from the decision making process. Many companies have monitoring processes in place to ensure that denied educational or research grant requests are not resubmitted as charitable grant requests.

PricewatherhouseCoopersKing & Spalding LLP18 Educational and Research Sponsorship Better Practices Involvement of sales force limited to guiding requestors on how to initiate a request. Requests are supported by a request letter. Documentation of business purpose. Requests are reviewed by a grants committees (or separate committees for research and non-research grants) or Compliance/Legal Proof of performance received. Payments are made directly from A/P to recipient. Limit educational grants for for-profit customers

PricewatherhouseCoopersKing & Spalding LLP19 Speaker Programs Survey Results Speaker programs continue to be a popular promotional event. Most companies track and obtain detailed information on attendees. Sales Force commonly involved in identification and selection of HCPs for speaker bureaus.

PricewatherhouseCoopersKing & Spalding LLP20 Speaker Programs, continued Survey Results Most companies review and/or approve speaker program content prior to event: Review by Legal, Regulatory, Medical/Scientific, and Compliance functions FDA package or use approvals to identify and omit off-label promotion Comparative claim verification Speakers may use their own material, but it must be approved in advance

PricewatherhouseCoopersKing & Spalding LLP21 Speaker Programs, continued Better Practices Speakers pre-qualified for use with established honoraria determined through objective FMV calculation Training of speakers prior to use Pre-approval of speaker content Policies on meals and entertainment applicable for speaker program events Tracking of attendance of HCPs at events Compliance performing onsite monitoring of the speaker programs

PricewatherhouseCoopersKing & Spalding LLP22 Sales Force Compensation Survey Results Companies are beginning to consider compliance issues in sales compensation planning The majority of respondents stated that an employee’s violation of corporate compliance policies affect his/her compensation, bonus, promotions, or other terms or conditions of employment. Better Practices Evaluate sales force compensation model to ensure that the metrics and base/bonus mix are consistent with compliance expectations.

PricewatherhouseCoopersKing & Spalding LLP23 HCP/Customer Spend Tracking Each company engaged their customers through a series of business activities, or customer events that should be clearly defined, compiled, monitored, and tracked as part of well-structured business and data processes. 70% of companies reported having processes in place to track: Gifts, meals and entertainment Travel Honoraria, grants, investigator payments, preceptorship fees Free goods (if provided) and other value provided.

PricewatherhouseCoopersKing & Spalding LLP24 HCP/Customer Spend Tracking – Best Practices –The ideal situation is an integrated reporting system that tracks all expenditures to/for customers. –Common processes, systems, and data require multiple users to access the same information for different purposes, including meeting compliance monitoring, state reporting, and commercial performance improvement goals. –With proper teaming, data assessment, integration efforts, and compliance controls, multiple stakeholder groups can improve the operations of the overall business, as well as their individual goals.

PricewatherhouseCoopersKing & Spalding LLP25 Next Steps Topics for next study? For additional information, please contact: Peter Claude - (973) Brian Riewerts - (410) John Bentivoglio - (202) Nancy Singer – (703)

Questions?

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