1. Compliance Requirements for the Pharmaceutical Industry and Impact on Marketing Practices Timothy M. Cunniff, Pharm.D. Vice President, Global Regulatory Affairs Lundbeck Inc. May 2009

2. Disclosure Statement Employee of Lundbeck Inc. (formerly Ovation Pharmaceuticals)

3. Objectives Describe the various legal, regulatory and industry compliance standards Discuss requirements applicable to industry interaction with healthcare professionals Summarize recent revisions to the PhRMA code and impact on pharmaceutical marketing practices

4. Legal Basis for Industry Compliance Programs Federal and State Laws Food, Drug and Cosmetic Act (21 U.S.C. 301 et. seq.) Anti-Kickback Statute (42 U.S.C. & 1320a-7b[b]) Civil False Claims Act (31 U.S.C. 3729) Fraud and Abuse Investigations and Prosecutions General Criminal Fraud Statutes Whistle Blower Act (31 U.S.C. 3730) HHS Guidance OIG FDA Industry and Medical Organization Recommendations PhRMA AMA

5. Recent Industry Settlements for Compliance Violations Bayer: $14MM TAP:$875MM Abbott: $600MM Schering–Plough:$435MM Pfizer: $430MM Serono: $704MM Eli Lilly:$1.42BB

6. Significant Compliance Standards for Industry  July 2002: PhRMA Code on Interaction with Healthcare Professionals  April 2003: OIG Compliance Program guidance  July 2005: California Law  Required industry to adopt policies that ensure compliance with OIG and PhRMA Code guidelines  January 2009: Revised PhRMA Code

7. OIG Compliance Program Guidance  Stresses the importance of the development and implementation of a functional compliance program  Cautions the pharmaceutical industry in three high risk areas  Identifies exemptions or “safe harbors” for federal and state healthcare programs  Utilized to decrease the risk of fraud and abuse in federally funded health care programs

8. OIG Compliance Program Guidance Three Potential Areas of Risk Accurate price and sales reporting to government agencies Kickbacks and other illegal remunerations Drug samples

9. OIG: Potential Area of Risk Accurate Price and Sales Reporting Accounting for price reductions, cash discounts, rebates, coupons, etc. for purchasers Data submitted used to calculate AMWP and Best Price Impacts reimbursement rates under Medicare and Medicaid Violations covered by False Claims Act Prohibits knowingly presenting to the federal government a false or fraudulent claim, or false record, to get a payment or false claim approved Civil monetary penalties

10. OIG: Potential Area of Risk Kickbacks and Other Illegal Remuneration Anti-kickback Statute  Criminal prohibition against payments made purposefully to induce or reward the referral or generation of federal health care business Identifying potential risk behavior  Determine remunerative relationships  Is any one purpose of remuneration unlawful?

11. OIG: Kickbacks & Other Illegal Remuneration Relationships of Concern  Manufacturer-Purchasers  Including those using formularies and their agents  Manufacturer-Physician  Including persons and entities in a position to make or influence referrals  Manufacturer-Sales Agent

12. OIG: Relationships of Concern Manufacturer-Purchaser Relationship  Discounts  Formulary Support Activities  Average Wholesale Price  Pharmaceutical companies have ability to control the AWP and indirectly influence customer’s profit  Wrongfully manipulating AWP violates anti- kickback statue

13. OIG: Relationships of Concern Manufacturer-Physician Relationship  Consulting  Educational Grants  Research Funding  Business courtesies and other gratuities

14. OIG: Manufacturer-Physician Relationship Consulting  Signed agreement for consulting services  Fair market value  Services pre-specified contractually  Legitimate need  Service is actually provided

15. OIG: Manufacturer-Physician Relationship Educational Grants  Unrestricted grant for a defined program  Independent from sales & marketing  Defined criteria  Awarded to conference sponsor  Industry cannot select speakers or control the agenda

16. OIG: Manufacturer-Physician Relationship Research Funding  Independent from sales & marketing  Fair market value  Legitimate and necessary  No “seeding” trials allowed  Clinical Officer conducts review of research

17. OIG: Manufacturer-Physician Relationship Business Courtesies/Other Gratuities  Determine and publicly document annual allotted amount  Meals  Modest  Industry representative present  Venue must be conducive for education  Entertainment prohibited  No Guests  Gifts/Reminder Items  Educational purposes only and should benefit patients

18. OIG: Kickbacks & Other Illegal Remuneration Manufacturer-Sales Agent Relationship  Compensation and Bonuses Practices  Expense accounts  Regular PhRMA Code training  Audit and review sales force activities

19. OIG: Potential Area of Risk Drug Samples  Selling drug samples or submitting claims for drug samples is unlawful  Prescription Drug Marketing Act of 1987 (PDMA)  False Claims Act  Anti-kickback statue  Label drug samples appropriately  Reconcile and account for drug sample distribution

20. PhRMA CODE Originally issued in 2002 and revised in 2008 (effective January 1, 2009) Addresses industry’s relationships with healthcare professionals with respect to marketed products and pre-launch activities Ethical standards of conduct Compliance with legal requirements Goal is to benefit patients and enhance the practice of medicine “Voluntary” for PhRMA member companies (not law)

21. PhRMA Code Informational Presentations 2002 Version Occasional meals may be offered Modest Conducive venue Provide educational value Company representative present No guests No entertainment 2009 Revision Outside meals with sales representatives not allowed

22. PhRMA Code Third Party Educational Meetings 2002 Version Financial support for CME allowed Funding via program sponsor Cannot control content, faculty, materials or venue Cannot reimburse travel for attendees Can provide meals and receptions 2009 Revision Follow ACCME standards or other entity that may accredit CME Sales & Marketing cannot make grants Industry cannot provide meals or receptions at CME events

23. PhRMA Code Consultants 2002 Version Reasonable compensation for services and reimbursement for travel expenses Written contract Legitimate need Criteria for selection Number of consultants Venue is appropriate Social events subordinate 2009 Revision No changes

24. PhRMA Code Speaker Training Meetings 2002 Version Reasonable compensation and reimbursement for travel allowed Must receive extensive training on product AND on compliance with FDA regulatory requirements 2009 Revision Firms to set a maximum amount per speaker Number of speakers and number of engagements per speaker should be limited Training should not be at “resort” settings Must draw distinction between speaker’s programs and CME Healthcare professionals should disclose relationship away form podium and for at least 2 years beyond termination of relationship

25. PhRMA Code Educational & Practice Related Items 2002 Version Items that primarily benefit patients allowed Not substantial value ($100 or less) Occasional basis only Practice-related items allowed Minimal value Must not provide a personal benefit 2009 Revision Items must primarily benefit the education of patients or healthcare providers Not substantial value Occasional basis only Practice-related items not allowed What, No Pens!

26. PhRMA Code Potential Future Revisions Revision of Direct-to-Consumer advertising principles DTC principles first described in 2005 Proposed revisions may cite standards developed by outside groups (i.e., AMA) Congressional pressure by Reps. John Dingell (D-Mich) and Bart Stupak (D-Mich) is driving reform

27. PhRMA Code Impact of 2009 Revisions Corporate compliance is paramount SOPs- Hundreds! Multiple approvals/Committee reviews Training Auditing Disciplinary action Individuals Firms (i.e., ABPI suspension of Roche) Many firms likely to scale back on marketing Global economic crisis Massive number of patent expirations PhRMA code provides some assurance that firms aren’t unilaterally reducing marketing spend

28. State Regulation of Industry Marketing Practice- One Example Massachusetts Code of Conduct effective July 1, 2009 Each firm must adopt a marketing Code of Conduct Submit description of training program for appropriate employees to document knowledge of: Code of Conduct General science Product-specific information Bans practice-related items (i.e., pens) Certify compliance with state law Adopt and submit polices for investigating non- compliance

29. Lundbeck’s Corporate Compliance Program Written code of conduct and ethical principles Certify compliance with PhRMA Code on an annual basis (CCO and CEO) Focus on specific “risk” areas Effective training and education Established lines of communication and processes to respond to issues

30. Lundbeck’s Corporate Compliance Program (cont.) Oversight and monitoring Primary: Compliance Officer Secondary: Compliance Committee Tertiary: President and CEO Final: Board of Directors Enforcement of standards through progressive discipline Internal audit functions

31. Lundbeck Compliance Policies Lundbeck has well over 100 substantive polices and procedures including: Meals, gifts and entertainment Consulting agreements for healthcare providers Medical education grants Commercial program support Advertising and Promotion Dissemination of published literature Prescription drug marketing and sampling Medical Science Liaison policy Medical Information response policy

32. Lundbeck Compliance Committees Promotional Advertising Review Committee Legal/Compliance, Regulatory, Medical, Marketing Medical Grant Review Committee Legal/Compliance, Regulatory, Medical, Finance, Marketing Corporate Compliance Committee Legal. Regulatory, Clinical, Medical, Human Resources, Finance, Marketing

33. Questions?