Aggregate Spend Trends Disclosure Reporting Whitepaper 2012

2012 US Trends in Aggregate Spend and Disclosure Reporting
Results from an Industry Survey
March 2012
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Exclusive Survey Results From Life Sciences Executives on Regulatory Compliance Trends in the US...
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. 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).
Biotech 10%
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 of company types of respondents. Please tell us the type of company for which you work
Medical Device 25%
Pharmaceutical Manufacturer 65%
Reproduction and distribution of this report is allowed only with the written authorization of Cegedim.
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Figure 2: Index - pg.23 How involved are you in ensuring your company How involved are you in ensuring your company complies with sample reporting for VT or federal 6004 complies with sample reporting for VT or federal 6004?
Not at all involved 15% Very Involved 39%
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 years survey, marketing, sales, and finance have slightly less representation (see Figure 4).
Figure 4: Department in which respondents work
Not very involved 10%
In which department do you currently work?
Index - pg.24
2012
40% 35% 30% 25% 20% 15%
2010
2011
2012
Somewhat Involved 36%
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 years 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.
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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 years survey, with 20% of respondents indicating that their company has over $10 Billion in revenue. (see Figure 5).
Figure 5: Index - pg.25 Please tell us the annual revenue of your Annual revenue of respondents companies company
In which of the following ways are youIndex involved Figure 3: - pg.24 with ensuring your company complies Responsibilities of respondents pertaining towith statespend and federal mandated aggregatein spend aggregate and disclosure compliance their and disclosure requirements? company.
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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, Cegedims 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.
Slightly more respondents indicate in 2012 that its a necessity to implement an aggregate spend and transparency solution that can be used in other countries across the world. Only 13% of respondents dont 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.
of respondents consider global capabilities when choosing an aggregate spend solution.
87%
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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 years 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. Weve 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
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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
50% 40% 30% 20% 10%
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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.
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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 7: Index - pg.26 system implementation for your aggregate spend Costs incurred from third party system implementation and disclosure reporting? for your aggregate spend and disclosure reporting
50% 40% 30% 20% 10%
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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).
Figure 8: Index - pg.26 requirements as more legislation is passed How respondents plan to satisfy reporting requirements as more legislation is passed
Figure 9: Index in - pg.27 How many dedicated full time employees (FTEs) your Number of dedicated full time employees (FTEs) who company have speci c job responsibility to support have specific job and responsibility to support state and your state federal aggregate spend and federal aggregate spend and disclosure reporting and disclosure reporting andcompliance? compliance in respondents companies
80% 70% 60% 50% 40% 30% 20% 10%
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How respondents plan to satisfy reporting
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
60% 50% 40% 30% 20% 10%

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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 weve 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.
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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 How do based you currently manage your spend solution on resources vs. how aggregate respondents and disclosure reporting and compliance would prefer to manage their aggregate spend and based on your resources? disclosuresolution reporting and compliance solution based on resources
60% 50% 40% 30% 20% 10%
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Figure 12: Index the - pg.28 new and pending legislation that impacts How respondents currently monitor new and pending life sciences industry today? legislation
How are you researching and monitoring
80% 70% 60% 50% 40% 30% 20% 10%

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80% 70% 60% 50%
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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%).
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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 HCPs and their affiliations, a companys 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.
Figure 15: Index - pg.30 What percentage of those data sources What percentage of those data sources are fromare a third from a third party? party?
76-100 14%
0-25 47%
51-75 15%
2012
26-50 24%
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).
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%
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2010
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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 companys aggregate spend system being flexible and fully integrated with a wide variety of systems.
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Figure 16: Index - pg.30 How do you currently obtain event and spend data How respondents currently obtain event and spend from your vendors? data from vendors
60% 50% 40% 30% 20% 10%
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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 dont 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.
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
35% 30% 25% 20% 15% 10% 5%
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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 US physician travels abroad on behalfof ofyour your When aa US physician travels abroad on behalf foreign a do liate(s) do you capture those foreign affiliate(s) you capture those payments/ payments/expenses for under reporting under US Federal law? expenses for reporting US Federal law?
No 26%
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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 respondents handle reporting of US Physicians How respondents handle reporting of US Physicians that travel abroad on their behalf that travel abroad on their behalf
Pay them in the country that the activity occured in foreign currency 18% Pay them in the US in US dollars 82%
On a scale of 1 to 10 with 10 being the most Figure 20: Index - pg.32 challenging and 1 being not at all challenging, please tell us how challenging each of the following are Challenges in consolidating spend data from multiple for you into consolidating spend data sources (scale of 1 10, with 1 being the least from multiple sources. challenging and 10 being the most challenging)
8
2010 2011 2012
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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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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 con dence that your companys 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%
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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.
What do you feel is the primary root cause Index of any lack Figure 22: - pg.33 of compliance to promotional spend regulations? Primary root cause of any lack of compliance with promotional spend regulations
35% 30% 25% 20% 15% 10% 5%
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13
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 last year (see Figure On aas scale of 1 to 10 with 1023). being very concerned and 1 being not at all concerned, please tell us your Figure 23: Index - pg.34 level of concern with each of the following in complying Confidence that reporting is fully compliant withthe Physician Payments Sunshine Provision.
2010 2011 2012
to review information, as well as a way for them to dispute/ask questions.

Figure 24: Index - pg.34 Respondents planning pre-submission review by Respondents planning aa pre-submission review covered recipients as suggested in the draft regulations. by covered recipients as suggested in the draft regulations
No 37%
Yes 63%
2012
8 7 6 5 4 3 2 1
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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
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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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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 tothe Figure 25: Index - pg.35 Physician Payments Provision, In response to the SunshineSunshine Act, will you migrate to an will you migrate to an automated solution? automated solution?
80% 70% 60% 50% 40% 30% 20% 10%
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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 dont 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. With the trend toward global transparency, how Figure 26: Index - pg.35 important is it for you/your organizationto implement Importance of implementing an aggregate spend anaggregate solution spend andtransparency solution and transparency that can be used in other that can across be used inother countries the worldcountriesacross the world?
60% 50% 40% 30% 20% 10%
t. ry . Id fa on' ct t s or ee at a al ne l i ed n ch fo oo r t si his ng . a It's so n lu ot tio a n.
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 aa priority in consideration Regions that are/would be priority in consideration of implementing a global aggregate spend and and of implementing a global aggregate spend transparency solution transparency solution
Eastern Europe 7% Latin-America 8% Middle-East 3%
Western Europe 61%
2012
2011
2012
Asia-Paci c 21%
Figure 28: Index - pg.36 Countries that are/would be a priority in consideration Countries that are/would be a priority in consideration of implementing a global aggregate spend of implementing a global aggregate spend and and transparency solution transparency solution (open text).
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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
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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 Cegedims 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.
Figure 29: Index - pg.37 aggregate spend and transparency Fromglobal where do the decisions for your companys initiatives global aggregate spend andoriginate? transparency initiatives originate?
Do30: you have responsibility for your company's Figure Index - pg.37 compliance with FCPA (Foreign Corrupt Practices Do you have responsibility for your companys Act)? compliance with FCPA (Foreign Corrupt Practices Act)? No 67% Yes 33%
Very few respondents are leveraging their aggregate spend solution to help 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.
Are you leveraging your aggregate spendIndex solution Figure 31: - pg.38 to help comply with FCPA/anticorruption regulations? Are you leveraging your aggregate spend solution to help comply with FCPA/anticorruption regulations? Yes 15% No 85%
2012
2012
From where do thedecisions foryour company's
80% 70% 60% 50% 40% 30% 20% 10%

s rs ce s ce te o o ar
2011
2012
2012
at es
St
co
Only one-third of respondents indicate having some responsibility for their companys 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. 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).
Re gi on
ite
Un
Lo c
al
al
he ad
un
tr
No
qu
ts
ur e
0%
2012
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17
Ye s
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 is your timeframe for moving forward What is your timeframe for moving forward withwith a a global solution for aggregate spend global solution for aggregate spend and transparency and transparency reporting? reporting?
We already have one 8% 2012 31%
No
M P L
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
2011 2012
Will the UK anti-bribery law, which took e ect in
60% 50% 40% 30% 20% 10%
0%
2012
Not de ned 41% 2014 7%
2013 13%
2012
18 White Paper
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 reportedincluding the nature and purpose of spend and recipient types. While we dont 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 havent budgeted enough money to build the compliance infrastructure. Theyre waiting for final CMS regulations before they start. This is not the most effective approach. Compliance is not merely 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 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 penaltiesit will also head off potentially deeper impacts on the companys 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. 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 arent 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 dont have to do anything until 2013.
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reporting 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 preparingnowfor 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
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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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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
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Chart Index
Figure 1:
Please tell us the type of company for which you work Medical Device 25% Pharmaceutical Manufacturer 65%
Breakdown of company types of respondents
Biotech 10%
Figure 2:
How involved are you in ensuring your company complies with sample reporting for VT or federal 6004 Not at all involved 15%
How involved are you in ensuring your company complies with sample reporting for VT or federal 6004?
Very Involved 39%
Not very involved 10%
Somewhat Involved 36%
2012
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Chart Index
In which of the following ways are you involved with ensuring your company complies with Figure 3: state and federal mandated aggregate spend Responsibilities of respondents pertaining to aggregate spend and disclosure compliance in their company. (*Multiple and disclosure requirements? responses allowed) .
50% 40% 30% 20% 10%
ta n pr ov al s t ta n r Ot he
2010
2011
2012
0%
of y tr En or d/
en
Da
Da
er at
tio
em
of
ec
Ap
ag
en
an
rS
sin
tG
rM
do
an
es
or
Ve n
ew
Pr oc
Re p
do
tR ev i
an
Ve n
or
in
Ga
th
In which department do you currently work?

Figure 4:
Department in which respondents work
40% 35% 30% 25% 20% 15% 10% 5%

s io ns e e
Tr ac
Re p
er
ki
ng
2010
Le g
isl
at
ive
Up
el
da
te
io
2011
2012
Le ga
in
nc
nc
ke t
Sa
na
er at
pl
Co m
24
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Op
ar
Fi
Ot
ia
he
le
0%
Chart Index
Figure 5:
Please tell us the annual revenue of your company

60% 50% 40% 30% 20% 10%
on on on on lli lli lli lli or e $ 20 Bi lli
Annual revenue of respondents companies

2010 2011 2012
0%
1 r$ de Un
Bi
Bi
Bi
Bi
.9
.9
99
$4
$9
on
on
lli
lli
Bi
Bi
$1
$5
Figure 6:
How respondents are currently satisfying reporting requirements
How are you currently satisfying the various state and federal aggregate spend and disclosure requirements?
50% 40% 30% 20% 10%
et s te m g th av em o st id at pr es om re ot qu io iri na ng l s di pen sc d lo in su re io n r Ot he
$1
Bi
lli
on
$1
9.
2010
2011
on
or
2012
0%
re a sp ith /w
ds he
sy s
so l
ut
ls of tw ar e
rt y
pa
ird
na
Th
ua
In t
an
W e
ar e
lly
er
no
ts
at
W e
isf
yi n
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Chart Index
Figure 7:
What costs have you incurred from your third party system implementation for your aggregate spend and disclosure reporting?
50% 40% 30% 20% 10%
or e 0K 99 9 9
Costs incurred from third party system implementation for your aggregate spend and disclosure reporting
2011 2012
0%
r$ de Un
99
50
,9
99
9,
99
9,
99
$9
99
1,
K-
4,
-$
Figure 8:
How respondents plan to satisfy reporting requirements as more legislation is passed

00 M $1 $5 $2 M
How respondents plan to satisfy reporting requirements as more legislation is passed
60% 50% 40% 30% 20% 10%

em s n et st tio
-$
2010
2011
$5
or
2012
he
ds
sy
lu
so
wa re
re a
sp
rt
ft
pa
/w
al
lly
ua
M an
26
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In
te
rn
Th
ird
No
ith
so
ts
at
isf
th
em
0%
many dedicated full time employees (FTEs) in your Chart How Index company have speci c job responsibility to support
Figure 9:
your state and federal aggregate spend and disclosure reporting andcompliance?
80% 70% 60% 50% 40% 30% 20% 10%
2010 2011 2012
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 respondents companies
0% Over the next year, do you anticipate your investment (solutions and resources) in aggregate spend and disclosure reporting and compliance to decrease, increase or stay the same? Figure 10:
E's Es Es Es ne FT FT FT No 10 5 5 FT 0 611
Expected change in investment (solutions and resources) in aggregate spend reporting and compliance over the next year
80% 70% 60% 50% 40% 30% 20% 10%

se e cr ea De
16
2010
-2
2011
20
1-
-1
FT
Es
2012
St
ay
th
In c
re as
sa
0%
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27
Chart Index
How do you currently manage your aggregate spend and disclosure reporting and compliance Figure 11: 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 compli60%
50% 40% 30% 20% 10%
se n pa an rty d so in lu -h tio ou n se
0%
in lly Fu
ou
-h
ird
pa
rt
so
lu
tio
th
d/
rc e
ou
Ou
Figure 12:
How are you researching and monitoring new and pending legislation that impacts the life sciences industry today?
How respondents currently manage aggregate spend solution How respondents would prefer to manage aggregate spend solution
How respondents currently monitor new and pending legislation
80% 70% 60% 50% 40% 30% 20% 10%

m nt ea We rc d h o or no m td on o ito an rin y g
co
bi
na
ts
tio
of
th
ird
2010
2011
2012
ow
/t ea
ou rc e
ul
re s
rn
al
In te
Th
ird
pa
rt y
28
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re s
Do n't
co ns
Ot he
ta
kn
0%
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%
2010
2011
2012
0% How many sources (including suppliers) does your company have that capture HCP and Organization spend information? Figure 14:
e ns e al ow nc nc Le g io kn na er at pl Fi Co m Op
Number of data sources (including suppliers) that capture HCP and Organization spend information
50% 40% 30% 20% 10%

0 5 10 5 0
2010
Do
n't
2011
1-
-1
-2
-2
6-
-3
11
16
21
26
M or e
th
an
30
0%
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Ot
ia
2012
he
29
Chart Index
Figure 15:
What percentage of those data sources are from a third party? 76-100 14%
What percentage of those data sources are from a third party?
0-25 47%
51-75 15%
26-50 24%
How do you currently obtain event and spend data from your vendors?
60% 50% 40% 30% 20% 10%
s sf er ha e a s n ac ap ce p ss lic to atio en n te to rt w he hic ir h da th ta e v m en an do ua r lly U m se or a e co of m th bin e ab atio ov n e of m 2 et o ho r ds
Figure 16:
How respondents currently obtain event and spend data from vendors
2010 2011 2012
0%
re ad s Sp
he
et
Da
ta
le
30
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Us
tr an
Chart Index
Within your aggregate spend and disclosure solution, which of the following do you use as your customer master? Figure 17:
35% 30% 25% 20% 15% 10% 5%
n n ed im n cu y d st oe om s er nt m ha as ve te r le S S IM Or ac HM tio ria pe lu Ce g Ot he r
Respondents customer master within their aggregate spend and disclosure compliance reporting solution
2010 2011 2012
0%
so Cu st om
Si
om
When a US physician travels abroad on behalf of your foreign a of liate(s) do you capture When a US physician travels abroad on behalf your foreign affiliate(s) do those you capture those payments/expenses for reporting under US Federal law? payments/expenses for reporting under US Federal law?
Figure 18:
No 26%
Ou
rc
pa
Yes 74%
2012
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31
Chart Index
Figure 19:
How respondents handle reporting of US Physicians that travel abroad on their behalf
How respondents handle reporting of US Physicians that travel abroad on their behalf Pay them in the US in US dollars 82%
Pay them in the country that the activity occured in foreign currency 18%
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 Figure 20: for you in consolidating spend data Challenges in consolidating spend data from multiple sources (scale of 1 to 10, with 1 being the least challenging and from multiple sources. 10 being the most challenging)
2012
2010
2011
2012
ur ce s ca Ma tio tc fro n o hin m fa ga al n nd lt H he CP est ex an abl pe d ish ns Or in e ga g da ni un ta za iq so tio ue ur ns ce s In co m pl et e sp en d in fo rm at io n
so
at a
al ld
in
en
tif y
32
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Id
en
ti
Di
sp a
ra te
Id
fo rm
at
an
st an
da
rd s
Chart Index What is your level of con

Figure 21:
Confidence that reporting is fully compliant
dence that your companys disclosure reporting is fully compliant with current regulations?
50% 40% 30% 20% 10%

nt ur e nt
2010
2011
2012
de
nt
de
No
ts
de
co
co
at
co
Ve r
What do you feel is the primary root cause of any lack of compliance to promotional spend regulations?
No m
ew h
tv er
Figure 22:
Primary root cause of any lack of compliance with promotional spend regulations
35% 30% 25% 20% 15% 10% 5%

or d da kee ta pin La ck en g of tr an y d/ un er o de ro r rs rs ta nd in g Sy of st po em lic /p y ro ce ss sh or tc om No in gs la ck of co m pl ia nc Sh e or se ta en ge of hu m an re so ur ce s
So
2010
No
2011
ta
ta
ll
2012
t dg e of La ck Lo w pr io bu rit y
0%
Po or re c
co
de
nt
0%
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Chart Index
On a scale of 1 to 10 with 10 being very concerned and 1 being not at all concerned, please tell us your Figure 23: level of concern with each of the following in complying Level of concern with issues in preparing for the Sunshine Act (scale of 1 to 10, with 1 being the least concern and 10 withthe Physician Payments Sunshine Provision. being the most concern)
2010 2011 2012
8 7 6 5 4 3 2 1
ta In t co egri m ty pl et h e, av an ing d tim acc el ura y da te, ta s nt da ie re c nd po in qu iri es af te rs pe nd is ip st ed
0
en d of sp
tio
ca
ti
ct
in
al
lr el
ev an
ts
pe
en
le
Co l
Da
ta
id
er
Pr op
Figure 24:
Respondents planning a pre-submission review by covered recipients as suggested in the draft regulations.
Respondents planning a pre-submission review by covered recipients as suggested in the draft regulations
No 37%
Ha
nd
lin
Yes 63%
34
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2012
Chart Index
Figure 25:
In response to the Sunshine Act, will you migrate to an automated solution?
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 tothe Physician Payments Sunshine Provision, will you migrate to an automated solution?
80% 70% 60% 50% 40% 30% 20% 10%
n No ,w m ew an i ua ll e l/s nh pr an ea ce ds o he ur et cu so rre lu nt tio n Ye s, ou to a ts p ou ur rc ch ed as so ed lu or tio n tio so lu n't
2011
2010
2011
2012
With the trend toward global transparency, how important is it for you/your organizationto implement anaggregate spend andtransparency solution Figure 26: that be used inother countriesacross the world? Importance of implementing an can aggregate spend and transparency solution that can be used in other countries
across the world
Ye s
,t
60% 50% 40% 30% 20% 10%

t. sa ry .
an
in
te
rn
Do
2012
It
Id fa on' ct t s or ee at a al ne l i ed n ch fo oo r t sin his g . It a 's so n lu ot tio a n.
0%
re m ui re q a el y so lu t
al
en
ab
It' s
wo u
ld
be
ni
ce
bu
ti
t's
no
tn
ec
es
kn
ow
0%
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Chart Index
Regions that are/would be a priority in consideration Figure 27: of implementing a global aggregate spend and Regions that are/would be a priority in consideration of implementing a global aggregate spend and transparency transparency solution
solution
Eastern Europe 7% Latin-America 8% Middle-East 3%
Western Europe 61%
Figure 28:
Countries that are/would be a priority in consideration of implementing a global aggregate spend and transparency solution
Asia-Paci c 21%
Number of data sources (including suppliers) that capture HCP and Organization spend information
2012
35% 30% 25% 20% 15% 10% 5%

il co ly s a y Ja pa n rla nd Br az Ita an in M Fr an ex i Ch rm UK ce
0%
36
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Ne
th e
Ge
Chart Index
Figure 29:
From where do thedecisions foryour company's global aggregate spend and transparency initiatives originate?
80% 70% 60% 50% 40% 30% 20% 10%
s ce ce rt ua o o No ts ur e s er s
From where do the decisions for your companys global aggregate spend and transparency initiatives originate?
2011 2012
0%
es at St d ite
tr
un
co
Figure 30:
Do you have responsibility for your company's compliance with FCPA (Foreign Corrupt Practices Act)?
Un Lo c Re g io
Do you have responsibility for your companys compliance with FCPA (Foreign Corrupt Practices Act)?
al
na
lh
ea
dq
No 67%
Yes 33%
2012
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37
Chart Index
Figure 31:
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? Yes 15%
No 85%
Will the UK anti-bribery law, which took e ect in April 2011, change how you comply with current anti-bribery laws (i.e. FCPA)? Figure 32:
Effect of UK bribery law on current anti-bribery law activities
2012
2011
2012
60% 50% 40% 30% 20% 10%

Ye s No
0%
38 White Paper
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? We already have one 8% 2012 31%
Not de ned 41% 2014 7%
2013 13%
2012
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39
2012 US Trends in Aggregate Spend and Disclosure Reporting
Results from an Industry Survey

Cegedim SA - Cegedim Relationship Management Business Unit - RCS Nanterre B 350 422 622 - 137 rue dAguesseau - 92100 Boulogne Billancourt - France - WP-2012-03-USCOMP-GL-L
March 2012
For more information, please contact compliance@cegedim.com www.cegedim.com/eucompliance

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2012 US Trends in Aggregate Spend and Disclosure Reporting

Results from an Industry Survey

Medical Device 25%

Pharmaceutical Manufacturer 65%

Not very involved 10%

In which department do you currently work?

40% 35% 30% 25% 20% 15%

Somewhat Involved 36%

60% 50% 40% 30% 20% 10%

of respondents consider global capabilities when choosing an aggregate spend solution.

How Are Companies Complying

not satisfying requirements or avoiding promotional spend

respondents indicated again this year that they were either

spreadsheets were from medical device companies. Some

How respondents plan to satisfy reporting

60% 50% 40% 30% 20% 10%

80% 70% 60% 50% 40% 30% 20% 10%

How are you researching and monitoring

80% 70% 60% 50% 40% 30% 20% 10%

40% 30% 20% 10%

HCP Spend Data Collection

Customer Data Management

so ur ce s ca Ma tio tc fro n o hin m fa ga al n nd lt H he CP est ex an abl pe d ish ns Or in e ga g da ni un ta za iq so tio ue ur ns ce s In co m pl et e sp en d in fo rm at io n

Physician Payments Sunshine Act Issues and Impact

to review information, as well as a way for them to dispute/ask questions.

Global Issues and Trends

Western Europe 61%

30% 25% 20% 15%

From where do thedecisions foryour company's

80% 70% 60% 50% 40% 30% 20% 10%

Will the UK anti-bribery law, which took e ect in

60% 50% 40% 30% 20% 10%

Not de ned 41% 2014 7%

Conclusion Recommended Reading

Very Involved 39%

Not very involved 10%

Somewhat Involved 36%

In which department do you currently work?

40% 35% 30% 25% 20% 15% 10% 5%

Please tell us the annual revenue of your company

Annual revenue of respondents companies

How respondents are currently satisfying reporting requirements

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

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

60% 50% 40% 30% 20% 10%

80% 70% 60% 50% 40% 30% 20% 10%

How respondents currently monitor new and pending legislation

80% 70% 60% 50% 40% 30% 20% 10%

80% 70% 60% 50% 40% 30% 20% 10%

50% 40% 30% 20% 10%

ur ce s ca Ma tio tc fro n o hin m fa ga al n nd lt H he CP est ex an abl pe d ish ns Or in e ga g da ni un ta za iq so tio ue ur ns ce s In co m pl et e sp en d in fo rm at io n

Chart Index What is your level of con

50% 40% 30% 20% 10%

35% 30% 25% 20% 15% 10% 5%

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

60% 50% 40% 30% 20% 10%

Id fa on' ct t s or ee at a al ne l i ed n ch fo oo r t sin his g . It a 's so n lu ot tio a n.

Eastern Europe 7% Latin-America 8% Middle-East 3%

Western Europe 61%

35% 30% 25% 20% 15% 10% 5%

60% 50% 40% 30% 20% 10%

Not de ned 41% 2014 7%

2012 US Trends in Aggregate Spend and Disclosure Reporting