Independence of compliance reviews is questioned in drug firm settlements

Thu Jun 2, 2016 7:34am EDT
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By Sarah N. Lynch

WASHINGTON (Reuters) - Some major U.S. drug companies have hired their own auditors to perform compliance reviews mandated in government settlements over alleged civil violations, such as paying kickbacks or off-label drug promotion, according to federal records reviewed by Reuters.

Third-party compliance reviews are playing an increasingly large role in helping the government ensure companies fulfill their obligations in federal settlements.

But unlike the Justice Department or the Securities and Exchange Commission, the Department of Health and Human Services inspector general does not prohibit companies from hiring firms with whom they have existing business ties.

Some lawmakers and legal experts say that practice creates conflicts of interest and could impair outside reviewers' independence.

"If the goal of this whole thing is to have an energetic and independent reviewer ferreting out mistakes and potential fraud within the company, do not put them under the financial thumb of the people who have millions of dollars at stake in keeping the audit work," said Kevin Outterson, a professor of health and corporate law at Boston University.

Several large drug makers - including Novartis, GlaxoSmithKline, Merck, Sanofi and Allergan Inc. - have relied on their existing or previous auditors, PricewaterhouseCoopers (PwC) or Ernst & Young (EY), to also serve as compliance reviewers, according to corporate filings and a list of reviewers.

The health agency's inspector general provided the list of reviewers hired by drug companies in response to a Reuters Freedom of Information Act request.

The inspector general typically settles civil claims through the use of a "corporate integrity agreement" mandating various reforms.   Continued...

The logo of Swiss pharmaceutical company Novartis is seen on its headquarters building in Basel, Switzerland October 27, 2015.  REUTERS/Arnd Wiegmann/File Photo