©2004 deloitte development llc. all rights reserved. 2004 pharmaceutical regulatory and compliance...

©2004 Deloitte Development LLC. All rights reserved.

2004 Pharmaceutical Regulatory

and Compliance Congress

Compliance Auditing & Monitoring3.02 Auditing and Monitoring for Compliance

Karen R. Lines, Esq.Associate General CounselGenentech, Inc.South San Francisco, CA

November 16, 2004

Sheryl Vacca, CHCWest Coast Practice Leader, Life Sciences & Health Care RegulatoryDeloitte & Touche LLP

Copyright © 2004 Deloitte Development LLC. All rights reserved. 2Confidential and Proprietary Material of Deloitte Consulting. Copyright © 2002 Deloitte Consulting (US) LLC. All Rights Reserved 2


and Compliance CongressBuilding the Emerging Model

Departmental Procedures

Standard Operating Procedures

Compliance Standards

Code of Conduct Corporate Policies

Day-to-Day Operations

Corporate Compliance

Program

Financial Risk Regulatory Risk

Systems/IT Risks Operational Risks

Board & Executive Committee




The Compliance Program Design Dilemma

• Designing an integrated compliance program that operates as one unit rather than many silos is challenging

• The business’s processes and operations often function in silos

• The compliance-related risks touch every aspect of the organization’s business & are difficult to “compartmentalize”

• The design should be based upon the organization’s business strategies

• The design should result in an organization-wide compliance monitoring plan

BusinessStrategy

Business Processes

Monitoring

Risk Mitigation




• Monitoring plan should be designed with the Compliance Program dilemma in mind.

• Monitoring creates the crosswalk between the Business Strategies and the Risk Areas.

Create a Compliance “Crosswalk”

Business StrategyWill be impacted by

many risk areas Risk AreaApply to more than

one business strategy

Monitoring

Vaccines will be available for the public

Monitoring Quality Control and Drug Safety




• Sarbanes –Calls for evaluation of internal controls

• COSO Standards–Compliance with laws and regulations

• Federal Sentencing Guidelines–Calls for evaluation of internal controls

• HHS Office of Inspector General –Regulatory-specific standards

–Employee Training–Compliance Audits

Focus on Regulatory Risks and Controls• The vast majority of health care/life science regulatory &

compliance program requirements align with Sarbanes & Internal Audit standards.




How Sarbanes 404 Integrates into your Auditing and Monitoring

• Objectives – Operations– Financial reporting– Compliance

• Components of a 404 Readiness– Monitoring– Information & Communication– Control Activities– Risk Assessment– Control Environment




Finalize Report & Corrective Action

Plan

Education, Remedial Action

Auditing and Monitoring Cycle

ReviewProcess for

Each Risk Area

Conduct Review

Develop ReviewCriteria

Define ReviewSample

Obtain Management

Response

Define Review Scope &

Assumptions

Test Inter-raterReliability with Multiple Reviewers

Document Observations & Findings

ReauditDefine Methodology

Validate Findings



and Compliance CongressContinuous Monitoring Cycle• Monitoring never ends… each review leads to the next, and the monitoring

plan and unplanned issues drive additional monitoring activities. It is a continuous process…


Assumptions


Define ReviewSample

Test InterratorReliabilityConduct Review


Obtain Management

Response

Finalize Report & Corrective Action Plan


Assumptions


Define ReviewSample

Conduct Review


Obtain Management

Response



Assumptions


Define Review Sample

Test InterratorReliability

Conduct Review



Re-audit and add new audits to the cycle

Re-audit and add new audits to the cycle




Practical Considerations Related to Auditing and Monitoring Strategy

• Developing your Auditing and Monitoring Plan– Deciding what to monitor

• Prioritize Risk Areas– Internal Factors, i.e.: any system changes, people changes, new practice,

etc.– External Factors, i.e.: new regulation, national and local enforcement

activity

• Compliance Program evaluation• Identify controls that make the process work : PROCESS AUDIT• Determine overall purpose effective: OUTCOMES AUDIT

– Resources available to execute plan– Consider integration with Internal Audit Plan – Identify timeframes for audits – Communication and Commitment to Plan



and Compliance CongressDeveloping Your Audit Approach

•Deciding the scope– Narrow down the purpose of the audit– Avoid scope creep before you start

•Resources available to execute the audit •Methodology •Sample size determination•Communication/Reporting Results




•Things to Consider:– The purpose of the sample or the review objective– The universe/population/sources of data– The size of the sample– What you are going to do with the results

Sampling Methodologies



and Compliance CongressSampling Methodology

• What should you consider before you decide what your sample size will be?– Who do you expect to share the information with and what is

their frame of reference?– Are you trying to figure out whether there is really a problem?– What is the organization’s perspective on “fixing” problems?– What resources are available to audit this area?– Does Senior Management agree this risk area is important?– What is the worst case scenario if this audit reflects unfavorable

outcomes?

• Attorney/Client Privilege?



and Compliance CongressPurpose of the Sample

•Is the review for:– Self - disclosure?– Education?– Part of an on-going monitoring plan?– Response to the federal government, subpoena,

carrier or FI?– Known risk area?



and Compliance CongressOther Considerations

•Priority– Internal –External

•Timeframe of data collection– concurrent– retrospective

•Availability of data–Manual–Leverage Technology




Tools Pros Cons

Manual Checklists •Low cost•No training required•Easy to customize

•Administration effort (collation of results)•Reporting effort

Excel based Spreadsheets (signoff process administered via email or on central server)

•Low cost•Simple, adaptable•Limited user training•Limited IT involvement

•Ongoing maintenance•Limited scalability•Limited reporting•Many efforts remain manual

Access based Databases

•Low cost•Simple, adaptable•Limited user training•Limited IT involvement•Enhanced reporting options

•Accessibility (not web enabled)•Limited scalability•Training may be required•No transparent dashboard reporting

Web based Assessment Systems

•Increased functionality•Usable for sophisticated, complex cos.•Improved reporting (dashboard)•Scalable

•Technology implementation effort & cost •Significant IT involvement•Ongoing maintenance – security, reporting

Sop

his

ticati

on

of

solu

tion

Leveraging Technology



and Compliance CongressPractical Application : Case Study

• Define Review Scope & Assumptions

• Develop Review Criteria

• Conduct Review

• Document Findings and Observations

• Obtain Management Response

• Finalize Report & Corrective Action Plan

Compliance TrainingCompliance Training

Risk Area Review Process

Managed Care ContractingManaged Care Contracting



and Compliance CongressCase Study

• Define Review Scope & Assumptions– Conduct interviews with Business Process Owners– Review Policies & Procedures– Review Education and Training materials– Document scope & assumptions

• Develop Review Criteria– Test Review Criteria– Enter criteria into database

• Conduct Review– Review documentation– Enter findings into database

• Document Findings and Observations• Query database for exception findings

– Summarize observations– Develop recommendations

• Obtain Management Response– Share findings with Business Process Owners– Obtain reactions to recommendations– Draft a Corrective Action Plan

• Finalize Report & Corrective Action Plan

Compliance TrainingCompliance Training

Risk Area Review Process

Managed Care ContractingManaged Care Contracting



and Compliance CongressCorrective Action Plan

Area of Focus Finding Recommendation Management Action Plan

Acct/Timeframes

1. Contract load 1. 20% data errors in contract load

2. Etc.

Periodically review data entry

Etc.

Develop a periodic review system

Accountable Party:John Smith, VP

Timeframe:2nd Quarter




Admissions

Customer Service

Marketing

Medical Records

Priv

acy

Indu

cem

ents

Privacy Notice

Employee Training

Complaints

Employee Discipline

Authorizations

Minimum Necessary

Access to Records

Amendment of Records

Confidential Communications

Facility Directory

Business Associate Agreements

Risk AreaDepartment

Or

•Develop the Report Card

Sample Report Card



and Compliance CongressIntegration into Business Strategy

•Use monitoring findings to develop and document ROI

•Assist the business process owners to identify root cause of findings

•Use corrective action to enhance efficiency and mitigate risk

•Organization-wide (vs. silo) allow program leverage



and Compliance CongressSummary

• An effective Auditing and Monitoring approach provides a method to:– Assist in identifying risk to the business that may have been

otherwise undetected internally– Assist by identifying if the controls developed to remediate a risk

are working and have actually helped to mitigate the risk– Assist with preventing a real and/or potential risk from escalating

by early detection through auditing which may help avoid additional harm to the company’s business

– Provides a “good faith” organization the ability to approach their real and/or potential risk weaknesses with a reasonable, scaleable method

• Auditing and Monitoring is a critical element for an effective compliance program which helps to drive compliance and behavior.




Karen R. Lines, Esq.Associate General CounselGenentech, Inc.South San Francisco, [email protected](650) 225-8673

Ms. Lines is Associate General Counsel with Genentech, Inc. in South San Francisco, California. Genentech, Inc. is a biotechnology company that discovers, develops, manufactures and markets human pharmaceuticals for significant unmet medical needs. She manages a team of lawyers responsible for providing legal advice and guidance to Genentech’s commercial organization. In the past few years, much of her focus has been on leading ongoing efforts to enhance Genentech’s Commercial Compliance Program. She began her legal career in private practice in Wilmington, Delaware. Ms. Lines is admitted to the practice of law in California, Delaware and Pennsylvania.

Sheryl Vacca, CHCWest Coast Practice LeaderLife Sciences and Health Care RegulatoryDeloitte & Touche LLP(714) [email protected]

Ms. Vacca is the West coast Leader for Deloitte & Touche’s National Life Sciences and Health Care Regulatory practice. She has assisted several life science companies develop their compliance programs, investigations, perform risk assessments and develop auditing and monitoring plans for the compliance department. She has significant experience consulting with life sciences and health care organizations on compliance issues including self disclosure, writing plans of correction, implementing systems in response to plans of correction, implementing QA systems and general regulatory compliance.

©2004 deloitte development llc. all rights reserved. 2004 pharmaceutical regulatory and compliance...

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