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May 27, 2008
International Medical Device Compliance Congress and Best Practices Forum
Managing Compliance Risk in a Global Market:
Better Practices and Clear Accountability for Third Party Relationships and Distributor Management
Moderated by Peter Claude PricewaterhouseCoopers
Introduction of Panel Members PwC Opening to Topic Panel Discussion with Audience Invented Scenarios Final Wrap Up
Agenda
Introduction of Panelists
Marc W. FarleyVice President, FCPA/HCC/Privacy, Office of Compliance, Comprehensive Care & Surgical Care, Johnson & Johnson, New Brunswick, NJ, USA
Daniel J. Garen, Esq.Chief Compliance Officer, Siemens Medical Solutions, Siemens AG, Tarrytown, NY, USA
Sylvain Poitras, Esq.Assistant General Counsel International, Cardinal Health, Rolle, Switzerland
Michelangelo Stefani, Esq.EMEA General Counsel, Covidien Ltd., Luxembourg
David A. StylerDirector, International Operations, Office of Ethics and Compliance, Abbott Laboratories, Abbott Park, IL, USA
Peter Claude (Moderator) Partner, PricewaterhouseCoopers LLP, San Francisco, CA, USA
Ground Rules
The opinions expressed by today’s panelists represent their own opinions and do not necessarily represent the opinions of their employers
Please feel free to interact with the panelists during the session and engage them in discussion
Third Party Relationships and Distributor Management
Commitment to obeying all laws and international conventions
Recent FCPA Investigations/ Settlements/ Cases
Global compliance risk comes in many flavors
The importance of vendors and distributor/customers
How do you manage the many risks?
Better practices and clear accountability
PwC Introduction of Topic
Panel Discussion with AudienceQuestion 1
Assessing risk…how does a company decide the nature/degree of due diligence or monitoring required for one customer versus another?
Panel Discussion with AudienceQuestion 2
What kinds of due diligence should a company conduct before passing a relationship as acceptable for business purposes and what should they look for (“red flags”) in their review?
Panel Discussion with AudienceQuestion 3
When is it best to involve a third party to provide input or assistance to the diligence process?
Panel Discussion with AudienceQuestion 4
Once a relationship has been passed, what kind of protocol should be put in place to re-review customers?
Panel Discussion with AudienceQuestion 5
Which risks in distributor relationships are better managed by corporate level activity or regional level activities vs. local company activities?
11International Medical Device Compliance Congress
Covidien & Third-Party Relationships Requirements
Covidien requires that all International Distributors, Sales Representatives, Consultants and Resellers that Covidien retains must:
Be qualified to represent, sell or promote products and services;
Have a reputation for professionalism that will reflect well on Covidien;
Be honest and ethical in their business dealings;
Be transparent in providing information to Covidien in connection with the sale of products and/or performance of services for Covidien;
Comply with all applicable laws, including the laws of the countries in which products will be sold and/or services will be provided; and
Receive only reasonable compensation that is consistent and commensurate with the services provided to Covidien.
12International Medical Device Compliance Congress
Covidien’s Commitment to Compliance
Establishing compliance with the FCPA and Ethical behavior:
Due Diligence: Perform due diligence with third party agents, distributors & representatives – Know who are you working with!
Contractual Safeguards: Ask third party agents, distributors & representatives to sign a contract stating that they will NOT bribe foreign officials.
Compliance with Laws, Policies & Procedures: Covidien expects its third-party distributors and agents to comply with all global laws, regulations and Policies.
Each Covidien global business unit has developed its own operating procedures for the retention, operation and termination of third-party distributors and agents.
Panel Discussion with AudienceQuestion 6
How do you train third parties on compliance requirements?
Panel Discussion with AudienceQuestion 7
Given the strategic nature of many distributors/customer relationships in a country and potentially cultural sensitivities, how do you keep them happy when looking closer at them either in diligence or in monitoring?
Balancing cultural traditions with compliance rules?
Panel Discussion with AudienceQuestion 8
What kind of ongoing monitoring should be done over distributor activities?
Invented Scenarios
1. Facilitating payment» New product registrations in Poland may be held up due to an
extremely slow and lengthy process to obtain local licenses and permits.
» Your distributor doesn’t seem to have a problem – your approvals come quicker than the competition’s!
» You know that facilitating payments are a common occurrence but have no evidence they occur.
» What are better practices to respond?
Invented Scenarios
2. Exercising Your Audit Rights
» All your new distributor or agent contracts have audit clauses in them.
» There is a highly sensitive and successful distributor in Country X which is giving you concern.
» Internal Audit has approached you for input into their 2009 plan.
» What are better practices around auditing compliance under your new audit clauses?
Invented Scenarios
3. Purchase Order Relationships
» You are hiring a new distributor in Germany. The distributor representative has stated that they do all their business with Purchase Orders (POs) and do not generally sign contracts.
» You need this distributor for market reasons.
» How can you manage compliance risk in PO-based relationships
Invented Scenarios
4. Transparency in Books & Records
» In Italy, an illegal payment is made by your distributor to the Director General of a government-owned organization to win a contract with the local government.
» The payment is supported by a false invoice that describes services provided by the government-owned organization.
» The false invoice is remitted back to your company and the distributor said it is a "Professional Fee".
Invented Scenarios
5. Refused Training
» You have recently engaged a distributor or a consultant.
» You call to arrange the time for the distributor/consultant to be trained. You are continually put off.
» What are the better practices to respond?
Final Wrap Up
Final Audience QuestionsPanel Summary Remarks
22International Medical Device Compliance Congress
PwC Team
Presenters
Peter Claude, Partner
Pharmaceutical and Life Sciences
T: 415.498.5024
Jean Sands, Senior Associate
Pharmaceutical and Life Sciences
T: 312.298.3026
Team Members
Brian Riewerts, Partner
Pharmaceutical and Life Sciences
T: 410. 659.3390
Chuck Bell, Manager
Pharmaceutical and Life Sciences
T: 646.471.1229
© 2008 PricewaterhouseCoopers LLP. All rights reserved. "PricewaterhouseCoopers" refers to PricewaterhouseCoopers LLP or, as the context requires, the PricewaterhouseCoopers global network or other member firms of the network, each of which is a separate and independent legal entity.
