In this Ropes & Gray podcast, moderated by health care associate Michael DiMaio, the co-leaders of the firm's Global Health Care Compliance Initiative, Amanda Raad, Kaede Toh and Alison Fethke, discuss compliance concerns related to the COVID-19 pandemic. They address issues that are top-of-mind for health care and life sciences clients, including shifts in business practices and enforcement risks, and operational challenges such as drug supply limitations.
Mike DiMaio: Hello, and thank you for joining us on this Ropes & Gray podcast. I'm Mike DiMaio, an associate in our health care group, based in Boston. I'm joined by my colleagues Amanda Raad, a litigation & enforcement partner and co-chair of the firm's anti-corruption and international risk practice, Kaede Toh, also a litigation & enforcement partner, and Alison Fethke, health care counsel. On this podcast, we'll discuss compliance issues that are top-of-mind for health care and life sciences clients related to COVID-19, such as shifts in enforcement risks, challenges related to limited drug supplies and possible adjustments to business practices.
For those of you unfamiliar with Ropes & Gray's Global Health Care Compliance Initiative, collaborating across practices and geographies, the Global Health Care Compliance Initiative has benchmarked and implemented global compliance programs grounded in companies. The co-leaders of the initiative span across our global offices, with Amanda based in our London office, Alison based in our Chicago office, and most recently, Kaede joined the initiative and is based in our Tokyo office. We also partner with law firms in six continents and are developing a compendium of local law requirements across key international jurisdictions. We want to specifically welcome Kaede who recently joined this Initiative and bring extensive experience advising multinational companies on international investigations, and in corruption risk assessments, and implementation of compliance and in corruption programs. Thank you for joining us.
Before we begin, we want to note that Ropes & Gray has put together a database of latest news and insights related to COVID-19, available at ropesgray.com/coronavirus or through the ropesgray.com homepage. These lists include, for example, for use of government and agency guidance related to pandemic and its impact on health and safety, as well as discussion of changes of enforcement. Shifting gears to the topic at hand, I wanted to poll this group on what you're seeing as the biggest impact of COVID-19 among our life science and health care clients. What issues are top of mind for your clients? Alison, would you like to kick us off and discuss what you're seeing in terms of how companies might be changing their business practices in response to the COVID-19 pandemic?
Alison Fethke: Thanks, Mike. In my discussions with life sciences and health care clients of late, we've had lots of different topics to tackle, including changes to virtual sales models with everyone shutting down their offices and shifting to stay-at-home, also changes to patient support offerings in an effort to try to meet greater patient needs, and also increased demand for charitable giving. Companies are really thinking hard about how they adapt their everyday business practices to this new normal where the ways in maintaining contact with our health care provider customers and with patients can be very challenging. In some of the questions that I've talked about with clients, we really had to think about whether or not changes that are being proposed are needed in order to respond to the pandemic, whether they're targeted, whether they're necessary and they actually assist customers or patients. And sometimes, we've assessed challenges that might actually result from a desire to ease restrictions on current practices, and this could be seen as just an opportunity to change a past business practice as opposed to something that really is related to the pandemic.
Mike DiMaio: What are you seeing as the biggest risks during this time?
Alison Fethke: Specifically, two areas where we've had conversations are grants and donation requests, and patient assistance – I think this is no surprise given what's going on. With respect to grants and donations specifically, companies are certainly getting more requests for charitable donations, and they want to meet that need. They want to be a good partner to their community, and to the health care community and to patients, and so they are in some cases expanding budgets where possible. In other cases, they are expanding the types of requests that they might accommodate. I think it's important in these cases to the extent possible, even with different business models and practices going on internally, to try to follow your normal grant and donation process in terms of receipt and review. An example of a different type of request that a life sciences client might get is a request to help fund a donation for personal protective equipment, either directly with product for a medical device company or through a funding request for other companies. This isn't the type of thing that would normally have been done in the past, but certainly is something that's happening more frequently now. One recommendation we've given is to have a specific policy or written statement on how the company is supporting these charitable endeavors in the time of the pandemic and what specific needs are being met. For example, in the past, a life sciences company might not have made direct donations to hospital clients if they're a typical client. But certainly, things have changed, and I think there is more flexibility given what's going on in the world. However, it's important to keep in mind that the basic principles of bribery and kickbacks haven't changed, and so some things really should continue to be avoided. For example, general funding donations to customers not for specific purposes, or general funding donations for patient advocacy organizations not earmarked for a specific purpose as well.
With respect to patient support, this is another area where we've had lots of conversation. Here again, an expansion of offering should be really targeted to meet the need that patients are facing right now related to the pandemic. It's not an opportunity to just expand, for example, financial subsidies to patients, even though some patients certainly may be experiencing challenges in this time. For example, expanding a free drug program to accommodate newly unemployed patients would certainly make good sense. Additional offerings for virtual education programs might make sense as well, but again, it's important to make sure that your restrictions on things like direct patient subsidies remain in place, or if they are being discussed, there is a really thorough vetting of these types of requests.
Mike DiMaio: Great. Thanks, Alison. Kaede, would you like to discuss drug supply limitations in Japan due to reliance on China?
Kaede Toh: Sure. Thank you, Mike. In Japan, as well in many countries around the world, we're seeing big strains on supplies. Japan depends very much on importing medical supplies, especially from China. Just by way of example, Japan imports approximately 50% of the ingredients used to manufacture generic drugs, including from China and South Korea, Japan imports about 80% of its masks from China, and Japan imports more than 90% of its ventilators primarily from the U.S. and Europe. And as we're seeing, the pandemic has snarled the customs procedures globally. I'd also add that a recent survey conducted on 45 domestic drug companies revealed that almost half of the respondents said that their current supply chains would dry up in six months – in other words, before the end of this year. So what is Japan trying to do to address this need? As a means to develop alternative sources and diversify supply chains, the Japanese government has sought to bolster production within the country through assistance from domestic manufacturers in other industries to produce medical supplies. So far, we've seen 400 domestic companies volunteering to help. By dividing a company's sourcing activities between multiple and local suppliers, it helps protect the company's business against supply disruptions to a single supplier. What we're seeing here is that when China's supply chain is impacted, global supply chains are impacted as well, and so the pandemic has forced governments to come up with alternative solutions, as we're seeing here in Japan.
Mike DiMaio: Thanks, Kaede. Amanda, turning it over to you, what types of process changes are you seeing in the industry?
Amanda Raad: Thanks, Mike. Following up on what both Alison and Kaede have started to talk to, process changes are not a matter of choice, but have almost become a matter of necessity because there are all these new and changing business practices that are happening. Going back to grants for a moment, there may not only be new grant recipients that businesses may be considering, but there's also the fact that there may be a really escalated timeline for how quickly a decision needs to be made about whether or not a grant can be approved. The same point following up on what Kaede said, with the supply changes, you may be getting supplies from all kinds of different suppliers and locations, which, of course, bring with it, again, time pressure and urgency. And all of the processes and procedures that companies have built were really designed around obviously moving with deliberate pace, but were designed around the system that envisioned people working largely in the office. Of course, there's remote interactions, but very much office-based, and that's just a different world than we're living in right now. And so most of what I have been working with clients to understand is: First, where are the biggest risks right now as compared to where they were before COVID-19? Once you understand what those risks are, instead of trying to come up with a whole new procedure and really developing a whole new protocol, it's then saying, "Okay, what is the outcome we're trying to achieve, and how can we do that safely, knowing what those particular risk areas are?" If the outcome that we need is to find a way to safely make these grants or donations, or find a way to secure the supply that we need but in order to do so really timely, it may be that the principles that governed our policies and procedures still very much apply, but the actual process for how you seek approval and what the approval timeline looks like looks different.
Some of the processes that exist are very data/information/paper-heavy and there's a lot of back-and-forth exchange of information, which takes time and can be somewhat burdensome. And so there are a lot more conversations happening, which I think is really a positive development in many ways because with conversation comes the ability to actually discuss the business need, the rationale and the decision-making process live in a way that you don't really get when you're going back-and-forth from a paper-chain approval process. And so I think there's a lot more communication happening and I think communication's really important. As Alison said, we have to be careful that we don't just throw caution to the wind and think that we'll get a bypass or an excuse for any issues or challenges that come up during this time because, of course, hindsight's 20/20 and you can always look back and make suggestions that you should have done things differently. But I think by really ensuring that you're focused on the ultimate outcome, what the biggest risks are, and then thinking through how to mitigate those risks and really just talking them through with the right decision-makers speaking to the people that are actually making the proposals, you end up getting to where you need to be.
Alison Fethke: Amanda, just chiming in on that point – once you get to that decision, don't forget, even though you may have moved away from some of the paper-based, more process-heavy structure that you're using when everyone's in the office, that there still continues to be documentation of intent and purpose for these decisions, whether it be expediting a purchasing decision or expediting a grant decision.
Amanda Raad: That's a great point, Alison, and not just of the decision-making process, but also of the new risks that you're facing. I think lots of people are conducting these informal risk assessments of sorts because that's the right thing to do and you kind of have to do it right now, but they may not be documenting them in the same way they otherwise would if it was being done in a more proactive time period where you have a little bit more time on your side. So I think mapping out that whole process from risk identification through to decision-making is really important.
Mike DiMaio: When thinking about risks, what types of flexibility or waivers are you seeing from regulatory authorities on enforced risk?
Amanda Raad: Well, wouldn't we all like a pure waiver? But I think the guidance has been helpful, as helpful as it can be, which is that we are all of course trying to do the best we can. From countries all over the world, you see regulators themselves trying to adapt to the times, not only in how they interact with each other, but also how they work on the cases that they're working on. So I think there's an understanding that things have to be done differently, but by no means have I seen anything that I would call anywhere close to a waiver or a kind of defense, other than to say: Things can be different, but they still have to be done correctly.
Mike DiMaio: Thanks, Amanda. Before we wrap up, we'd like to note that Ropes & Gray's Global Health Care Compliance Initiative has worked with partnering local counsel to develop a compendia of country-specific laws relevant to health care and life science companies and their clients' programs. Sections for several regions have been completed, including Asia, Europe and North America. Please reach out to Amanda, Kaede or Alison for more information. Also, in connection with this effort, we'll soon be launching a new podcast series, On the Ropes: Enforcement Risk Roundtable, which will feature conversations with our local counsel partners across the globe where we'll discuss regional compliance in their jurisdictions, including changes caused by the COVID-19 pandemic – so please stay tuned. In the meantime, please visit our COVID-19 website at www.ropesgray.com/coronavirus for additional information and insights. Please also feel free to subscribe to this series wherever you regularly listen to podcasts, including on Apple, Google and Spotify. Thanks for listening.
Originally published June 4, 2020
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