The pharma industry is harming itself with a reluctance to disclose bad regulatory news to investors, according to the US Securities and Exchange Commission’s enforcement director.
Speaking in front of a pharmaceutical audience in Washington DC earlier this week, Andrew Ceresney said that companies which neglect to inform the FDA of events that are material to their business in an accurate and timely fashion are leaving themselves open to enforcement action.
This can also lead to individual penalties for senior management figures, said Ceresney, who cited the case of Imaging Diagnostic Systems, which was deemed to have filed misleading statement to the FDA relating to an intention to file for approval of a medical device.
As both the chief executive and chief financial officer were found to have been aware the filing would not occur on schedule, they were fined $150,000 apiece and were barred from serving as officers or directors of public companies.
In another example, biopharma company Immunosyn was charged with fraudulently misleading investors about the regulatory status of a drug product which had been placed on hold by the FDA before the start of phase I trials.
One of the company’s executives had told potential investors that phase II trial would start within three month and approval would come within a year, which prompted enforcement action by the SEC and resulted in a summary judgment last October. Two of the company’s officers are now waiting to hear what penalties they will face.
“The message from these cases is that you need to be completely accurate in recounting your dealings with the FDA,” said Ceresney. “So much turns on those interactions and not being straight with investors will have significant consequences.”
The recent examples reveal that the problems can be avoided by sharing critical FDA correspondence with investors. Disclosing “the remedial steps to which the company agreed, including senior level engagement in investor communications, are the kinds of controls that can pay substantial dividend,” he said.
Ceresney’s speech also highlighted other areas where the pharma industry’s track record in recent years has had room for improvement, including a number of cases involving bribes being given in return for prescribing, positions on a formulary or inducements disguised as charitable donations.
The comments have particular resonance in the wake of a string of allegations of bribery and corruption by GlaxoSmithKline (GSK), Sanofi and other companies in China and other emerging economies.
He cited cases involving Pfizer, Eli Lilly and Schering-Plough (now part of Merck & Co) as US-based examples, and noted that the best way to avoid these violations is through strong, risk assessment-based compliance programmes that include oversight by third parties.
“The pharma industry is one on which we have been particularly focused in recent years,” said Ceresney.