A digital compliance office can do more than keep biopharma firms out of regulatory hot water

Health Care Current | August 13, 2019

This weekly series explores breaking news and developments in the US health care industry, examines key issues facing life sciences and health care companies, and provides updates and insights on policy, regulatory, and legislative changes.

My Take

A digital compliance office can do more than keep biopharma firms out of regulatory hot water

By Amry Junaideen, national life science and health care leader, Deloitte & Touche LLP

As my colleague Greg Reh noted in his recent My Take, many biopharmaceutical companies are on the cusp of a digital transformation that could push the sector to the next echelon of performance and efficiency. As departments and processes become increasingly digitized, it is important that company leaders not overlook one critical area… compliance.

Compliance touches all aspects of the pharmaceutical business. In addition to reporting to regulatory bodies, the compliance office impacts a wide range of functions within the company. This includes human resources, research and development, finance, patient programs, and communications with patients and health care professionals.

Compliance can be mired in manual processes

Compliance is rarely at the forefront of conversations about digitization because areas that touch customers more directly tend to be higher on the priority list. Moreover, compliance officers often come from a regulatory or legal background where process optimization and electronic processes tend to be rare. It is no surprise compliance operations have long relied on manual processes—and a company’s compliance program is often only as powerful as the number of people assigned to it.

The Deloitte Center for Health Solutions recently interviewed biopharma executives to assess the adoption of digital technology in compliance and to identify potential opportunities. We found that while some companies have automated certain compliance activities, adoption of digital technology is still often in the early stages. By maintaining manual processes in compliance, biopharma companies might not be getting the value they expect from their compliance operations.

C-suite executives should look beyond the traditional role of compliance, which is keeping the company out of regulatory hot water. By automating mundane manual processes that deal with past risks, the compliance office might have greater capacity to identify and avert future risks—and highlight its value to the overall organization. I am not advocating that compliance moves to the top of the priority list as biopharma companies undergo a digital transformation, but it is an area that is too important to exclude from the digital discussion. Perhaps, thinking of compliance as an investment rather than a cost—and quantifying its value in terms of return on investment—can inform this discussion.

What does a digitized compliance office look like?

Digitizing certain processes could help compliance officers become more proactive by helping them understand why a compliance event occurred. This could help them avert similar issues from occurring in the future.

A digitized compliance office is typically more efficient at addressing compliance issues than a compliance office that relies on paper-based systems. Digitizing some manual processes can give the compliance office more time to focus on complex and risk-prone areas. Chief executives should consider a thoughtful, strategic, and enterprise-wide approach that creates synergies between the compliance office and all other departments throughout the entire organization. But it is strategy—not technology—that can drive digital transformation.

While biopharma companies are becoming increasingly digitized, they could be missing a potentially significant opportunity if they don’t include the compliance office. We propose a digital maturity model for compliance to help organizations devise a digital strategy that can reach its full potential. The digital-maturity model consists of three stages:

1. The fundamental stage: This stage involves preparatory work to ensure that existing systems and processes are ready to go digital. During this stage, the digital team should determine how productivity could be impacted by integrating data systems and by simplifying, standardizing, and automating key processes.

Typical technologies: Data integration, traditional analytics, data visualization, automation through Governance Risk and Compliance (GRC) technologies.

2. Insight generation: The goal of this stage is to use digital tools to understand why a compliance issue occurred and to set up a system to prevent similar events in the future. A digitized compliance office should be able to implement continuous controls that can automatically stop processes that can lead to a compliance event.

Typical technologies: Robotic process automation or RPA (rules-based systems that mimic human behavior to automate parts of repeatable processes), advanced analytics, some cognitive technologies such as machine learning (ML), natural language processing (NLP), natural language generation (NLG), chatbots.

3. Power of foresight: At this stage, the role of compliance is transformed. Predictive intelligence helps compliance officers anticipate and thwart potential compliance issues before they occur. Compliance principles and checks are seamlessly integrated in business processes. The compliance office is able to transition away from mundane processes and focus most of its attention on developing new ways of generating value, such as identifying new market opportunities and operational efficiencies.

Typical technologies: Cognitive technologies (e.g., artificial intelligence, ML, NLP, NLG) that can analyze large amounts of unstructured, semi-structured, and structured data from multiple internal and external sources; risk sensing; behavioral analytics; the ability to make predictions by connecting signals from discrete data points that in isolation do not represent risks but collectively signify a pattern indicative of a risky behavior or process.

If it ain’t broke… you can still fix it

Drug manufacturers might spend more than $2 billion—and encounter myriad compliance hurdles—to bring a new drug to market. I expect that regulatory demands will likely continue to grow, which will increase demands on compliance officers. Rather than adding more people to keep pace, company executives should include compliance as they digitally transform other processes.

The promise of improved efficiencies and cost savings might not be enough to convince some company leaders to invest in a digital compliance platform. Even if they are able to see the potential benefits, they often don’t want to invest in new processes, particularly if existing processes are getting the job done. But C-suite executives should consider what role compliance could play going forward and whether the current level of investment is enough to get there.

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In the News

Medicare IPPS final rule boosts hospital inpatient payments for CAR-T and other new therapies

On August 2, the US Centers for Medicare and Medicaid Services (CMS) finalized the Medicare Hospital Inpatient Prospective Payment System (IPPS) and Long Term Acute Care Hospital (LTCH) Prospective Payment System rule for 2020. In the final rule, CMS called for a net increase of 3.1 percent for hospital inpatient payment rates—the highest increase in a decade—which will boost total IPPS payments by roughly $3.8 billion. The rule also calls for $8.4 billion in Medicare Disproportionate Share Hospital (DSH) payments in 2020—$78 million more than in 2019.

The rule changes the way low-wage index (mostly rural) hospitals are paid by increasing the index for hospitals that are below the 25th percentile. This will result in an increase for the lowest wage index hospitals. However, because the policy is budget neutral, it will result in a wage index decrease for hospitals above the 75th percentile. CMS also addressed what it considers to be an “inappropriate” reclassification of hospitals from urban to rural by removing rural reclassifications from the rural-floor wage-index value beginning in 2020.

In the rule, CMS also finalized its proposal to increase add-on payments for new technologies such as Chimeric Antigen Receptor T-cell (CAR-T) therapies and certain innovative medical devices and antibiotics. CAR-T therapy is a form of cancer treatment that uses a patient’s own genetically modified immune cells to fight disease. Treatments can cost as much as $300,000. Medicare currently covers up to half of the cost of CAR-T and other new technologies. Beginning in 2020, the maximum add-on payment will increase 65 percent (75 percent for new antimicrobials). Additionally, starting in 2021, medical devices that are approved via the Breakthrough Devices Program will go through an alternative, expedited payment pathway. The goal of these proposals is to speed access to new treatments for Medicare patients.

(Source: CMS, Fiscal Year (FY) 2020 Medicare Hospital Inpatient Prospective Payment System (IPPS) and Long Term Acute Care Hospital (LTCH) Prospective Payment System (CMS-1716-F), August 2, 2019)

Related: On August 7, CMS announced that it would cover CAR-T therapies for Medicare patients if they are administered in facilities that follow specific safety rules known as Risk Evaluation and Mitigation Strategies (REMS). CMS will cover CAR-T treatments for approved indications (so far, non-Hodgkin’s lymphoma and B-cell precursor acute lymphoblastic leukemia) and off-label uses, which are set by compendia (external sources of expertise on medically accepted indications). Earlier this year, CMS proposed only covering the therapy if it was administered to patients whose previous diagnoses returned or who failed other treatments (see the February 26, 2019 Health Care Current). The agency also would have required that the treatment be provided in a hospital setting. REMS facilities include additional settings such as clinics and oncology practices.

CMS’s latest announcement means that hospitals will no longer have to participate in clinical registries or studies to administer the therapy, which the original proposal required. Finally, instead of requiring hospitals to submit additional long-term outcomes data about patients who receive the treatments, CMS will rely on post-market data submitted by CAR-T manufacturers.

(Source: CMS, Decision Memo for Chimeric Antigen Receptor (CAR) T-cell Therapy for Cancers (CAG-00451N), August 7, 2019)

CMS issues new rules to help states manage opioid use in Medicaid

On August 5, CMS released new guidelines outlining changes to its Medicaid Drug Utilization Review (DUR) provisions. The guidance requires states to implement a minimum set of drug-review and utilization standards for opioid use within Medicaid programs by October 1. These provisions are meant to supplement existing Medicaid DUR requirements to further reduce fraud, abuse, and misuse related to opioids. Under the new rules, states will also be required to:

  • Implement prospective drug reviews (also known as safety edits) and claims-review processes to set and monitor opioid prescription limits, maximum daily morphine equivalents (MME), and concurrent use of opioids and benzodiazepines or antipsychotic drugs.
  • Set up processes that monitor and manage the appropriate prescribing and use of antipsychotic medications by children enrolled in a state’s Medicaid plan. States will also be required to submit an annual report of program activities that focus on children who live in foster care.
  • Create a process to identify and monitor fraud and/or abuse of opioid substances by Medicaid beneficiaries, providers, and pharmacies.

States have until December 31 to submit plans to CMS outlining how these requirements are being incorporated. They are encouraged to provide trainings for clinicians on the new provisions.

(Source:, State guidance for implementation of Medicaid drug utilization review (DUR) provisions included in Section 1004 of the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act (P.L. 115-271), August 5, 2019)

Wisconsin moves closer to expanded Medicaid

On August 5, several Democratic lawmakers from Wisconsin announced plans to introduce a standalone bill to expand the state’s Medicaid eligibility to 133 percent of the Federal Poverty Level (FPL), as called for by the Affordable Care Act (ACA). According to Governor Tony Evers (D), about 82,000 of the state’s residents—half of whom are uninsured—would qualify for the expanded program. Wisconsin is one of 14 states that has not expanded its Medicaid program.

(Source: Wisconsin State Journal, Wisconsin Democrats try again for Medicaid expansion, August 6, 2019)

New Jersey prepares to transition to a state-based insurance exchange

New Jersey is seeking permission from CMS to continue its use of the federal platform this fall as it transitions to operating its own insurance exchange beginning in November 2020, according to the New Jersey Department of Banking and Insurance. In June, Governor Phil Murphy (D) signed legislation that would allow the state to establish a state-based insurance exchange in time for next year’s open-enrollment period for the 2021 plan year. For the upcoming enrollment season, New Jersey residents will continue to use for buying coverage. In the first quarter of 2019, 223,000 people in New Jersey were covered by a policy purchased through—down 6.7 percent from the same period a year earlier. States that use the federal platform pay 3.5 percent of premiums collected to the federal government. Washington, D.C. and 11 states operate their own insurance exchanges.

(Source: New Jersey Department of Banking & Insurance)

Breaking Boundaries

The technology that keeps your kids hooked on Fortnite could also improve drug discovery

Biopharma companies should be interested in ways to evolve traditional high-risk, high-cost drug discovery and development. The cost to bring a drug to market has skyrocketed over the past several years—from $1.1 billion in 2010 to more than $2.1 billion in 2018, according to Deloitte’s annual analysis on measuring the return on pharmaceutical innovation. Could virtual reality help speed development and lower costs?

C4X Discovery, a biopharma company based in Manchester, England, recently released a video that shows how researchers can use a VR headset to immerse themselves in a world of molecules and proteins. This augmented experience is a more comprehensive way to understand the structure and function of molecules and proteins and how they interact. The team built a VR program that uses a platform similar to the one used for the popular video game Fortnite (video game developers actually helped develop the program). It turns out that getting researchers to perform the same tasks over and over in drug discovery is similar to keeping kids engrossed in their video games. It has to be fun and intuitive. Using VR, researchers can deepen their understanding of the shape and behavior of the molecules and proteins and come up with new ways to effectively pair the right drug molecules to target proteins in the body. As simulations become faster, researchers might be able to develop new drugs more quickly. C4X is seeing positive results from an addiction drug that is entering clinical trials.

At the other end of the drug-development spectrum, some companies are looking for ways to use VR to market new drugs once they become available. VR is seen as a tool that could help educate consumers about diseases and treatments. It could also be used to communicate treatment options to physicians. VR, for example, might allow users to take a ride through the body's blood stream, see a drug's mechanism of action, or feel what it's like to live with the symptoms of a disease. Such technology might help a patient understand the long-term effects of a disease.

The goal of VR marketing is to translate immersion into engagement. Engagement might differ depending on the condition. For example, simulating vision problems could help people understand the effects of certain eye diseases. However, immersion might have less relevance for diseases that don’t directly impact the senses. Still, some biopharma companies seem willing to experiment with VR to promote new products to consumers and health care providers, and to revitalize older brands.

Related: Deloitte’s paper, Tackling digital transformation: How biopharma companies can realize the power of digital and prepare for a new reality, shares findings from a four-day online crowdsourcing simulation with leaders from the biopharma sector. We found that biopharma companies are getting closer to incorporating digital technologies more broadly in everything from research and development (R&D), to supply chain, to patient engagement. In research, companies are applying artificial intelligence (AI) and computational biology to drug discovery and development. The technologies are also being used to make clinical trials much more efficient. With supply chain, technologies such as sensors, robotic process automation (RPA), blockchain, and advanced analytics could enable greater product visibility, traceability, and inventory control. For companies trying to take a more patient-centric approach, digital technologies—combined with behavioral science principles—could help improve patient engagement.

How can companies leverage the promise of digital? The Deloitte research shows that each biopharma company should chart its own course. The first step is to establish an ambition and execute against it. Our research suggests that companies often need five key competencies to get to the future state: advancing scientific knowledge through access to new data sources, applying the principles of behavioral science to improve patient outcomes, establishing an enterprise architecture structure, developing predictive analytics and AI capabilities, and enabling cultural change.

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