Corporate Governance Reforms
The firm, principally in connection with its derivative litigation, has been instrumental in the design and implementation of cutting-edge corporate governance and compliance reforms tailored to address specific compliance failures and weaknesses at major Fortune 500 companies, with particular emphasis in recent years in connection with the pharmaceutical industry. The firm, for example, working closely with industry experts, has played a leadership role in major derivative litigations against directors and officers of Johnson & Johnson, Eli Lily & Company and Schering-Plough Corporation.
These actions reflected a host of problems related to different aspects of business, which include the failure to comply with Food and Drug Administration (FDA) mandated current Good Manufacturing Practices (cGMP) requirements at production facilities, illegal sales and marketing of products beyond the scope of the FDA warning label indications, and the failure to warn physicians and customers of known risks from the use of company drugs. These issues resulted in, among other problems, plant closures and massive product recalls, the failure to obtain timely FDA approval to market a critical “next generation” drug, and the imposition of hundreds of millions of dollars in regulatory sanctions, fines and penalties.
The firm, working with sophisticated industry experts, actively investigates the areas of corporate governance and compliance weaknesses that led to the regulatory problems and concomitant alleged breaches of fiduciary duty and then designs and negotiates best-in-class compliance systems and processes, tailored to work within the business structures and constraints of each company, with the goal to aggressively identify and correct potential future issues before they become risk management problems or regulatory black-marks leading to fines, reputational injury or massive tort exposure.
Examples of the tailored governance and compliance programs the firm has been instrumental in designing and implementing include a medical risk management (MRM) program designed to operate from the individual product level up through independent channels to the Board. Trained Product Safety Physicians (PSPs) were assigned to every product marketed and in development, with responsibility for safety issues throughout that product’s life cycle, including related to all FDA labeling decisions. PSPs report directly up through the independent medical channel to the Chief Medical Officer (CMO), who, in turn reports directly to the Science & Technology Committee of the Board, which is expressly tasked with oversight of the MRM program. The PSPs are also responsible to coordinate with the Vice President-Global Patient Safety, who reports to the CMO, is responsible for all scientific analysis and interpretation of data and studies and surveillance relating to product utility and safety, derived from investigation within the company through all phases of pre-clinical and clinical development, as well as all pharmacovigilance and pharmacoepidemiology activities relating to the company’s products and product candidates. To help insure the integrity of the medical risk management program, comprehensive documentation of all communications relating to the investigation, analysis, interpretation and communication of safety issues relating to the product are required to be maintained within approved computerized documentation archives in accordance with established operating procedures.
The firm was instrumental in the design and negotiation of a comprehensive product risk management (PRM) system, to be instituted on a global basis, which will track product issues and questions from the product team level up through the independent quality control system, including mandatory reporting by the Chief Quality Officer to the Board. The PRM system imposes standards for appropriate reporting, escalation, and remediation of issues arising with products, directing such critical factors as the responsibility for development of action plans, parameters for development of and adoption of resolution timelines, documentation requirements, and quality metrics for evaluating issue resolution, including tracking remediation against established timelines.
The firm has also successfully implemented the use of mandatory core objectives, adopted at the Board level and imposing rigorous reporting responsibilities and quality and compliance obligations across the company. To give teeth to such provisions, the firm ensures that adherence to and compliance with such core objectives are factors directly relevant to the evaluation and compensation of company employees world-wide. The firm has also developed detailed Board committee charters that ensure, among other reforms, robust and regular reporting of quality, compliance, medical risk and product risk management issues directly to the Board on a timely basis. The firm has long advocated the elimination of product or business line silos in the quality and compliance arena, pushing for the adoption of global systems which are staffed by independent quality and compliance line employees under the direct supervisory and compensation control of the Chief Compliance and Quality Officers, who themselves have direct reporting responsibilities to the Board, and over which the Board has direct budget and funding oversight responsibility.