This is on-topic here — in a Merck focused blog — inasmuch as the settlement represents a sea-change (my earlier immediate reactions here) — one all of big pharma is likely to soon face — or at least all of big pharma with one (or more) corporate integrity agreement(s) (or CIAs, for short) in place (which is essentially all of big pharma, anyway!):
As I pointed out in response to comments in other fora, in In Re Caremark (based on personal knowledge), no directors were named to the compliance committee function, itself. The compliance function there simply reported to the audit committee of the board, which then reported to the board. Subsequent CIAs (think legacy Schering-Plough, and by dark inheritance, New Merck, here) required that the compliance leader report to the CEO, or even to the board chairman. But I am aware of nothing like this in Caremark — or any subsequent settlement/CIA. Anyone else?
Specifically, in this weekend’s Pfizer shareholders’ derivative action settlement (see page 33 of that 71 page PDF file), a whole new board committee — a majority of which must be independent (under NYSE standards) — called a Regulatory Committee is chartered.
Each of the five required board members sitting on that committee — to the same extent as would obtain under Delaware corporate law generally, is now personally responsible for negligence — in ommissions, or failures to detect, or failures to adequately police, the policies.
Prior to this weekend, I am aware of no CIA or similar agreement where a sitting board member is directly charged with regulatory compliance — as opposed to simple oversight, and concomitant receiving of reports. See, here — from the December 2, 2010 memo of law supporting the proposed settlement:
. . . .[Pfizer] will create a new “Regulatory and Compliance Committee of the Board of Directors” that will operate for a term of at least five years – and to be continued thereafter following a decision of the Board upon the Committee’s recommendation – with a broad mandate to oversee and monitor Pfizer’s compliance and promotion practices. The Committee will meet quarterly and provide a full report to the Board at least annually, and is specifically charged with evaluating whether there are patterns of improper promotional activities that suggest widespread misconduct or improper positioning of Pfizer drugs. . . .
The Regulatory Committee will receive extensive and detailed information related to potential drug marketing issues, and enjoys substantial authority to act and follow up on the information and issues that come to its attention. The proposed settlement also ensures that the Regulatory Committee will have adequate expertise and authority to effectively engage in its oversight responsibilities. The Committee has the authority to meet privately with any Pfizer employee, to compel management to conduct special healthcare compliance audits, and to retain outside experts, consultants and counsel independent of the Company and management to assist it in evaluating Pfizer’s drug promotional activities. . . .
The Regulatory Committee will be truly independent from management. As part of the settlement, Defendants are causing their insurers to finance a $75 million fund that, after the payment of any award of fees and expenses to Plaintiffs’ Counsel, will be used for the sole purpose of funding the Committee’s activities. If any funds are remaining after the five-year term, they will be returned to the insurance carriers; if the fund is exhausted during the Committee’s initial five-year term, additional funding will be provided by Pfizer upon the Committee’s request. . . .
I am aware of no other large-cap pharma company that even has a purely-regulatory committee, at the board of director level, let alone one with a $75 million “funded mandate“. This is a big deal — and it should be, given Pfizer’s repeated-offender status — on these dimensions.
Anyone wish to offer their $0.02, here?