Interim Chief Compliance Officers for Biotech Companies: An Increasingly Compelling and Credible Option

As the 2016 U.S. Presidential election draws toward a climactic close, biotechnology stocks are taking a beating. Hedge funds reportedly are dumping many of their biotech holdings. Allergan is down over 32% year to date. Why? The fear of uncertainty combined with the fear of a government crackdown on pharmaceutical and biotech companies are two key factors for this investor skittishness. Investors' fears are well-founded and grounded in past precedent. After the 1992 election and Mrs. Clinton's effort to reform health care, an unprecedented regulatory enforcement crackdown on the health care industry began that has continued to this day. With the glare of the election spotlight focused in part on drug pricing controversies, an issue that affects everyone, cutting across political party, economic and demographic lines, post election attention to this issue is highly likely at all levels of government.

Accordingly, regardless of who wins the election, the life science sector and especially biotech companies can expect a post-election regulatory enforcement crackdown. So what should biotech Boards, CEOs and executives do to insulate themselves from this foreseeable enforcement onslaught? As I have written in the past, investing in a sound, appropriately scaled governance and compliance program makes abundant sense in this high-risk environment. The reality, however, for many biotechs, especially in the Boston and San Francisco areas that are either launching or preparing to launch their first commercial products, is that Boards and CEOs have been focused on science and funding, not on commercial compliance requirements. In-house legal counsel likely have a patent and corporate law background, not a commercial compliance one. In short, members of the Board and executive leadership team likely have little or any current experience in the legal risks and requirements of today's commercial compliance needs to market, sell and commercialize a product effectively. For those that may have relevant experience, it is likely dated from the 90's or early 2000's -- but today's compliance and commercial worlds have changed dramatically. Additionally, it is no secret that the DOJ and OIG are specifically targeting start-up biotechs precisely for this reason -- these companies pose easy targets for prosecution with either nonexistent, immature or inadequate compliance programs.

So what can and what should biotech companies do that are "going commercial" to strike the right balance between fiscal efficiency and compliance credibility?

Increasingly, outsourcing by hiring an Interim Chief Compliance Officer has become an attractive and viable option that allows biotech companies to scale-up their compliance program in unison with their commercial operations in a cost-effective yet highly credible way, weaving sound compliance leadership, advice and practices into their commercial DNA from the very beginning.

Gone are the days where a company has to have a full-time compliance officer sitting in its corporate headquarters for twelve months a year. Gone also are the days where the only choice companies have is to either hire an inexperienced, junior but affordable lawyer or compliance professional or select a very experienced and but very expensive former VP Chief Compliance Officer to lead their compliance program. The former option risks ineffectiveness and greater risk, the latter option is usually simply unaffordable.

The alternative to wait and bolt on a compliance program while in the interim hoping to fly beneath the radar in the erroneous belief that start-up biotechs are too small for DOJ prosecutors to notice has been utterly eviscerated as a viable option. Headlines (and weekend comedy shows) have been filled with examples of companies and executives who have attempted to do just that. These ad hoc attempts result in uniform post mortems. The risks of doing so are simply too great -- where CEOs, Presidents and other high-ranking executives could find themselves subpoenaed and in front of congressional committees (forced to take the fifth amendment on the advice of counsel), criminally indicted and facing federal prosecution, and investors losing millions of dollars in the form of fines, corporate penalties and legal fees. These images are clear, vivid, and very real... and are not the outcomes any biotech Board or CEO want on their watch.

The good news is that Boards and CEO's can have the best of both cost efficiency and credible compliance expertise through outsourcing and hiring an Interim Chief Compliance Officer. With tremendous advances in technology that make remote coordination effective and viable, together with significantly enhanced automation of compliance processes and compliance reporting, what wasn't possible 15, 10 or even 5 years ago is very possible and available today. And the best news is that you now have world-class expertise and experience available at a fraction of what a SVP or VP of Compliance would cost with equivalent credentials, and most importantly, equivalent value.

If you'd like to learn more about Interim Chief Compliance Officer and related compliance services please feel free to contact me, Steve Vincze, President & CEO, Trestle Compiance, LLC at [email protected] or at 617-800-3704. I look forward to speaking with you.