Key Takeaways from Recent Regulatory Guidance

General Counsel, outside counsel, compliance executives, representatives of regulatory bodies, and forensic practitioners discussed an array of issues at the 19^th Annual FCPA & Anti-Corruption for the Life Sciences Industry conference in New York City from May 9^th to 10^th 2024. The following highlights some of the topics discussed.

Ephemeral Messaging and Off-Channel Communications

• • Ephemeral messaging, also known as self-destructing messaging, refers broadly to any messaging software that automatically erases conversation history between users (whether by default or through settings). Off-Channel Communications refers to company-related communications on a platform not subject to company preservation or monitoring policies.
  • While the SEC has a long-standing policy regarding communications for broker-dealers, life sciences companies are not subject to the same record keeping regulations. However, the increased government scrutiny around off-channel communications is causing companies across all industries to reassess their compliance policies.
  • The DOJ is increasing its enforcement focus on off-channel communications. DOJ recommends that robust compliance programs include policies around the use of personal devices and third-party communication platforms. Since 2019, the DOJ has offered companies up to a full remediation credit under the FCPA Corporate Enforcement policy based on the company’s ephemeral messaging policies and procedures.
  • In March 2023, the DOJ provided additional guidance on their evaluation of compliance programs. Specifically, the DOJ will consider the design (risk assessment and policy and procedures), effectiveness (auditing and monitoring), communication (training), enforcement (investigation and remediation), and whether the company has empowered compliance with appropriate resources, both financial (headcount and systems) and practical (autonomy and management support).

Anti-Corruption Crackdown in China

• • Recently, the Chinese government significantly increased its enforcement of anti-corruption laws, specifically in the healthcare space. The renewed focus is a result of increased medical costs, reduced government funds post-COVID, and widely publicized corruption within the life sciences and healthcare industry.
  • As a result of this crackdown, activities once considered to be foundational to the industry are being pursued, including hosting academic conferences, engaging Healthcare Professionals (HCP) as consultants for speaker programs and hospital visits by sales representatives.
  • To mitigate the risks associated with the crackdown, companies must work on reviewing and updating policies and procedures around documentation of expenses, pre-approval processes for HCP spend, documentation of meetings or calls with regulators, and increasing the frequency of monitoring activities and compliance audits.

DOJ Voluntary Disclosures, Prompt Reporting, and M&A Safe Harbor

• • Companies that voluntarily self-disclose misconduct and provide “extraordinary” cooperation and remediation may be eligible for declinations, even with aggravating circumstances. While the DOJ does not define “extraordinary,” former Assistant Attorney General Kenneth A. Polite noted four factors to be considered when evaluating “extraordinary”: Immediacy, Consistency, Degree, and Impact.
  • In April 2024, DOJ announced the Pilot Program on Voluntary Self-Disclosure for Individuals. Under this program, individuals may receive a non-prosecution agreement if they voluntarily self-disclose previously unknown information about certain types of criminal misconduct. The individual making the disclosure cannot be a CEO or CFO of a public company and the offenses must relate to certain types of violations, including foreign corruption or bribery.
  • In October 2023, DOJ announced a new safe harbor policy for voluntary disclosures of misconduct discovered by an acquiring company during an acquisition. To be eligible, the acquiring company must self-report the misconduct within 6 months from the closing date and the misconduct must be fully remediated within one year.

For further information and discussion on these points or other enforcement updates, please contact us.