Ethics and Compliance Structure and Programs

Baxter designed and updates its ethics and compliance structure and programs regularly to reflect the needs of a diversified and complex global healthcare company. Additionally, the company manages a range of programs and activities to help employees make good decisions about appropriate behaviors in the markets in which they operate.

Corporate Responsibility Office

The Corporate Responsibility Office (CRO), established by Baxter’s board in 1993 and composed of six senior executives, is responsible for communicating the company’s ethics and compliance standards, providing guidance and overseeing training to employees and directors, maintaining multiple channels for employees to report concerns, and monitoring compliance. The CRO, which meets at least every quarter, reports to the board's Public Policy Committee and reports on financial matters to the board's Audit Committee (see graphic). Baxter was one of the first companies to establish a direct reporting relationship between its CRO and its board, ensuring ethics and compliance oversight at the highest level.

The company has since established Regional Ethics and Compliance Committees to implement the CRO's charter globally and enhance corporate understanding of local cultures, values and behavioral norms. Membership in the Regional Ethics and Compliance Committees rotates to ensure broad employee exposure and participation. The company also has dedicated compliance and legal resources in each of its global regions: Asia Pacific, Europe, Middle East and Africa (EMEA), and Latin America and Canada. At the business level, the company also has established similar governance structures for its BioScience and Medical Products businesses, bringing together a cross-functional group of commercial and functional leaders to enhance the effectiveness of Baxter’s compliance program.

Corporate Audit conducted six audits (three in EMEA, two in Latin America and Canada, and one in Asia Pacific) that reviewed the implementation status of Baxter’s International Interactions with Healthcare Professionals, Medical Institutions and Non-Profit Organizations.

Certificate of Integrity and Compliance

Each year, Baxter requires executives, mid-level supervisors, sales representatives and other selected employees around the world to reaffirm their commitment to the company's ethics and compliance standards by completing and submitting a Certificate of Integrity and Compliance (COIC). The COIC also serves as a reporting document that measures the integration of ethical business practices throughout Baxter. In 2011, more than 14,500 employees who have manager or greater-level responsibilities completed the COIC, which is available in 12 languages.

Legal and Regulatory Compliance Training

Baxter requires employees worldwide to take Web-based training on legal and regulatory compliance. In 2011, more than 37,400 employees completed more than 103,900 e-Learning courses covering areas such as product complaints, pharmacovigilance, adverse-event reporting procedures, workplace violence prevention, data privacy, trade compliance, requirements for selling to the U.S. government, the Foreign Corrupt Practices Act (FCPA), antitrust, intellectual property, and Baxter’s ethics and compliance standards. Baxter’s Ethics and Compliance group and Legal department also conducted 442 classroom sessions around the world in 2011 to train a total of 13,844 employees on Baxter’s ethics and compliance standards and supporting policies.

Also in 2011, Baxter continued to implement its risk-based anticorruption education program to provide awareness-level training to most employees, and more advanced training to employees who regularly interact with government officials and healthcare professionals. In 2011, Baxter conducted more than 300 international anticorruption training sessions, reaching over 9,500 employees in targeted positions, and more than 100 U.S. healthcare compliance training sessions to more than 4,000 employees.

Relationships with Healthcare Professionals and Government Officials

As government spending on healthcare as a percentage of gross domestic product or per capita income has increased in the United States and abroad, governments are seeking ways to reduce pressure on their budgets while maintaining current or improved levels of healthcare delivery. At the same time, healthcare companies face the perception that their marketing programs and R&D and production costs are significant factors in increasing healthcare costs. With this additional scrutiny, companies such as Baxter reinforce the importance of transparent relationships with healthcare professionals. This includes anticorruption programs that work to ensure that those relationships and related payments are for necessary and bona fide services. As a company dedicated to making a meaningful difference in patients’ lives, Baxter’s integrity in this area is paramount.

Physician Payment Disclosure/Sunshine Act

Beginning in 2013, companies operating in the United States that manufacture covered drugs, devices, biologics and medical supplies will be required to report to the Centers for Medicare and Medicaid Services (CMS) all payments (such as consulting fees, travel and lodging, meals, education grants and royalties) provided to U.S. healthcare professionals (HCPs) and healthcare organizations (HCOs) that total more than $100. As an example, Baxter makes payments to physicians who serve as investigators in clinical trials and collaborate on other R&D initiatives to compensate them at fair market for needed work done on the company’s behalf.

In response to the Sunshine Act, which was passed into law as part of U.S. healthcare reform 2010, Baxter implemented a program to address all applicable requirements and to help ensure compliance. While the U.S. government will disclose the reporting period later in 2012, as of January 1, Baxter started collecting all payments and other transfers of value given to U.S. HCPs and HCOs. Additionally, Baxter has updated all applicable Baxter policies to include mandatory requirements, and all U.S. company employees were required to complete training to understand the law, Baxter’s updated systems and policies, and their individual role in ensuring compliance.

International Anticorruption Activities

During 2011, Baxter’s Ethics and Compliance team, working closely with other groups and functions in the company, continued to develop additional, innovative tools and approaches to conduct periodic assessments and reviews of Baxter’s global operations with regard to key corruption risks. In 2011, Baxter conducted such activities with regards to its operations in Brazil, Colombia and Mexico in Latin America; Australia, China, India, Japan and Taiwan in Asia Pacific; and Czech Republic, France, Greece, Italy, Portugal, Saudi Arabia, Switzerland and Turkey in EMEA. Results of the assessments have shown continued progress in awareness, understanding and implementation of Baxter’s anti-corruption programs.

Also in 2011, Baxter continued global execution of its International Anticorruption Third Party Policy, with particular emphasis on business partners who interface with non-US healthcare professionals and government agencies in activities such as, but not limited to the approval, registration, promotion and sales of Baxter’s products and therapies.

This multi-facetted program includes a robust process to conduct due diligence on such business partners, as well as to retain and train them with respect to anticorruption laws and Baxter’s standards and expectations. The success of the Third Party program relies on extensive, ongoing collaboration between the Ethics and Compliance, Legal and Business teams, as well as externally with Baxter’s business partners.

Because anticorruption efforts can be impeded or enhanced by others in the industry, Baxter also is committed to establishing and improving industry codes of conduct and enhancing ethical behavior across the healthcare industry.

In 2011, Baxter continued to work with Eucomed and AdvaMed on a European approach to third party anticorruption efforts, helping to create a standard industry approach. Additionally, Baxter’s China ethics and compliance team made progress with the Chinese industry association, RDPAC on advancing an industry-wide ethical sales and marketing code. Industry members of RDPAC would be expected to follow that code of ethics and apply it in their daily interactions with healthcare professionals and government officials. Baxter also continues to evaluate how broader anticorruption initiatives such as the UN Global Compact, World Economic Forum Partnering Against Corruption Initiative or the Organisation for Economic Co-operation and Development Principles may complement the company’s approach.

Trade Compliance

As part of Baxter’s commitment to integrity and compliance in its business relationships, the company revamped and re-launched its global trade compliance policy, identified and trained trade compliance officers globally, and established tools and processes to screen for, and address trade compliance risks. The company also re-launched its Export Control and Economic Sanctions training course. Key employee groups are required to complete this course, which is intended to raise awareness about global export controls and economic sanctions, and their impact on Baxter, its employees and customers. The course also focuses on Baxter's policies and procedures, as well as the responsibility of employees to ensure compliance in this area.

Data Privacy and Security

In the course of business, consumers, patients, plasma donors, healthcare professionals, employees and others share personal information with Baxter. Privacy laws and our global privacy policy, adopted in 2010, require the company to protect this information. The company’s policy defines Baxter’s privacy standards and ensures that all of the company’s global operations follow similar controls for protecting the personal information of Baxter stakeholders. In 2011, all employees in the United States completed an online training course on the policy. As part of a phased approach, employees in other countries will be required to complete the training in 2012.

Baxter’s global privacy program includes a Global Privacy Council and a network of Local Privacy Owners (LPOs).The council manages and oversees the protection of personal information companywide while the LPOs are responsible for privacy compliance in their respective countries. Canada, the United States and all countries in Europe had LPOs in place by the end of 2011. The company began to introduce the privacy program in the Asia Pacific and Latin America regions in the latter part of the year as well.

Closely aligned with data privacy is information security. Baxter’s Information Technology (IT) Risk Governance Board meets quarterly to ensure appropriate accountability and decision-making relative to IT risks. In 2011, Baxter established a cross-functional Information Governance Council to prioritize organizational response to security, privacy and legal information risks. The company has also established a robust Information Protection program, complete with global policies, organizational awareness and compliance systems, to enforce appropriate use and protection of Baxter information and technology. For example, Baxter deployed an Information Classification and Trade Secret Policy in 2011 that was translated into 14 languages and communicated to and acknowledged by all employees via a mandatory e-training course. In 2012, Baxter is implementing additional security technologies to identify and protect sensitive electronic files and data , while extending its capability to log, monitor and manage information sent via e-mail and other network transit. This investment will help strengthen the company’s security capabilities and support its commitment to protect the best interests of customers, employees, management and other stakeholders.

Advertising and Promotion

The U.S. Food and Drug Administration (FDA) and other agencies worldwide regulate the advertising and promotion of pharmaceuticals, medical devices and biologics. Included in FDA’s oversight are print and broadcast advertising, websites, press releases, sales brochures, scientific symposia and convention booths, among other promotional materials and activities. Baxter’s Advertising and Promotion staff manage the company’s compliance with promotional regulations companywide. See Product Use for more detail.