Dear Declan,
It is a genuine pleasure to transmit to you and the Solstice team the final deliverables from Calderwood & Harkness's US sales and marketing compliance engagement for Solstice Biomedical Devices Ltd. in connection with the planned US commercial launch of the Pulsar™ CRM System. As you will recall, we opened this engagement on April 8, 2024, under Matter No. 1037-00003, and I am gratified that we have been able to bring the substantive work to completion well ahead of the October 1, 2024 launch date, giving the team approximately seven weeks for implementation.
Please find attached the following three documents, which together constitute the final work product of the engagement.
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**I. ATTACHED DELIVERABLES**
**1. US Sales and Marketing Compliance Framework — Final Report and Recommendations (August 12, 2024)**
This is the comprehensive final report synthesizing all workstreams of the engagement. It addresses:
- Federal compliance under the Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)), the False Claims Act (31 U.S.C. §§ 3729–3733), the Physician Payments Sunshine Act / Open Payments program (42 U.S.C. § 1320a-7h), and FDA promotional regulations applicable to the Pulsar™ CRM System (Class II, Product Code MHX, 510(k) No. K232847, cleared February 9, 2024); - A state-by-state compliance survey and analysis across 12 jurisdictions (California, Colorado, Connecticut, Louisiana, Maine, Massachusetts, Minnesota, Nevada, New Jersey, Oregon, Vermont, and Washington, D.C.); - Distributor compliance recommendations for the Ascendant Distribution Solutions LLC ("ADS") relationship under the ADS Distribution Agreement (Ref. SBD-ADS-2024-0315, dated March 15, 2024); - Sales compensation plan analysis, including the territory manager variable compensation structure; - Physician engagement program structure for both consulting and speaker programs; - Compliance program infrastructure recommendations, aligned with the OIG General Compliance Program Guidance (November 2023) and the OIG Pharmaceutical Manufacturer Guidance (April 2003, adapted); and - A remediation action plan with a detailed implementation timeline keyed to the October 1, 2024 launch.
**2. Template Physician Consulting Agreement**
This template is designed for engagement of physician Key Opinion Leaders and incorporates the following key provisions:
- Fair market value compensation at $350–$500 per hour, tiered by specialty and academic rank; - An annual per-consultant cap of $12,000; - Structuring consistent with the personal services and management contracts safe harbor (42 C.F.R. § 1001.952(d)); - Sunshine Act / Open Payments disclosure acknowledgments; and - Compliance certifications set forth in Exhibits A, B, and C.
**3. Template Speaker Program Agreement**
This template governs physician speakers presenting on the Pulsar™ CRM System and incorporates:
- Honoraria of $1,500 per live presentation and $750 per virtual presentation; - An annual per-speaker cap of $18,000; - A meal and hospitality per-person cap of $150 per attendee per event, aligned with the AdvaMed Code of Ethics (2020 Revision); - Requirements for use of approved slide decks and prohibition of off-label discussion; - Needs-assessment documentation and venue restriction provisions; - Speaker training prerequisites; and - Sunshine Act reporting consent.
These templates reflect the 180 speaker programs planned for Year 1 (120 live and 60 virtual), with an estimated total speaker program spend of approximately $225,000.
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**II. SUMMARY OF KEY RECOMMENDATIONS AND FINDINGS**
While the full report sets forth our analysis in detail, I want to highlight several core findings and recommendations for your immediate reference:
**A. Federal Anti-Kickback Statute and False Claims Act.** The planned commercial arrangements — including the ADS distribution commission of 18% of net US sales, the physician consulting and speaker programs, and the territory manager variable compensation structure — are generally structurable within applicable safe harbors, subject to the specific guardrails and modifications detailed in the report. In particular, the territory manager variable compensation plan (approximately $72,000 at plan, representing roughly 42% of total compensation, with a median quarterly quota of $110,700) includes a 2.0x accelerator multiplier on quarterly sales exceeding 120% of quota. This accelerator warrants — and the report details — the compliance-based clawback provisions and compliance scorecard weighting we have recommended to mitigate inducement risk, particularly in the context of projected Year-1 US revenue of $26 million.
**B. Physician Payments Sunshine Act / Open Payments.** Solstice Biomedical Inc., as the US subsidiary (Delaware corporation; 200 Harborview Drive, Suite 1100, Boston, MA 02210), will be the applicable manufacturer for Open Payments reporting purposes. Based on the planned physician engagement programs, we estimate approximately $650,000 in Year-1 reportable transfers of value across consulting fees, speaker honoraria, meals, travel, and educational grants. The applicable 2024 CMS reporting thresholds are $12.49 per instance and $100 in the aggregate per covered recipient per calendar year. Data for calendar year 2024 must be reported to CMS by March 31, 2025. I note that the CMS Manufacturer ID application was submitted in June 2024, and I would recommend that completion of that application be confirmed promptly — this is flagged as a priority action item below.
**C. FDA Promotional Compliance.** We have completed a detailed review of draft promotional materials, sales training decks, and website content for the Pulsar™ CRM System. The device's cleared indication for use — continuous cardiac rhythm monitoring in adult patients with suspected or documented cardiac arrhythmias — serves as the baseline for our analysis. We have identified specific recommended revisions to ensure consistency with the cleared indications and to address off-label promotion risks and fair balance requirements. The report includes a proposed standard operating procedure for a Medical-Legal-Regulatory (MLR) review committee, which we recommend be formally constituted and operational prior to launch.
**D. State Marketing Compliance.** Our 12-state survey identifies registration and fee requirements that must be completed before launch, along with ongoing reporting obligations in several jurisdictions. The most time-sensitive items are discussed in the priority action items below.
**E. Distributor Compliance.** Proposed amendments to Sections 7 (Compliance) and 12 (Audit Rights) of the ADS Distribution Agreement have been transmitted separately to Ascendant's counsel, Dawn Hitchens and Gregory Paige at Hadley, Ostrander & Paige LLP. The proposed amendments strengthen sub-distributor compliance certification (covering up to 5 authorized sub-distributors requiring Solstice approval), Sunshine Act data-collection pass-through obligations, audit rights (twice per calendar year on 30 days' written notice), and compliance training requirements for ADS personnel.
**F. Compliance Program Infrastructure.** The report recommends the establishment of a US Compliance Committee comprising Declan Harrington (General Counsel), Siobhán Mulcahy (Global Compliance), Marcus Reilly (US Commercial), Dr. Nadia Farouk (Medical Affairs), and Theresa Brennan (US Regulatory). We also recommend the hire of a permanent US-based Compliance Officer by Q4 2024, with Siobhán Mulcahy serving on an interim basis. Additionally, the compliance hotline operated by Clearpath Ethics Services Inc. (contract signed June 10, 2024; Ref. CP-SBD-2024-061; annual cost $18,500) should be activated and communicated to all US employees as part of the launch readiness plan.
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**III. PRIORITY ACTION ITEMS FOR OCTOBER 1, 2024 LAUNCH**
With approximately seven weeks remaining before the planned launch, we recommend the Solstice team prioritize the following:
1. **State Registrations.** Complete manufacturer registration in Vermont (annual fee: $500) and submit the Massachusetts annual registration (annual fee: $2,000) with the required PhRMA Code adoption attestation. Minnesota annual reporting requirements should be calendared. Additionally, given that the Pulsar™ CRM System monitor carries a WAC of $4,950, which exceeds the $2,500 threshold under the California Fair Pricing Act, the required pricing disclosure must be filed.
2. **CMS Manufacturer ID.** Confirm completion of the pending CMS Manufacturer ID application (submitted June 2024) to ensure Solstice Biomedical Inc. is properly registered for Open Payments reporting for CY2024 data.
3. **MLR Committee Formation.** Formally constitute the Medical-Legal-Regulatory review committee and implement the promotional review SOP included in the report, so that all launch materials undergo a compliant approval process before October 1.
4. **Compliance Training Rollout.** Complete compliance training for all 53 US commercial employees (42 territory managers, 8 regional directors, 3 area VPs, plus Marcus) prior to commercial launch, using the training curriculum developed by Meridian Consulting Group LLC as supplemented by the legal compliance modules we have prepared.
5. **ADS Distribution Agreement Amendments.** Finalize the proposed compliance amendments to the ADS Distribution Agreement, currently under review by Dawn Hitchens and Gregory Paige at Hadley, Ostrander & Paige LLP.
6. **Compliance Hotline Activation.** Ensure the Clearpath Ethics Services Inc. hotline is fully operational and communicated to all US personnel in advance of launch.
7. **Template Agreement Finalization.** Formally adopt and deploy the attached template physician consulting agreement and speaker program agreement for any KOL or speaker engagements being initiated in advance of or concurrent with launch.
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**IV. ENGAGEMENT FINANCIAL SUMMARY**
I am pleased to report that total professional fees for the engagement are $289,450, with total expenses (travel and research databases) of $7,215, for a combined total of $296,665. This is well within the $325,000 fee cap established in our engagement letter dated April 5, 2024. A final invoice will follow under separate cover from Miriam Calloway.
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**V. AVAILABILITY FOR IMPLEMENTATION SUPPORT**
The Calderwood & Harkness team remains fully available to assist Solstice with implementation of the recommendations set forth in the report. This includes, without limitation:
- Negotiation support for the ADS Distribution Agreement amendments; - Customization of the template agreements for specific physician engagements; - Advice on state registration filings; - Ongoing promotional material review through the MLR process; and - Any other implementation questions that arise as the team prepares for launch.
I should note that any such additional work would constitute a scope extension beyond the current engagement and would be addressed through a supplemental engagement letter or amendment to the existing letter. That said, we are confident that Solstice is exceptionally well-positioned for a compliant and successful US commercial launch.
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**VI. ACKNOWLEDGMENTS**
I want to thank you, Siobhán, Marcus, and the broader Solstice team — including Dr. Nadia Farouk, Theresa Brennan, and Patrick Dunne — for the outstanding collaboration throughout this engagement. Your team's responsiveness and thoughtful engagement with the issues made a meaningful difference in the quality and efficiency of the work. I also want to acknowledge the contributions of Dr. Lena Voss and James Cho at Meridian Consulting Group LLC, whose compliance program design work provided valuable input to our analysis and recommendations.
Our entire team — Amy Whitfield, Miriam Calloway, and I — has genuinely enjoyed working on this important initiative, and we are proud to have played a role in supporting the Pulsar™ CRM System US launch preparation.
Please do not hesitate to reach out if you would like to schedule a call or meeting to walk through the report in detail. I am happy to coordinate a session at your convenience.
Warm regards,
**Joel Strauss** Partner, Healthcare & Life Sciences Calderwood & Harkness LLP 1250 Avenue of the Americas, 38th Floor New York, NY 10020 Direct: (212) 801-4422 Email: jstrauss@calderwoodharkness.com
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**Attachments:** 1. comprehensive-compliance-framework-report.docx — *US Sales and Marketing Compliance Framework — Final Report and Recommendations (August 12, 2024)* 2. template-physician-consulting-agreement.docx — *Template Physician Consulting Agreement — Solstice Biomedical Inc.* 3. template-speaker-program-agreement.docx — *Template Speaker Program Agreement — Solstice Biomedical Inc.*
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