S03E135 The Ever Changing Compliance in Life Sciences with Darshan Kulkarni

Compliance isn’t a checkbox anymore; it’s the engine room shaping strategy, pricing risk, and deciding whether a deal should close. We sit down with Darshan Kulkarni, pharmacist, attorney, professor, and veteran advisor to life sciences companies, to examine how enforcement trends, data ownership, and AI are rewriting the rules for pharma, biotech, and health tech leaders.

We start with Darshan’s unconventional path from sixth-generation pharmacist to regulatory lawyer and educator, then dig into the pressure points every leader feels right now. Why the DOJ and OIG expect compliance to be resourced and at the table. How successor liability can blow up an acquisition if issues aren’t self-identified and disclosed. Why “100% compliant” is not a badge of honor but a signal your program isn’t looking hard enough. And where promotional risk really lives today: not in the TV ad that passed MLR review, but in the hallway conversation where a rep guesses at an off-label question.

From there, we turn to diligence and dealmaking. Darshan breaks down the most common red flags in clinical trial sites, especially physician-ownership rules and formation problems that can make a target effectively unownable. We explore how non-competes, data rights, and state privacy laws collide with federal frameworks, and how to price and structure deals when the risks are real but fixable.

AI and digital health raise the stakes even further. We unpack consent gaps, PHI exposure, IP conflicts, and the difference between public LLMs and truly private deployments. Transparent does not mean public domain, and pushing sensitive data into a public model can make control vanish. The throughline is clear: build controls that find problems early, separate legal advocacy from compliance oversight, and make incentives support the behavior you want.

Reach Darshan here: 
darshan@kulkarnilawfirm.com
https://www.kulkarnilawfirm.com/

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Transcript

Welcome And Guest Background

SPEAKER_00 0:47

So whether you're a statement leader or just starting your journey as a law firm owner. The Leadership in Law Podcast is here to equip you with the knowledge and tools you need to build a successful and fulfilling legal practice.

SPEAKER_02 1:16

Please join me for her inviting Sean Kalcarney to the show today. Darshan is a Philadelphia police attorney focused on the legal, regulatory, and compliance issues facing pharmaceutical, biotech, and medical device companies. Through the Kulcarney Law Firm, he helps companies navigate FDA regulations, clinical research, advertising compliance, and mergers and acquisitions. Beyond his legal practice, he's the host of the Darshan Taunks Podcast, where he has done more than 800 interviews with leaders in life sciences, healthcare, and compliance. Darshan also teaches FDA and policy at Drexel University and is an active leader within the American Bar Association. I'm excited to have you here, Darshan. Welcome.

A Nonlinear Leadership Path

SPEAKER_01 1:57

Thank you for having me. I appreciate the invitation. Absolutely. Can you tell us a bit about your leadership, Germany? I think if I could reduce it all to one word, it would be chaos.

SPEAKER_02 2:05

Okay.

Burnout, Work Habits, And Focus

SPEAKER_01 2:05

But I think that's true for most people. I think every person who says that thinks that they're like breaking new territory when they say chaos. The fact is that in my case, I was a sixth generation pharmacist. My dad owned a pharmaceutical company, his dad owned a pharmaceutical company, and before that they owned pharmacies. I grew up in India and I knew I was going to be in life sciences my entire life. The question only was: would I own a pharmaceutical or would I be a physician? Law was never on the path until I probably got through most of pharmacy school. And at the end, they were like, so medicine next? I had a rule. We had to get three graduate degrees in our family. That was the rule. So I was done with one there and I was looking at two more. I was gonna be, I thought it was probably gonna land up being med school. But the idea of going to med school for the next 13 years and then just still being very unhappy did nothing for me. Turns out you can be unhappy with only three years extra school. So at that point, it was just a question of efficiency of unhappiness. And then turns out I I actually had a great time in pharmacy school and I had a great time in law school and working as a lawyer. Most people talk about how much they hate their jobs. I don't remember hating my jobs ever. I love that. Um I think I mostly remember being tired, but that's from overworking. And I'm probably close to burnt out, not because I don't love my job and don't love what I do. I absolutely love what I do. What I do think, however, is I find myself just working for the last 20 years. I've never taken a break. The only time I know I've actually turned off was 17 days in May in probably the last 20 years. Wow. Including weekends. And when I say that, I genuinely work probably from 9 in the morning to 1 a.m. every night. Oh my gosh. My girlfriend, she bless her heart. I don't know how she tolerates me. But on vacation, I don't know too many people who take full-blown vacations. Like I work every single day. And if it's not something, it's something else. So from that perspective, I think the idea of leadership journey suggests like this equal path and giving up things and calling things. And I don't think it was any of those. It was more just I knew which general direction I wanted to go. I enjoyed doing a lot of other stuff. I found, for example, I spent a little bit of time working in the health insurance industry. Wasn't my thing. There are people who absolutely love doing that, and that that's amazing. I love being in the life sciences. I love innovation, meets regulation, meets compliance, meets bringing something that changes people's lives every single day. And that makes me happy. My leadership journey was going to pharmacy school, then going to law school, then doing my MS in quality assurance regulatory affairs from Temple School Pharmacy, coming out uh clerk for a federal court judge, then I was corporate counsel for a little bit for a generic company that also had some brand name products. COVID hit. I started my own firm while working full-time as a pharmacist and actually teaching at what used to be the Philadelphia College of Pharmacy, and now it's part of St. Joe's. Did that for several years in 2017 because of all the stuff I do on LinkedIn? The person who's now my friend, but was my former boss, invited me to be VP of regulatory strategy and policy for a global consulting company. And we were talking about the rules and the regs that impact and change how the entire industry was going to work. And I loved her leadership. I've always been a fan of hers, though she's incredible. But it gave me a chance to step out. And I went from part-time being a lawyer to being full-time a lawyer. And well, that was always full-time. It was more a question of just I didn't have enough work for that. And then the the it kept going from there. I worked as inside outside council, if you will, and just been in the life sciences teaching at various places the whole time. And while all of that was happening, just financially looking at other things like real estate investments and all that good stuff that kept me busy. Yeah.

SPEAKER_02 6:11

Exactly. What I find interesting is a leadership journey in some, it's like when they get to law school, it's the clerking in different practice areas to see what they like. It seems like you started out in the beginning knowing where you were gonna go. You knew you were gonna be in some form of life sciences, and then it just happened that you also went to law school to get number two for your parents.

SPEAKER_01 6:32

Yeah. Exactly right. I I knew that I would be in that space. If someone would have told me, you know what, you should be a, I don't know, litigator. I probably wouldn't have enjoyed it. What I've been very lucky with is having a clear vision on what makes me happy and trying to stay within that. Not to say that other stuff couldn't have made me happy, and maybe it's given me blinders on what makes me happy. But it was it's been fun, and I'm excited to be part of this industry and this profession, quite bluntly.

SPEAKER_02 7:04

And you've probably seen a lot of changes and just constantly seeing things change up all the time.

SPEAKER_01 7:11

So uh I put out six newsletters, five podcasts every single week for the last, I want to say five years. Wow. Uh, and there's something new in every single one of them. And I run out of weeks, like I'm scheduled five weeks in advance right now.

Life Sciences Career And Media Output

SPEAKER_02 7:32

Wow, that's pretty impressive. So you're the person the the you know healthcare or the life sciences looks to for the cutting edge information and very cool. Now you talked a lot about compliance, and what's changed to make compliance very central in pharma and biotech MA?

Why Compliance Now Drives Deals

SPEAKER_01 7:51

So a few different things have changed. I think I remember probably around 2012, 2013 or so, I was walking the floors of this exhibition hall, and I was talking to some people and going, the lawyers are looking and the compliance is going to be big. And the guy literally shooed me away, going, You don't know what you're talking about. Since then, there were multi-billion dollar penalties. Compliance has gone from being the people who sit in the back of the room who no one knows exist, but to basically help, not just helping, but causing boardroom decisions. The DOJ has been in full force, the OIG's been in full force. The result of all of that being compliance is required to be at the table. The DOJ put out 2023, I think 23, they put out a rule saying that we want compliance to be fully effective. And if there's an MA transaction, for example, if compliance does not have a seat at the table, and you guys don't, if necessary, self-identify some of the problems that you guys have, you could be looking at successor liability. And if you do, you might be able to get away with making the appropriate disclosures, and you may not be looking at successor liability, which is huge in a transaction, because the last thing you want is to be carrying someone else's problems along with your own. So I think that was a huge game changer. In the same time, while the DOJ is making these rules, they also came up with another rule, which is on whistleblowers. And they basically said that we encourage whistleblowers. They also said that if you have employees and they aren't performing compliantly, we want you to name, shame, and blame them. And if you do, good news for you, bad news for them. And there are these ramifications that come onto their employment agreements where essentially it comes out and says that their bonuses need to be affected, their salaries need to be affected if they're non-compliant. And what does non-compliance really mean? Noncompliance means not following the rules, bribing people when they shouldn't be, or not having appropriate controls in place to kind of become a lot more active in the life sciences. There's special healthcare fraud units that are out there. And they're going out there and we're talking about in one case, I think there was a$3 billion net that was put out for all these physicians and healthcare practitioners who are non-compliant. Pharma companies have paid multi-billion dollar penalties going back a decade. So that's one element. The DOJ got busy. The Office of Inspector General came out and they said we have these seven elements of compliance we expect all of you to follow. I tell you that probably about 60% of people know about the OIG ones. Almost no one knows about the DOJ ones, but you've got to sit and reconcile those. And I can tell you the people who think they're really like cutting edge have the OIG stuff, but do not have the DOJ stuff. But let's say you get that in place. Now you also have DOJ OIG and then combine that and connect that to FDA requirements. You then connect that to OCR, which is Office of Civil Rights, which is HIPBUV for those people who are thinking about. Now you take all of that, you connect that to state privacy laws. You connect that to state subscription laws if you have someone on a subscription type of model. You connect that to like there are so many different nuances that most people have not thought of. And now you layer all of that with AI. And it keeps people like me busy, which I'm very appreciative of.

SPEAKER_02 11:26

But yes, but not until 1 a.m. You need to get a you need to take a break. As much as you love what you do, you gotta learn how to stop. Take a break.

SPEAKER_01 11:37

Can you imagine every single day going, I wish I don't miss this bit of information? Like every morning there's new stuff. And it's fun when you're talking to a client. This happens to me almost on a daily basis, where I'll go, but three hours ago, the DOJ announced this, and the client's eyes just pop out going, first of all, why do you know that? This changes everything I was gonna do. And this is the guy I want to hire because he knows what's happening as we speak. Those are the best parts.

SPEAKER_02 12:05

Being indispensable.

SPEAKER_01 12:08

Not just it being in the know. It's like you're sitting at your battle station and you're better armed than anyone else.

SPEAKER_02 12:18

It sounds like compliance for you is like keeping the puzzle pieces in play.

SPEAKER_01 12:22

Yeah. Yeah. Yeah. It's all the balls juggling in a way that you're the only one who sees where the next ball's coming from.

SPEAKER_02 12:30

And do you ever have a client that's 100% in compliance?

SPEAKER_01 12:33

No, you'll never have a client. Because the moment you're 100% in compliance, your compliance program has failed. Something changed. Because it's not looking hard enough. You should be finding problems. You should be fixing problems all the time. If you aren't, and this is actually came out earlier this week, where the DOJ, or it was courtroom decision. Essentially, what they had was they had a vendor, and the vendor said we're 100% in compliance, and we have all these controls in place. And turns out it was great. That sounds amazing. Like I have a vendor who's saying they're 100% in compliance. Turns out the entity that did the certification of compliance was owned by the same guys who had the company. So you need to do deeper, you need to look deeper. Why are you 100% compliance? That does not make sense.

SPEAKER_02 13:29

And what could be that's interesting because you can't that's like the whistleblower. You can't inspect your own and expect you to see it with neutral eyes.

SPEAKER_01 13:38

And even if you are inspecting your own, show me that you're catching things. If you're 100% always like a hundred it's like saying, tell me that your marketing plan works. I can always change something. I'm always looking deeper, and there's always a little tweak I can make.

SPEAKER_02 13:57

So when you're thinking about MAs in that industry and cars are evaluating a target company, what compliance issues raise the biggest red flags during the due diligence part of it?

DOJ, OIG, And Successor Liability

SPEAKER_01 14:43

So the first question to ask is, what are you worried about? Some clients will come in going, I don't even know what I don't know. Some clients will come in going, look, we already have a DOJ hit. We want to know what these guys are pointing out and if that lines up. Some people will say, What are you seeing? What are the areas that are of interest right now from the DOJ that we should be worried about? So this second, I probably go, you know what? There's a lot of interest around promotional compliance, advertising off label and having no controls in place. So I would say clinical trials is being dinged on a lot because there have been these lawsuits around what are called clinical trial sites and the doctor's offices who do the actual clinical trials, they aren't following the rules. Simple things like I would tell you 90% of small doctors' offices are non-compliant, illegally non-compliant with state laws. And I've told them, and they're like, Yeah, I'll take the rank. And is it a big risk? Oh yeah, it would shut down the entire industry. It's just inappropriately formed, it's formation problems. So it's I'm actually mentioned this on other podcasts, so now that I think what I can talk about, it goes to the unauthorized practice of medicine. Because technically speaking, if clinical research is part of the practice of medicine, for example, the state of Texas defines clinical research as part of the practice of medicine. Other states may not specifically call it out, but if you're diagnosing, treating, or otherwise managing disease states, I'd argue that you're engaged in the practice of medicine. If that's true, only a doctor can own a doctor's office depending on the state in question, which is a pretty large majority of states. But in many cases, it's not doctors owning these clinical trial sites. So you basically have a bunch of these doctor's offices not owned by doctors, which is illegal under multiple state laws.

SPEAKER_02 16:44

Okay. And they're just rotting it out. Just saying, whatever, we'll take our chances.

SPEAKER_01 16:49

Yeah. And there are MA companies right now going, okay, you're telling me this is standard, right? We'll just take it. We'll just buy it. So I'm going, let me get this straight. So you're buying an entity, you're going to give me$10 million for this entity that you can't own. The physician, there are non-competes. The FTC rules, for example, right now, yesterday's news was they're still enforcing the rules around non-competes for physicians on a one-off basis. But the short version is that, well, and there are multiple states that are still saying, you know what, healthcare practitioners, we're going to not enforce or make it illegal to enforce non-competes. Different states, for example, Pennsylvania has a rule around that. You're now buying something you cannot own with a physician, you cannot stop from going across the street and opening up the practice all over again. So what did you just pay$10 million for? Yeah, good question.

SPEAKER_02 17:43

It's not even they're buying data.

SPEAKER_01 17:45

No, you can't own that data in some cases. It's not your data.

SPEAKER_02 17:51

That's amazing. And what is happening if they do get caught and brought up? Do they just forfeit the company? They shut the company down.

SPEAKER_01 17:58

You'd shut the company down, but you'd also be engaged in the unauthorized practice of medicine, which means fines, penalties, and possibly what happens if someone dies, someone gets hurt. Which is the more likely scenario if you're taking care of people. So is that at that point criminal?

SPEAKER_02 18:18

Well, you knowingly purchase something that's illegal.

SPEAKER_01 18:21

And then had someone take care of people illegally.

SPEAKER_02 18:26

That's interesting. And so there's a lot of those out there.

SPEAKER_01 18:29

I'd say the vast majority of small sites are like that. When I say majority of 95%.

SPEAKER_02 18:34

Wow, that is absolutely amazing. So that's crazy. Looking at the advertising in the pharmaceutical industry, what are you seeing is the biggest non-compliant issue? Because we see commercials all the time for some sort of pharmaceutical or another. It just seemed to be constantly on TV.

The Myth Of 100% Compliance

SPEAKER_01 18:52

The ads on TV are usually not the problem. The ads on TV you usually go through what's called an MLR board, a medical legal regulatory review board. The idea is that you've got a doctor, a lawyer, and someone who's with a regulatory background looking at these things, going, you know what? Okay to do or not okay to do. So you've got those vetted. What you're often dealing with are the sales reps going to a doctor's office. And the doctor, now, sales reps have been trained. The quintessential sales rep we think about is often this really pretty blonde who is, I don't know, 25, 26, 30 years old. She goes into the doctor's office. The doctor is, I want to talk to her. And that's all you're looking for. You're looking for that 30-second opening where he'll talk to her. Now she's been trained. She thinks that she knows everything. Now the doctor asks this really technical question about the drug, and she doesn't know what she doesn't know. So she answers that question. Except the drug was not approved for that indication. She doesn't know that the drug was not approved, but she doesn't want to look stupid in front of someone. She's making a best guess based on the gaps she's filling in, et cetera, et cetera, et cetera. You're now getting into off-label marketing. Now, off-label marketing is inherently problematic, and that's where the multi-billion dollar fines came from. However, the FDA rules have changed because the FDA lost six court cases saying off-label marketing may be okay because as long as the information's truthful and not misleading, that's the standard, truthful and not misleading. So the sales rep who's going out there just making stuff up, that's a problem. On the other hand, the sales rep who's going in there and maybe even gets it right. Now the question goes to what's called intended use. This idea that did you always mean to send out that sales rep to talk about these off-label uses? Or was it about something else? Was it always about, you know what, the sales rep is a one-off, we train her, we tell her not to do stupid stuff like that, and we're good. But if you have like these PowerPoints where you're going, everyone would go out there and talk about these off-label uses. Well, then it was never about that one sales rep, it was about you as a company making huge mistakes. So those things have to be balanced though. And the FDA has to balance shutting down free speech. And so it goes into a constitution.

SPEAKER_02 21:15

Yeah.

SPEAKER_01 21:15

So shutting down free speech against allowing for the preventing inaccurate information from coming out there. So what kind of controls should you have in place to make sure that happens appropriately? That's what compliance, that's what legal is there for. The difference between compliance and legal for a lot of people is that legal's got your back every single time. And that's literally what we go to law school for. You are the last friend before a company goes down. I think that's such a wonderful concept. The idea that you could be a horrible person, I'm still gonna get your back. Yeah. That sounds like a and that's not to say that you're forgiven or that you're it's to say that look, everyone needs an advocate for them. I think that's a as a concept, that's wonderful. And so lawyers are inherently as taught to look out for the needs of our client and advocacy. On the other hand, compliance, as they're all going, no, that's not the point here. What is appropriate, what is right, what is fair. So you that's why they want if you talk to the DOJ, the DOJ, they want to separate the compliance from the legal. It's not always possible. Um expression of small. Right? DOJ goes, we want compliance at the table, we don't care where the legal is.

SPEAKER_02 22:36

Um as a point. Interesting. So that's now we're seeing a whole lot of AI and everything. So look at Yeah, how do you see AI and digital health and decentralized trials changing the compliance expectations and the MA risks?

Due Diligence Red Flags In M&A

SPEAKER_01 22:52

See, I think AI raises all kinds of questions. So in the clinical trials world, I'm just going to pull one out. There's been a situation where you have these software vendors who are going, you know what? I'm going to go to a doctor's office, and you doctors are getting these what are called informed consent forms. If you're going to do clinical trials, or you're going to do any kind of medical procedure, I don't know if you've had one done for you, but the doctor comes in and goes, Here's this 40-page document that tells you everything we're going to do to you. You've got about 30 seconds to sign this, and we're just going to start like opening up and chopping up your body. That's an exaggeration, but that's what that feels like. I am probably not mentally all there. I'm about to walk into surgery, and you're going, here's a 40-page document, sign this. I mean, like, how is that going to work? Can I truly give you consent? And can that consent truly be informed? So that's the concept. The problem is that you land up in a scenario where you sign this documentation, you find out that you never got consent. And if you did get consent, you got consent for that one procedure. You never got consent to take that data and then sell it. So there's a lot of in data out there where companies want to build on the pre-existing data, build on patient data, only to find out that it's illegal to get that information. And they're saying, eh, don't worry about it, just put it up there anyways. We'll make it simple so that we can get consent from patients. They can then learn from the information, but it's not your information. It's the patient's information. You, as a doctor's office, don't have the right to give that information to someone else. But it'll make my job easier. It'll help the next set of patients. And those are valid thoughts, but still not my data. I don't get to have a say in that. So from a consensus standpoint, from a privacy standpoint, you've got concerns. You then add on. So if you're buying a health tech company, for example, where what is a source of data? Do you have personal health information in the stuff you're buying? Because there have been multi-billion dollar settlements with Enthropic and Chat GPT, involving, for example, I think the New York Times. So you've got privacy issues, you've got intellectual property issues, you've got bias issues, which we all know about. We also have hallucination problems. What controls do you have in place to catch all of this? So you're now using this to inform whether you're going to buy a doctor's office, whether you're going to buy a health tech software company, whether you're going to buy a pharmaceutical company. Who owns the data on which you're placing a lot of value? Turns out you may not own that data.

SPEAKER_02 25:33

And once you put it up to Chat GPT, it's potentially in the public domain. Yeah, but it's potentially because once you put something there, we had, I remember the discussion with authors that were using Chat GPT to help improve their book or whatever, come to find out now your book is part of the LLM. So plagiarism is now part of your life.

SPEAKER_01 25:57

Right. And those are the questions you need to figure out. There's a whole discussion. So there's something called clinical trial transparency. And what that means is you take patient data and we want everyone to benefit. That's the entire reason a lot of patients participate in these studies. They're not in there because they want to help pharma company ABC. They're in there because they want to help other patients. The European Union basically came out and said, we want the information you have on patients, we want that information to be disclosed. These AI companies are saying if the information is out there, we can have it. And I'd argue just because the information is out there does not mean you can have it. It just means that it has to be disclosed under regulatory rules. Doesn't mean you get to play with that information. That was never part of that implicit agreement. So which one is it? Is it for public use or is it purely a regulatory disclosure? And if you're the AI company that's building off it, is that your data to build off of? Are you going to get sued? So it gets into all kinds of other issues.

SPEAKER_02 27:00

Interesting to see how that comes down. Because I don't think there's a way, unless you do a private project in say Cloud or ChatGPT for that to actually stay yours. Isn't there a new setting or something recently that I don't want to provide data? I think that's a that happened not too long ago. And is that true?

SPEAKER_01 27:21

I get into those questions all the time. So the first question is do you use a public LLM or private LLM? Public ones like ChatGPT. Now do you have a public instance of that or do you have a private version that you're basically running off of your own servers? Right. So law firms, for example, talk about this where we're like, oh, we're going to have our own version of AI. Will you? Now what does that mean? What does your own version mean? Does that mean you built the AI and it's all completely within your servers? Okay. It has its own issues if we leave that alone for the second. Or it sits there, but every time you want to ask questions, it puts a call out to Chat GPT and then comes back in, which means that your data got sent out to ChatGPT. Agents do that.

SPEAKER_02 28:06

People think their agents are private, and it's wait a minute, you're still on the backbone.

SPEAKER_01 28:11

Exactly. Phrases all kinds of questions there as well. But sounds like there's I wonder for your audience a lot.

SPEAKER_02 28:17

Absolutely. It sounds like when it comes to compliance, it's always going to be something new, something growing, something special, and something interesting.

SPEAKER_01 28:25

I think it's been an amazing journey so far.

SPEAKER_02 28:28

Very this has been very interesting. I've enjoyed the conversation, and I hope our audience has too. And if they want to connect with you or ask any questions, how what's the best way to reach out to you?

SPEAKER_01 28:38

You can find me on LinkedIn. You can also just go to my website at KilcarneyLawfirm.com, or you can reach out to me at darshan at KilcarneyLawfirm.com. So that's my last name, Kilcarney Lawfirm.com.

SPEAKER_02 28:51

Perfect. We'll have those links in the show notes. This has been very interesting. I really appreciate your time today. So thank you so much, Darshan, for being here with us.

SPEAKER_01 28:59

Thank you for allowing me to be part of this.

Unauthorized Practice And Site Ownership

SPEAKER_02 29:01

Thanks for joining me today for this episode. As we wrap up, I'd love for you to do two things. First, subscribe to this podcast so you don't miss an episode. And if you find value here, I'd love it if you would rate it and review it. That really does make a difference in helping other people to discover this podcast. Second, you can connect with me on LinkedIn to keep up with what I'm currently learning and thinking about. And if you're ready to take the next step with a digital strategist to help you grow your law firm, I'd be honored to help you. Just go to LawmarketingZone.com to book a call with me. Stay tuned for our next episode next week. Until then, as always, thanks for listening to Leadership in Law Podcast, and be sure to subscribe wherever you listen to podcasts so you don't miss the next episode.

SPEAKER_00 29:46

Thanks for joining us on another episode of the Leadership in Law Podcast. Remember, you're not alone on this journey. There's a whole community of law firm owners out there facing similar challenges and striving for the same success. Head over to our website at LawMarketingZone.com. From there, connect with other listeners, access valuable resources, and stay up to date on the latest episodes. Don't forget to subscribe and leave us to review on your favorite podcast platform. Until next time, keep leading with vision and keep growing your firm.