Inspire Pharmaceuticals, Inc. - Corporate Governance Principles & Practices

Principles and Practices

I. Introduction

Inspire conducts our business in an ethical, fair, honest and lawful manner. We act responsibly, respectfully and with integrity in our relationships with patients, healthcare professionals, providers, governments, regulatory entities, customers, shareholders, suppliers and vendors.

Inspire is committed to establishing and maintaining an effective Comprehensive Compliance Program in accordance with the "Compliance Program Guidance for Pharmaceutical Manufacturers" (the "OIG Guidance ") published by the United States Department of Health and Human Services Office of Inspector General ("HHS-OIG"). Our Compliance Program is one of the key components of our commitment to the highest standards of corporate conduct and ethical practices.

Our Compliance Program is designed to prevent and detect violations of our principles of conduct and to establish an ethical culture. It is Inspire's expectation that all employees will comply with our codes and policies. As the OIG Guidance recognizes, however, the implementation of such a program cannot guarantee that all improper conduct will be entirely eliminated. In the event Inspire becomes aware of potential violations of our principles of conduct, we will investigate the matter and, where appropriate, take corrective and preventive actions.

Inspire has described below the fundamental elements of our Compliance Program. As the HHS-OIG calls for in its OIG Guidance, we have tailored our Compliance Program to fit the unique environment of our company. We diligently review and enhance our Compliance Program to meet our evolving compliance needs.

II. Overview of Compliance Program

1. Leadership and Structure.
Chief Compliance Officer. We have designated a Chief Compliance Officer who reports to the Chief Executive Officer and the Chairperson of the Audit Committee of the Board of Directors. Among other duties, this officer oversees compliance training, education, auditing and monitoring; enforces disciplinary guidelines for any infractions of our Comprehensive Compliance Program and its implementing policies and procedures; responds to any detected issues; and undertakes corrective action procedures. The Chief Compliance Officer provides updates to senior management, the Audit Committee of the Board of Directors, and to the full Board of Directors.

Quality and Compliance Committee. Inspire has established a Quality and Compliance Committee (the "Committee") of representatives from different functional areas throughout the organization. Paramount goals for the Committee are communication, compliance and continuous improvement in accordance with our ethics. Subcommittees are formed, when appropriate, to address specific matters and provide reports back to the Committee. The Committee and subcommittees meet regularly to accomplish oversight responsibilities and goals.

2. Written Standards.
Inspire's written standards are designed to provide a framework for Corporate Governance in accordance with ethical standards and legal best practices. The Pharmaceutical Research and Manufacturers of America ("PhRMA") voluntary "Code on Interactions with Healthcare Professionals" (the "PhRMA Code") assists manufacturers in complying with applicable laws and ethical obligations. Elements of our Comprehensive Compliance Program, and its implementing policies and procedures, are based upon the PhRMA Code, the OIG Guidance, and related authorities, and include company policies with respect to gifts, conferences, meals, entertainment and other areas relating to interactions with healthcare professionals. We review and revise our written standards as often as deemed necessary or appropriate.

3. Education and Training.
A critical element of our Comprehensive Compliance Program is training. Training is conducted in a systematic way that provides a solid basis for conducting business in a compliant, professional and safe manner. The goals of training include providing information on organizational approaches and expectations regarding strict compliance with our ethics.

4. Internal Lines of Communication.
Inspire is committed to providing a workplace conducive to open discussion of its business practices. We encourage open and candid communication for all employees to discuss questions or report issues and concerns. We have established confidential and anonymous resources for reporting issues and concerns.

5. Auditing and Monitoring.
Inspire's Comprehensive Compliance Program includes active monitoring and auditing to evaluate compliance with the company's policies, procedures and applicable industry best practices. In accordance with the OIG Guidance, the nature of our reviews as well as the extent and frequency of our monitoring and auditing varies according to a number of applicable factors and considerations.

6. Responding to Potential Violations.
Inspire's policies and procedures includes processes for responding to potential violations of our principles of conduct. Although each situation is evaluated on a case-by-case basis, the overall framework is applied consistently and appropriately to address these matters.

7. Corrective Action Procedures.
Our Comprehensive Compliance Program is designed to establish the company's ethics and expectations. However, as the OIG Guidance recognizes the program may not prevent all violations. Inspire promptly evaluates violations to identify the root cause and to take the appropriate corrective and preventive actions.

Annual California Compliance Declaration Requirement
Inspire declares that, to the best of our knowledge and based on our good faith understanding of the statutory requirements, we are compliant with our Comprehensive Compliance Program and with California Health and Safety Code sections 119400 and 119402. Our Comprehensive Compliance Program incorporates a number of written codes and policies reflecting the ethical principles and practices adopted by our company. These materials can be obtained by visiting the Codes and Policies page in the Corporate Governance section of our Website or by calling 1-866-553-6370.

Page last updated: 01-Feb-2008