How an upsurge in compliance focus, anti-bribery measures and a drive to greater transparency are leading pharma towards partners with demonstrable compliance capability and infrastructure.
Compliance is a powerful term with seemingly paradoxical implications; it can keep businesses awake at night and, as compliance training and administration reach overload, send employees to sleep during the day. But pharmaceutical executives that fail to understand the full extent of their compliance obligations could be sleepwalking their way towards major reputational damage.
Compliance in all its guises, and the reputation concerns that drive it, is now firmly established as one of pharmaʼs biggest business-critical issues. However, as the industry strives to build public trust, compliance now extends much further than promotional codes of practice, self-regulation and statutory legislation. The strengthening of international regulations around anti-bribery – and renewed vigour in their enforcement – has placed pharmaceutical companies under unparalleled scrutiny. Moreover, that scrutiny does not end at pharmaʼs security-controlled gates – it extends to third-party suppliers and agencies. Crucially, pharmaceutical managers that commission work to third parties must treat service providers as an extension of their business – making them accountable for the conduct of their chosen suppliers. The stakes are high.
Industry outsourcing shows no sign of abating, with companies increasingly contracting out key disciplines to drive growth. But choosing the right partner is no longer simply a calculation based on cost, expertise and ROI. Itʼs about ensuring that suppliers have the infrastructure, systems and processes required to meet the same rigid regulations by which the industry itself is measured. This leads to a dichotomy. Pharma companies want lean, agile and cost-effective agencies to deliver innovative, responsive and effi cient programmes, but these objectives appear at odds with the growing expectation for agencies to have the appropriate resources and corporate support frameworks to manage variable compliance requirements. Furthermore, such operational pressures risk compromising creativity and innovation. The demands, however, are understandable and unlikely to disappear.
Compliance has always been a strategic imperative for pharma. However, while governance determining how industry communicates with healthcare stakeholders is well-established, a sharper focus on ethics and corporate responsibility has emerged. Further, in a global marketplace enabled by online communication, legislative controls increasingly cross national borders. The most prominent regulations around business ethics are now enshrined in law. In the past fi ve years, antibribery legislation across much of Europe, as well as the Foreign Corrupt Practices Act (FCPA) in the US, have enforced strict rules around benefi ts that health professionals might receive from their relationships with healthcare companies. This is leading to previously unimagined resources being dedicated to transparency and disclosure of the details of those ʻtransfers of valueʼ. The penalties for violation have been severe. With authorities able to impose unlimited fines for corporate malpractice, pharma has been hit by a number of high-profi le penalties for fraud and corruption. In 2013 alone pharma forked out almost $3.75bn in settlement fees, with the cumulative five-year total extending beyond $10bn.
Rise of the CIA The battle to curb corruption has seen the introduction of Corporate Integrity Agreements (CIA) in the US, requiring pharmaceutical companies to put in place a comprehensive compliance infrastructure. CIA or not, every company now has compliance offi cers and committees, written standards and policies, and employee training programmes that permeate a culture of compliance across organisations. Companies must also build systems that enable the reporting of payments and other transfers of value. CIAs mandate signifi cant provisions for HR, recruitment and IT, and require businesses to provide annual status reports on compliance activities. Alongside the tough regulations imposed by the Sunshine Act, the compliance climate in the US is fi ercer than ever. However, in a global industry where the majority of players are multinational, the ramifi cations of US legislation are far-reaching. A large percentage of major pharma companies now work under a CIA. Moreover, with standard clauses determining that the scope of CIA coverage extends to ʻcontractors, subcontractors, agents and third party vendorsʼ, the impact on outsourced partners is significant. The sustained focus on compliance and ethics means that even companies that have escaped a CIA will have compliance programmes with the same vigorous pursuit of high standards – and want to apply those standards in every country in which they operate.
“The increased pressure to bolster compliance capabilities, agency-side, is coincidental with the introduction of CIAs and the stronger emphasis on anti-corruption measures in general,” says Andrew Berrie, chief operations officer, McCann Complete Medical. “Companies are understandably looking for evidence that their partners have got systems, processes and practices that protect them against a compliance breach. Requirements generally fall into three broad categories, although there is a degree of overlap or interconnectivity between them. This is especially so between codes of practice and transparency/disclosure.
“A significant tranche of compliance work relates to the development of corporate codes of conduct; cementing principles of equal opportunity, respect, environmental responsibility and ethical business conduct. These codes are themselves passed on to agenciesʼ suppliers and sub-contractors. And having agile, secure and auditable systems in place to manage them is crucial.”
IT security, data protection and privacy is another area of growing scrutiny. “In the digital era of multiple-device, global communication, pharmaceutical companies are justifiably determined to ensure that information security and data privacy is maintained, and that access and user control is secure and traceable. The variable privacy laws around the transfer of data only serve to make this requirement yet more challenging,” says Andrew.
The third component concerns transparency and disclosure. “Agencies need to ensure that they have robust and transparent mechanisms for disclosing aspects such as physician payments, customer engagement and stakeholder interaction,” says Andrew. “The overlaps with standard promotional compliance are obvious, but once again, national variation in interpretation brings additional complications. Moreover, across all three components, the variability in requirements from companies across the pharma industry is huge. Although these are largely ʻvariations on a theme,ʼ such divergence can place signifi cant pressure on agency resources and disrupt objectives to deliver agile, cost-effective and effi cient services. Furthermore, since agencies are required to deliver client specific compliance training to all employees on a companyby-company basis, the impact on resources is multiplied. Certainly, a more uniform cross-industry approach could deliver real economies of scale for pharma and agencies alike. But at present, only larger network agencies with infrastructure and scale appear well-placed to manage demand.”
Building trust Compliance – never regarded as a sexy subject for pharma – is often derided as a ʻnecessary evilʼ or a barrier to innovation. But enforcing it has become crucial to the strategic objective of improving the industryʼs reputation and building trust among healthcare stakeholders. “There are two real drivers for the current trend; ethics and compliance. And they are not the same thing,” says Paul Woods, an expert compliance consultant with more than thirty yearsʼ experience in pharma. “Ethics is about doing the right thing, while compliance is about complying with laws and regulations. The industry is trying to do both. But one only has to look at Ben Goldacreʼs Bad Pharma to understand pharmaʼs current predicament. There is a perception that pharma cannot be trusted and puts profi ts before patients. Itʼs not enough to comply, pharma has to show that it is complying. Self-regulation and legislation work alongside each other, although in the US the lawyers are leading the way while Europe has greater emphasis on a code-led approach to ethical behaviour. The ʻethicalʼ efforts, backed up by legislation, are about pharma companies demonstrating that theyʼre responsible citizens. At the highest level, organisations are having to develop infrastructure that shows that they are accountable and acting responsibly. But those requirements are cascading down to agencies to ensure their practices meet the same standards of transparency and ethics. CIAs, though their origins are in the US, are having a major influence globally.”
With much of pharma influenced by a CIA, companies are working their own way through the malaise and developing detailed policies and procedures that were not in place ten years ago. These begin with a high-level code of conduct, out of which comes a number of divergent policies and the procedures to apply those policies. “Itʼs extremely complex. Moreover, with agencies required to adopt the same strict guildelines, suppliers are being expected to build compliance and ethics competence that mirror those of their much-bigger clients. This is a big undertaking that requires specialist expertise and signifi cant resource. Establishing the processes and procedures is just the first step. To progress, companies have got to win the hearts and minds of their employees.”
Call for collaboration The ʻhearts and mindsʼ challenge extends beyond individual pharmaceutical companies and into their diverse supplierbase. It is a collective responsibility that requires true partnership between client and agency, an understanding of increased pressures and an appreciation of the realworld variability in resourcing levels. With agencies typically yielding operating margins that are much lower than those enjoyed by pharma – and where the key billable currency is time – the development of a more collaborative, partnership-led approach to compliance could drive real efficiency gains and industry-wide economies of scale.
Compliance is a long-term journey on the road to becoming trusted partners and not a destination in itself – and as pharma renews its efforts to build trust and demonstrate its ethics credentials, developing sustainable relationships with trusted partners will remain pivotal to success. “The most effective partners will be those that can demonstrate a comprehensive investment in compliance infrastructure and a commitment to ensuring all employees benefi t from ongoing training and development to meet clientsʼ needs,” says Andrew. “The pressures can be substantial and in smaller agencies this has the potential to get in the way of efficiency and creativity. To avoid this, best practice is to deploy a compliance team thatʼs focused on being on top of ever changing compliance requirements. Alongside them, agencies need advocates throughout their organisation to help drive a culture of compliance and always ʻdoing the right thingʼ.”
The intelligent agency As a network agency and part of the InterPublic Group of Companies (IPG), McCann Complete Medical can call upon a dedicated compliance function designed to develop codes of conduct, policies and SOPs to support individual clientsʼ requirements. The function, which includes risk management, HR, IT and data security departments, works collaboratively with agencies and departments across the Group to provide ongoing training and education, and support IT security, data privacy and audit/reporting.
“As the industry strives to break down old perceptions and build trust amongst stakeholders, efforts to improve compliance are intensifying. Agencies have a major, and often customer-facing, role to play in those efforts,” says Andrew. “Marketing, procurement and compliance managers must therefore identify partners that take compliance seriously and have the infrastructure, scale and agility to respond to client needs. Ultimately, the potential damage of any breach will far exceed billion dollar fines. The reputational damage will be much more costly.”
Pharma companies are accountable for the conduct of their chosen agencies and must treat third party suppliers as an extension of their business
Agencies must have robust compliance infrastructure, systems and processes to assure compliance and ethics
Requirements include corporate codes of conduct, data security/privacy assurance, transparency and disclosure systems/processes
Agencies must advocate, nurture and deliver a culture of compliance
The implications of breaches – both financial and reputational – are costly
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