Compliance is no longer an option
The Irish 18th century politician Edmund Burke is often attributed with the famous quote stating that “the only thing necessary for the triumph of evil is for good men to do nothing”. Whilst in reality it is doubtful he ever uttered those exact words, the meaning is particularly poignant for corporate leaders in the current legal climate with respect to compliance.
Imagine the scenario…a leading pharma company CEO being led off to serve a lengthy jail sentence for “white collar crime” after his company was found in serious breach of the law with regards to bribery. Systematic illegal payments made to physicians by a number of employees over a number of years, linked to a traceable increase in prescriptions of the company’s brand by those physicians, all leading to public outcry and legal proceedings.
“Imagine the scenario…a leading pharma company CEO being led off to serve a lengthy jail sentence…”
But surely this is all a little far-fetched? After all, the CEO did not personally commit these crimes, a clear corporate compliance policy was in place and it would be impossible to monitor the actions of every employee. Well, recent and forthcoming legislation puts the responsibility firmly in the lap of the senior executives. If they do nothing, or too little, and allow irresponsible employees to commit such evils then they will pay the price.
Having a compliance plan isn’t enough
It is true to say that big pharma already pays very close attention to compliance, armed to the teeth with teams of compliance officers and lawyers who set out stringent rules around the “dos” and “don’ts” of what can be spent and where. However, the real challenge moving forwards is that of operational compliance – the ability of a company to ensure rules are actually adhered to by those on the ground.
The US market is perhaps more mature in this area, with strict regulations around disclosure of payments and the forthcoming Sunshine Act coming into effect in 2013, but the European region is catching up fast. For example, in the UK a new Bribery Act is due to come into force in April 2011 (building on the existing Foreign Corrupt Practices Act, or FCPA) and the Association of the British Pharmaceutical Industry (ABPI) is laying out new transparency reforms to limit promotional gifts to prescribers, with clear ramifications for those at the top who don’t keep their house in order (see this earlier article by Steve Gray).
The key thing here is that the senior executives are being asked to take greater responsibility for what actually happens on the front-line of the business. No-one expects any company to be perfect, but you certainly don’t want to be the one that stands out from the crowd by demonstrating poor control of your promotional activities – just look at the case of Siemens, which was recently fined $1bn for failing to maintain accurate books of records.
“…the real challenge moving forwards is that of operational compliance – the ability of a company to ensure rules are actually adhered to by those on the ground.”
As such, Cegedim Relationship Management recently conducted a European survey on this aspect of ‘operational compliance’ to see how well prepared companies are for the new transparency regulations.
What does Europe think about compliance?
Within the survey, Cegedim asked European pharma executives from across different functions a series of questions relating to compliance issues and the impact new regulations will have on the industry. The majority of respondents sat within commercial functions with 29% being in marketing, 26% in dedicated compliance roles, 18% in sales and 7% in general management. Most respondents worked within pharmaceutical companies (83%), with a small contingent from the medical devices (8%) and biotechnology sectors (6%).
The survey (see ‘About the author’ below for details of how to obtain the full survey) revealed some interesting perspectives on the future impact of new compliance regulations, including:
• A belief that the new regulations will have a major impact on the pharma landscape, with 93% seeing business compliance as a major challenge in Europe and 82% seeing an impact from the UK Bribery Act and FCCPA.
• Eighty-three percent (83%) of respondents see the new transparency guidelines leading to better resource allocation.
• An associated view that promotional spending will decrease (62% agreement), whilst half of the respondents (53%) believed investment in aggregate spend transparency will increase.
The more advanced status of the US market with respect to compliance was also reflected in the fact that whilst 73% of European respondents classed their ability to comply with transparency regulations as ‘good’ or ‘excellent’, only 29% of US respondents fell into the same categories – reflecting the ‘higher bar’ in the US being harder to reach.
“Eighty-three percent (83%) of respondents see the new transparency guidelines leading to better resource allocation.”
But Europe would do well to take note of what is happening in the US market, with 75% of respondents believing that it will influence the shape of Europe in compliance as the new rules come into force.
Time for promotional spend tracking to step up
In order to ensure companies do not fall foul of the new laws, it is clear that there is a need for more granular and accurate promotional spend tracking systems. Indeed, whilst a quarter of the survey respondents acknowledged that they either did not monitor expenditure or simply used manual processes like Excel, only 10% agreed such manual processes would be sufficient in the future and there was unanimous agreement that some form of tracking would be required moving forwards.
However, putting the right systems in place is only one piece of the solution. This needs to be accompanied by internal training from top to bottom to ensure all are aware of what activity is in line with corporate policy and what is not acceptable, in addition to reinforcing the need to capture all activity accurately.
Of course, there is a third piece at play here too – even with the right systems and the right training, companies will still be heavily dependent on accurate data, provided in a format which can be quickly integrated with their tracking systems.
Challenges, challenges…but where are the benefits?
To summarise, if pharma leaders want to avoid stepping into the story of our aforementioned CEO and sleep easy at night they need to:
• Put in place systems that ensure accurate, timely and granular promotional spend tracking for transparency purposes
• Ensure there is understanding of the systems and buy-in at all levels of the organisation
• Continually assess data quality and strive to improve input sources to such systems
This might all sound like a lot of hard work and, in the worst case, something that will tie up company resources and distract from the business of investing in new medicines. Well, in the short-term there is sure to be some pain, but once the processes are in place there are tangible benefits.
“Stories of illegal marketing practices and multi-million dollar fines have done the pharma industry no good in recent years.”
Stories of illegal marketing practices and multi-million dollar fines have done the pharma industry no good in recent years. If improved compliance leads to such activities being a thing of the past, this will no doubt improve the industry’s image and lead to benefits all round.
So investment in operational compliance might be a bitter pill to swallow right now, but it’s going to make pharma better.
About the author:
Paul Tunnah is Founder and Managing Director of pharmaphorum, the online information, discussion and networking site for pharma executives. For queries he can be reached through the site contact form.
For more information on the Cegedim Relationship Management survey on “2010 European Trends in Aggregate Spend, Transparency, and Disclosure” please visit www.cegedim.com/eucompliance or email email@example.com.
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