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Chief Compliance Officers address emerging challenges

Authored by Karl Simpson


One of the stories of this year in the pharmaceutical sector is unquestionably the serious challenges that GSK have been facing in China, where it has been shrouded in a bribery scandal. The basis for the allegations made by the Chinese government against GlaxoSmithKline was that the company had been bribing doctors and the country’s officials to sell the company’s drugs at higher prices. In addition to this the company was forced to suspend its Research Head in China over allegations he and some colleagues made false claims in the journal Nature Medicine in 2010. This led to arrests, corporate executives were prevented from leaving the country, and the investigations continue. There have been many subsequent claims made against other companies too, implying perhaps that the China market is currently undergoing some reforms which have implicated many of those which provide its healthcare. The outcome of these investigations will no doubt get as much coverage as the allegations but this is not the point of this article.

It does provoke further thoughts about the very considerable challenges of corporate compliance in global markets for pharmaceutical and biotech companies. In particular, do the challenges of emerging markets present particular challenges as the global pharmaceutical industry looks to push aggressively into these countries in search of growth, market share and brand visibility? This also prompted us to think about the growing role of the Chief Compliance Officer for large pharmaceutical companies.

The Chief Compliance Officer usually reports into the General Counsel and is responsible for ensuring that compliance is adhered to in accordance with the company’s policies and standards. Compliance is a very important agenda item in the modern pharma environment. Poor compliance can lead to brand damaging headlines, declining revenues, financial penalties, long and protracted legal contests, imposed Corporate Integrity Agreements (CIA), as well as considerable deflections of management time and energy. This places considerable accountability upon those charged with ensuring corporate compliance. This compliance is no longer even limited to the selling and promotional practices of pharmaceuticals, but increasingly covers other areas such as the way in which companies are interacting with third party providers in the conduct of clinical programmes as well as investigators.

Compliance is now something which should be prominent in board meeting discussions because the board has a responsibility in its governance of the company to ensure the correct systems, structures and training are being implemented to ensure the very highest levels of compliance. It is not the board’s role to design these systems for compliance but it is clear they need to have close interactions with the executives leading this work, in many cases the Chief Compliance Officer. This prominence of the Chief Compliance Officer perhaps illustrates the growing importance of these appointments and the role they now have in the broader leadership of the company.

The introduction of the UK Bribery Act in July 2011, as well as the guidance issued by the Organisation for Economic Co-operation and Development (OECD) on internal controls, ethics and compliance, placed legal responsibility and operational importance upon companies. These are critically important challenges for companies now and hence having a corporate officer whose responsibility it is to ensure effective policy, adequate employee training and suitable detection measures.

In writing this article, Liftstream was particularly interested to get the perspectives of Chief Compliance Officers and how they consider the distinct challenges of emerging markets in compliance terms, if indeed they did.

Commonly the Chief Compliance Officers we spoke with believed that the foundation of good compliance is in the training of the people. The companies we spoke with employee in excess of 50,000 people and each of these people need to understand both the policies and the values of the company. These employees are representing the company, or are in fact “ambassadors” of the company and therefore need to acutely understand their responsibility to do the right things. Those companies who considered their products 1stin class / Best in class perhaps felt their employees needed less ‘creative’ approaches to promote and sell their products, approaches which might be considered in the grey areas of compliance. Generally speaking though, each of the companies encouraged zero tolerance towards breaches in compliance, however nuanced these might be.

Compliance policies and procedures almost need to be ‘one size fits all’ and these cannot be tailored to each country or region you choose to operate in. However, it is centrally important to select and hire the right people to act as General Managers or Business Unit Heads in your business. These people need to act with passion and integrity and they have to be given the freedom to operate. As Chief Compliance Officer, you have to be aware of the risks and to implement the checks and balances which might alert you to a compliance issue. Often leadership at a local level needs to be rotated with reasonable regularity. This prevents too much behavioural influencing and ingrained practices.  At a regional or local level too, you need to ensure you have a 2nd or 3rd pair of eyes observing the practices of the GM’s business. It is important to continuously refresh your compliance network and also to ensure you have this ‘staff rotation’. One Chief Compliance Offer we spoke to talked of a particular occasion in the past where they appointed a new GM to a country in Eastern Europe and almost by lunchtime on the GM’s first day, there was a queue outside his office with people bringing forward issues. It perhaps illustrated the need for dynamic workforce management.

The consensus from our interviews seemed to suggest that many emerging economies are no worse or better than more mature markets, despite the negative perceptions that many developed markets tend to possess about emerging economies. In some countries the cultural dynamics mean that reporting compliance breaches becomes a more challenging behaviour to encourage among employees. This can be addressed through improving diversity and ensuring you have a strongly mixed working culture as well as a strong support infrastructure which supports this reporting. It can sometimes take longer to get the training right and the people to understand the values of the company when you have not been present in the country very long, but this is another focus for your global compliance managers and why these people must be trained to the highest standards.

So while many companies have been confronted on compliance issues, which do nothing to improve the image or perception of the pharmaceutical industry in society, there is clearly a growing sophistication in compliance functions. The role of the Chief Compliance Officer is becoming a strategic partner in the executive leadership of the company. They have to bring the highest adherence and compliance monitoring. Failure in this responsibility can impose considerable operating challenges.

What is apparent though it that employing the right people is paramount, at all levels of the company. One Chief Compliance Officer of a top 5 pharmaceutical company told us that “Above all else you need to select the right people. Compliance is in essence the result of good leadership”. It is clear there will still be those people who operate the wrong side of the line and companies can’t eliminate this behaviour entirely, but this is the difference between isolated issues of individual human misconduct and what might be more systemic company incompliance.

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