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European Pharmaceutical Contractor

Removing Incentives

The full effect of the Bribery Act is likely to be felt in the coming years, especially within the healthcare industry. How do pharmaceutical companies ensure they remain compliant, especially as they have to take into account local, national and international laws – particularly when dealing with third-party organisations?

The recently introduced Bribery Act 2010 forms part of the UK’s new hard line approach in the fight against corruption. It is an Act of Parliament that covers the criminal law relating to bribery. The penalties for committing a crime under the Act are a maximum of 10 years imprisonment, along with an unlimited fine, and the potential for the confiscation of property. The Bribery Act has also seen a more proactive approach of the Serious Fraud Office (SFO) in investigating corruption allegations and enforcing anti-corruption laws. However, since its inception, the Act has not seen any prosecution that attracted too much attention. In the case of the pharmaceutical industry, the Act adds to a whole set of codes already in place and that cover many aspects of the Bribery Act. So what does the Act mean for the future of pharmaceutical companies and how do they need to prepare for it?

The Bribery Act 2010

The Bribery Act came into force in 2011, replacing the ‘Common Law Offences’ and the ‘Prevention of Corruption Acts’. It acknowledges four categories of bribery: active bribery (section 1); passive bribery (section 2); bribery of a foreign public official (section 6); and corporate offence (section 7). So far the law has stayed very vague in its scope and the SFO prefers a cooperative approach rather than a repressive one. At this time, there has just been one case recorded under the Bribery Act; however, the SFO is likely to increase its prosecution in the coming years.

The main steps to undertake in order to comply with the Bribery Act are the identification of key risk areas (such as countries with high level of corruption, employee training, high value projects), and the people concerned with bribery in these sectors (associated person to the company). The Bribery Act requires implementing ‘adequate procedures’; in other words a company cannot be held responsible if the SFO considers that all possible measures were taken to prevent corruption on its behalf. For the pharmaceutical industry, these procedures correspond to transparency rules that already exist in some countries and the SFO has stated that it appreciates the fact that British companies publicly declare their relationships with third parties (if a company is willing to share its financial relationships, it is a sign that it has nothing to hide).

Events regarding the health industry are widely sponsored by pharmaceutical companies in order to support the continuing training of health professionals and ensure a high level of knowledge. Commercial organisations support medical education through a variety of activities, ranging from small, local meetings to large, independent scientific congresses. Such activities are either supported directly (for example, the company leads and directly funds all content and logistics), or indirectly (if the company provides an unrestricted grant for instance). The relationship between industry and health professionals in the context of medical education continues to be raised by various stakeholders as a point of reputational vulnerability for all those involved; the introduction of the Bribery Act focuses on this tightened control of financial relationships.

As stated by the SFO, prosecution under the Bribery Act will only be issued if it is seen to be of public interest. As a result, because the pharmaceutical industry provides medicines it could be seen as a clear target in the coming years. The Association of the British Pharmaceutical Industry (ABPI) has operated a self self-regulatory Code of Practice for over 50 years. The ABPI Code already addresses the ethical aspects of relationships between pharmaceutical companies and third parties; however, conscious of an ever-evolving need for transparency, the ABPI Code had already incorporated new guidance on relationships with third parties (for example, a requirement for public declarations of sponsorship of health professionals and health organisations). Because the self-regulation approach of the industry is valued by the SFO, a memorandum of understanding has been issued to assess which aspects of relationships are covered by the ABPI Code, and which ones are covered by the SFO.

One of the main differences between both issues is that the Bribery Act has an international reach and applies to staff and third parties outside the UK. However the focus of national codes of practice, such as the ABPI Code, is on local activity. Compliance with any local code may be evidence that adequate procedures are in place but is not a guarantee against scrutiny or liability.

Practical Implications for the Pharmaceutical Industry

When converting the law into real policies for an organisation, all these dispositions can be quite blurry and more precise guidelines are sometimes needed. The first thing to understand is that the Bribery Act is just another risk that organisations have to quantify, mitigate and document. When analysing where the risks are, a pharmaceutical company needs to assess the various audiences with which it interacts. Obviously, there is a need for top-level commitment and clear policies against bribery; however, it is also important to identify high-risk elements of the business. For example, the level of risk faced by individuals (and therefore the level of support and training required) varies, not according to seniority, but to specific job roles. In the pharmaceutical industry, employees who are typically in high-risk roles are those who interact directly with customers, such as medical representatives. Having said that, signatories and compliance officers also require additional training and support. It is also important to consider employees who might be asked to accept inappropriate inducements, such as those that interact with suppliers.

A key step in addressing Bribery Act compliance is to apply the ABPI Code and its basic principles. This mitigates the risk of bribes or inducements being offered. However the requirement extends beyond the Code and the obvious areas of risk – training of staff should be appropriate to the level of risk faced. For example, there should be a clear policy on training advisors and agencies and to ensure that the agency has a similar policy.

Another key point is the registration of all the familiar links existing between company employees and government employees, suppliers or customers. Indeed it is only by documenting the conflicts of interest that due diligence processes can be proven. Hospitality is a clear issue in the Bribery Act and in the ABPI Code; this is why guidance must be issued for all employees: how many times can I go into the same restaurant? Can I accept this gift? Moreover, it is important to implement robust processes to validate the organisation of meetings, the use of consultants, and all the benefits that are provided to healthcare professionals and that will be displayed (fees, payments, sponsorship, grants and donations). In order to prevent any risk (such as detecting irregular financial relationships once they have taken place), those processes must encompass the validation of both forecast and actual relationships with third parties and they must be well documented and recorded in case of audit.

In the end, the best strategy for a company wishing to prove its full compliance is to show a willingness to publicly declare, and document, relationships with healthcare professionals and document them. This will demonstrate compliance with the different codes in practice and will soften the possible prosecutions in case of a breach.

The Impact on the Future of the Health Industry

In other European countries, there is a similar trend toward greater transparency of financial relationships between the health industry and health professionals. This strengthening of requirements involves the publication of proactive legislation or the introduction of new rules in the local codes of practice. For instance, in France, since 1993 a law (loi DMOS) requires that companies selling prescription medicines get the opinion from the healthcare council before providing hospitality or payments to healthcare professionals. Last December, a new law reinforced the requirements concerning the relationships between the healthcare industry and healthcare professionals. This law also strengthens the prevention of conflicts of interests. As a result, from 2013, pharmaceutical companies will have to display all payments and benefits provided to these healthcare professionals and to healthcare organisations (associations, hospitals, and so on).

Another example can be seen in the Netherlands, where the pharmaceutical industry association has taken an active role in self-regulating disclosure and transparency. Under the Dutch code, companies must disclose two different types of financial relationships with healthcare professionals: service agreements; and sponsorship agreements of meetings between a company and association of professionals/institutions that directly or indirectly improves healthcare to patients, or that promotes medical science. These transparency rules became effective in January 2012 and the first disclosure will take place in 2013.

These two examples show that if the national laws share the same philosophy, the way they are broken down in each country can differ for reasons related to the organisation of different health systems, or even for cultural reasons. So, how does one achieve Bribery Act compliance in the future – an extraterritorial law – as well as other European laws and codes of practice?

From one point of view, there is the need to implement local processes that comply with national requirements; often this requires a comprehensive training programme. The programme should vary according to the risks associated with the role. Signatories and field-based personnel may benefit from more detailed scenario-based training in a workshop format, which could be combined with other considerations (such as ABPI Code of Practice updates). For office-based administrative staff, e-learning might be more appropriate, however all employees should be required to validate their knowledge on an annual basis.

On the other hand, there is a need for the pharmaceutical companies to get a global overview of all the relationships taking place in different countries (to comply with extraterritorial laws); this can be achieved if the local processes are integrated into a global system. This way, all the data processed at a local level can be retrieved in a centralised database and analysed according to extraterritorial rules (such as the Bribery Act, but also the American Sunshine Act) (see Figure 1, page 18).

Implementation of the Bribery Act, as well as other regulations concerning transparency, affects governance, regulatory compliance and risk management. This is why an integrated approach called Governance, Risk Management and Compliance (GRC) is particularly useful, for the global vision it provides, in the management of processes covered by this law. A GRC platform should enable one to trace, validate and easily publish all financial relationships between a pharmaceutical company and healthcare professionals. In order to prevent risks, this approach should allow a better anticipation of non-compliances by focusing on proactive validation of relationships with healthcare professionals, reconciliation of actual expenditures compared to planned expenditures, and on the identification and treatment of potential non-conformities.

From an IT point of view, the GRC platform must be connected to other IT systems (ERP, CRM, and EDM) thereby allowing the aggregation of all financial flows with third parties and the validation of compliance with internal procedures and external codes or laws. IT architecture can be designed as in Figure 2.


The Bribery Act is just one example of extraterritorial rules that apply to companies in different countries to promote transparency. These provisions are specific to each country, but they represent different aspects of a global issue which encourages pharmaceutical companies to promote a global integrated regulatory compliance.

The next big challenge for the pharmaceutical industry will not be to find a global solution for compliance and bribery issues within all its subsidiaries, but to cope with different local compliance standards, while at the same time guaranteeing that these different standards comply with extraterritorial transparency requirements.

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Laurent Clerc is Managing Director and regulatory affairs expert at BMI SYSTEM. A trained pharmacist, Laurent holds a Master of Health Law, a Master of Quality Assurance and an Executive Master of Business Administration. He has a professional background of more than 18 years serving the pharmaceutical industry and hospitals within consulting firms specialised in regulatory affairs.

Steven Gray is Manager of Compliance Hub Ltd, and has over 20 years of experience within the pharmaceutical industry, spread across a wide range of disciplines. Author of The Code Explained and The Pharma Rep’s Code Explained, he is also frequently published in several industry and healthcare journals and regularly speaks and chairs industry events, including on the UK Bribery Act.
Laurent Clerc
Steven Gray
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