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European Pharmaceutical Contractor

Company Compliance

Compliance training and certification are hot topics for contractors in the life sciences sector. In the context of business pitches, factors such as the robustness of contractors’ internal compliance controls and continuous training plans for staff are increasingly decisive factors in the contractor selection process. This article will provide an overview of the recent focus on allegedly corrupt business practices in the pharmaceutical industry, including the consequences for companies and their individual managers and employees.

Legal Framework

In recent years, legislators around the world have been sharpening laws targeting bribery, and authorities have intensified and professionalised their investigations. The new Brazilian Clean Companies Act – taking effect in 2014 – targets bribery of foreign and domestic government officials, and is set to provide a basis for fines of up to 20 per cent of the gross revenue of the year prior to the initiation of the proceedings (1). The UK Bribery Act, which came into force in 2011, sanctions the failure to prevent bribery by persons working on behalf of a business, and addresses both bribery in the public and private sector (2). Fines under the UK Bribery Act can be set at seemingly unlimited amounts.

Apart from financial and reputational damage, companies violating these legal acts face a series of administrative sanctions, such as being banned from public tenders, forced suspension of business activities, or even complete dissolution of the legal entity, as foreseen by the Brazilian legislation. Furthermore, individual employees may face substantial fines or imprisonment. Under both Acts, the merits of the violating company’s compliance programmes may impact the sanction in any single case – for example, the UK Bribery Act foresees a statutory defence to prosecution if adequate procedures intended to prevent bribery have been implemented.

US and Europe

The US already has an actively enforced legal framework through the 1970s’ Foreign Corrupt Practices Act, which has been used extensively to target corruption in the pharmaceutical sector. Its enforcement has contributed to the strict internal compliance systems in many US-based companies. In the European Union (EU), and in terms of pharma-specific provisions, Article 94 of EU Directive 2001/83 states a general prohibition to influence prescriptions or supply of pharmaceutical products through gifts, benefits, advantages or hospitality. The acceptance of such offerings is also prohibited. This general rule is implemented in EU member states through national legislation, as well as through self-regulatory industry association codes.

Examples of the consequences of violations of anti-bribery legislation – in addition to what has been mentioned for the UK and Brazilian legislation above – are invalidation of clinical trial results, product seizure, prohibition of product distribution, litigation by governments and other companies, and installing of external monitoring bodies in the company. Besides substantial fines and risk of imprisonment, individual employees or ex-employees may be banned from working in the pharmaceutical industry and obliged to pay back any bonus or incentive reached partly upon non-compliant behaviour.

In a report from 2006, Transparency International states that bribery is the cause of losses of up to 25 per cent in the supply chain (3). Fraud and abuse in healthcare have been estimated to cost individual governments in developed countries as much as $23 billion per year. As a consequence, corruption in the healthcare sector may mean that patients receive less effective, more expensive treatment, or products they do not need.

Stepping up Enforcement

Against this background, it is not surprising that national authorities are extending enforcement in the field. In the US, a number of corruption cases have been settled, involving high monetary amounts. A prominent example is the $3 billion settlement signed by GlaxoSmithKline in 2012, in a case involving elements of corrupt business practices in the context of off-label prescriptions. More recently, the Chinese authorities have initiated cases against a number of foreign and domestic pharmaceutical companies. In one of these cases, the company is alleged to have used travel agencies to facilitate bribes in amounts of $490 million to doctors to boost sales of its medicines (4). It should be observed that these cases may also trigger actions under other countries’ legislation relating to the bribing of foreign government officials.

National legal frameworks provide slightly varying definitions of what constitutes bribery. Given the potential international dimensions of a case, it may make sense just to use the broadest possible definition, such as “an act of taking or receiving something with the intention of influencing the recipient in some way favourable to the party providing the bribe” (5).

Potential Pitfalls

In the pharmaceutical context, bribery poses a risk at several levels of the supply chain due to the complexity of the healthcare systems and involvement of various decision-makers. Different from many other sectors, the end consumer (the patient) is usually not directly paying for, nor selecting, the product. Many of the decision-makers are considered ‘government officials’ – for example, healthcare professionals in state-owned hospitals or employees of state reimbursement agencies. This also enables applicability of bribery laws that only target bribery in the public sector.

Enforcement activities in various jurisdictions have highlighted some examples of bribery areas:

● Illegal rebates and kickback schedules – for example, to employees of hospitals, reimbursement agencies or health insurers
● Illegitimate grants, sponsorships and donations – for instance, to hospitals or research centres to influence decisions of healthcare professionals and key opinion leaders
● Too high honoraria or payments for services never provided
● Coverage of too high or non-existing travel expenses
● Gifts and lavish hospitality

As mentioned, outsourcing of the administration of such illegal transfers of value – for example, to travel or marketing agencies – will not remove the responsibility or liability for the company on whose behalf this occurs.

Increasing Transparency

To increase transparency of the interactions between healthcare professionals and pharmaceutical companies, a wide range of legal and self-regulatory initiatives have evolved in recent years. Some examples are the so-called US Sunshine Act, national legislation in France, Greece, Italy and Portugal, as well as the most recent pan-European selfregulation initiated by the European Federation of Pharmaceutical Industries and Associations (EFPIA), which will be implemented across the countries included in the EFPIA membership (6).

Under the EFPIA HCP/HCO Disclosure Code, member companies are required to disclose all payments and other transfers of value to healthcare professionals and their organisations in defined categories. As a consequence of the new code, EFPIA also introduced a general ban on gifts and a threshold concept for hospitality.

Future Considerations

With increased transparency, media and public scrutiny of the pharmaceutical industry is likely to intensify. As a consequence, expectations of companies’ compliance programmes and processes will grow. Companies may need to provide more explanation on the importance of their collaborations with healthcare professionals and be more specific about the qualities of their compliance programmes.

Whereas no compliance system in the world will ever completely protect a company from wrong-doing by individual employees companies may need to adopt a more holistic risk management to benefit from the ‘compliance defence’ offered by various jurisdictions. Integrated risk detection and communication, visibly supported by upper management and involving all levels of the internal organisation, may evolve into a competitive advantage.

1. Brazilian Clean Companies Act. Visit: Ato2011-2014/2013/Lei/L12846.htm
2. UK Bribery Act. Visit: http://webarchive.
3. Transparency International, Curbing Corruption in Public Procurement. Visit: http://archive.transparency. org/regional_pages/asia_pacific/ newsroom/news_archive2/handbook_ for_curbing_corruption_in_public_ procurement_2006
4. Haydock I, GlaxoSmithKline, bribery and the China conundrum, Scrip Regulatory Affairs, July 2013. Visit: productsector/pharmaceuticals/ GlaxoSmithKline-bribery-and-the- China-conundrum-345262
5. ‘Bribery’ definition. Visit: www. bribery.html#ixzz2hkr4kzsy
6. EFPIA HCP/HCO Disclosure Code. Visit: 116/44/Final-EFPIA-disclosurecode- published

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About the author

Samantha Regenthal
heads the Legal & Compliance Services at SFL Regulatory Affairs & Scientific Communication Ltd ( She counsels life sciences business, regulatory and compliance functions on a broad range of legal, compliance and corporate governance topics, and related internal processes and systems. Before joining SFL, Samantha worked as a lawyer in the headquarter legal department of F. Hoffmann- La Roche Ltd in Basel, Switzerland.
Samantha Regentha
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