European pharma’s compliance challenge

pharmafile | June 13, 2011 | Feature | Sales and Marketing |  global regulatory landscape, regulatory affairs, regulatory compliance 

Life Sciences companies across Europe are facing a series of emerging global legislation and increased regulatory enforcement, designed to prevent corruption and bribery.

But how well placed are these organisations to comply with the need for improved information transparency and aggregated healthcare practitioner spend data? And how will the European regulatory climate compare to the more mature US regulatory model?

Cegedim Relationship Management has undertaken its first annual survey into pharmaceutical compliance activity across Europe.

The 2010 survey reveals life sciences companies across Europe are now very aware that regulatory compliance and compliance management is a challenge – a challenge that will drastically change the way companies behave and they way they interact with healthcare providers and customers.

Compliance and awareness

These organisations are also very aware that compliance with new regulations, such as the UK Bribery Act, will have a significant impact on the industry’s image. Done well, regulatory compliance should have a very positive effect on image. However, if one company fails to step up to the mark and receives high-profile fines, the industry impact will be very detrimental.

As a result, organisations across the life sciences industry are co-operating and collaborating to determine and define the standards required. These companies are certainly looking at the US regulatory market, with three quarters (75%) of the respondents believing methods of tracking promotional spending currently used in the US will be deployed in Europe – and recent developments show us that this is indeed now the case.

But while European regulators are closely following the more mature US model, the clear cultural differences between Europe and the US will undoubtedly have an impact on the future regulations.

In the US, organisations must proactively disclose a large amount of information; from violations to every aspect of healthcare practitioner spend, under the Sunshine Act that comes into effect in 2013, specific to 2012 interactions with healthcare practitioners and organisations.

This enforcement model reflects the high levels of regulation and enforcement applied across every US industry, from finance to utilities.

European compliance – a major challenge

In Europe, however, there is a greater emphasis on self-policing. But life sciences companies are now being asked by the authorities to improve information transparency and provide aggregated spend details. There is no doubt that the new regulatory requirements, at global, regional and local levels will affect the way life sciences companies do business; with 93% of respondents agreeing that regulatory compliance will be a major challenge in Europe.

There is little doubt that companies in the US are ahead of the regulatory curve – perhaps three to five years ahead of their European counterparts. This market has been highly regulated for several years, and the forthcoming Sunshine Act includes even greater demands for spend transparency. As a result, US life sciences companies are heavily focussed on operational compliance, working hard on the key issues of improving data quality, meeting regulatory reporting requirements and vendor management. As this data is compiled, many are starting to leverage the insights from this information to share across their organisations to achieve productivity gains.

By contrast, in Europe, compliance officers are still determining policy, assessing the implications of global, regional and local regulatory requirements. Indeed, for many companies, the process of creating a regulatory compliance team is still in its infancy.

But there is one area where Europe is already ahead of the game, at a planning level at least, namely, leveraging transparency and aggregate spend information to derive benefits above and beyond compliance. 83% agree the implementation of transparency guidelines will lead to better resource allocation; whilst almost two thirds (62%) agree implementation of transparency guidelines will generate promotional spend decreases. The survey provides a fascinating insight into the nascent regulatory landscape in Europe. It reveals that life sciences companies are investing in regulatory compliance and assessing policies and procedures, but it also raises concerns about timing and the need to extend monitoring beyond traditional sales and marketing functions.

With demands for information transparency looming, life sciences organisations must now move beyond the planning stage, consider every aspect of spend and embark upon operational compliance programmes.

Anti-corruption spotlight

Whether or not it was merited, there can be no argument that life sciences organisations are now firmly in the spotlight of anti-corruption and anti-bribery officials. Global polices regulating promotional expenditure and sample distributions are being reinforced, whilst in the US life sciences companies have experienced both dawn raids and serious investigations by the Department of Justice.

And the implications are significant; pharmaceutical and medical device companies can face both civil and criminal sanctions. Global electrical engineering and electronics firm Siemens was recently fined more than $1 billion for not maintaining accurate books of records, while individual executives from well-established international companies are being prosecuted for not having implemented enough internal control and validation measures.

Furthermore, the series of legislation facing life sciences companies continues to grow.

The recently revisited UK Bribery Act comes into force in April 2011 and adds even more complexity to the existing Foreign Corrupt Practices Act (FCPA), the Organisation for Economic Co-operation and Development (OECD) Convention; and the Sunshine Act (US, 2013).

But just how geared up are European life sciences companies for this new regulatory intensity? Survey results revealed some awareness (95%) of the growing regulatory compliance requirement and the majority (73%) are very well informed.

Meanwhile, over eight out of ten respondents (82%) believe the coming anti-corruption regulations, such as the FCPA and UK Bribery Law will highly (38%) or somewhat (44%) impact the regulatory environment. Less than two out of ten (16%) feel that there will be low or no impact. But understanding the extent of that impact remains a challenge.

Escalating compliance demands

Certainly organisations are aware of the implications of escalating compliance demands.

Ninety-three per cent of respondents agreed that regulatory compliance will be a major challenge in Europe and the same amount also say the regulatory compliance environment will have a major impact on the life sciences industry image.

However, it is apparent that despite well-publicised regulatory compliance recruitment programmes, the responsibility for compliance in Europe still rests primarily with sales and marketing teams. 117 individuals contributed to the research; 83% of these were from pharmaceutical, 8% medical device and 6% biotechnology companies.

So how confident are these organisations in achieving fast emerging regulatory compliance demands?

According to the research, almost three-quarters (73%) of the respondents say that their company is either excellently (31%) or well equipped (42%) to comply with transparency regulations as they exist today. Just one quarter (25%) feels that their company is fairly (22%) or poorly (3%) equipped to deal with transparency regulations. This compares with just 29% of companies in the US believing the organisation is either excellently or well equipped to comply.

This clearly reflects the different levels of maturity in the US and the very strong culture of enforcement: in the US, organisations have to demonstrate regulatory compliance to what are far more stringent regulations that span the entire organisation, not just the sales and marketing role.

Given that stringent regulations are increasing in Europe, the results suggest a worrying level of complacency amongst organisations. And those that only rate their ability to comply as ‘fair’ today – as the regulations unfold in the industry – should be particularly concerned about how they will address compliance at global, regional and local levels over the coming 12-18 months.

The survey highlighted opportunities associated with compliance activity – most notably the value of creating and providing aggregated spend information to the business as a whole.            

Some 83% agree the implementation of transparency guidelines will lead to better resource allocation; while almost two thirds (62%) agree implementation of transparency guidelines will generate promotional spend decreases.

Benefits beyond compliance

These figures make it clear that organisations across Europe are already looking to derive benefits beyond compliance from this investment by better understanding the deployment of resources in terms of both people and investment.

This contrasts heavily to the US where there has traditionally been a clear line between compliance and the business: organisations in the US are only now beginning to look at attaining possible business benefits from regulatory compliance data. The business-based attitude of the European market should enable companies not only to embed compliance activity in every part of the organisation, but also derive additional benefits faster. Given the awareness of the importance of regulatory compliance activity to the life sciences industry, just how committed are these organisations to investing in the right people, processes and technologies to drive successful compliance programmes?

Over half (53%) of respondents anticipate their investment in solution and resources to provide aggregate spend transparency to grow, relecting the growing awareness of the compliance risk across both the industry and Europe. And of the 40% that expect investment to stay the same, the majority of respondents are in country-based, rather than regional roles revealing a gap between local and regional compliance understanding.

A shift away from manual processes to suitable software systems will be critical to keep up with multinational and complex company operations, as pharma companies now need to track every interaction and financial transaction, monitor both direct and indirect payments undertaken, and then reconcile expenses to each official or physician.

Adding customer data management to the process provides a depth of information that can be analysed to assess value, understand how much is being spent at an individual level and improve resource allocation. This is a powerful tool that, if used correctly, should have a direct, bottom line impact on business.

Conclusion

Transforming the image of the life sciences industry will take time. But the commitment being demonstrated today is extremely positive. Whilst organisations are obviously keen to avoid the negative publicity, fines and possible court cases associated with bribery and corruption, there is no doubt that organisations in Europe are also looking to derive benefits from improved transparency, whether for internal compliance reasons or external disclosure.

With a real opportunity for a life sciences company to establish a good image to the healthcare market, the industry is increasingly considering transparency as a huge competitive advantage and benefit, and an opportunity to improve resource utilisation, rather than simply an expensive and time-consuming overhead expense.

But, while the commitment is not in doubt, organisations are still struggling to actually deliver transparency, both from a technology and business model perspective. This is a multi-disciplinary project that is not just about exploiting technology but also about driving new behaviour change and imposing compliance as a change in ethical behaviour to the customer.

Critically, global regulatory compliance and transparency demands an automated and streamlined solution: not only are the costs of a manual or spreadsheet approach too high, but without some kind of automation and built-in alerts that reflect the different countries’ interpretations, organisations will be exposed to a high risk of compliance breach.

Regulatory compliance is becoming a key function within the life sciences business; indeed it is, in some companies, becoming a cornerstone of how business is conducted and is massively inluencing the commercial model. But for the industry to achieve wholesale changes in attitude and perception, every organisation needs to commit.

Now is the time to work with other organisations in the field to develop best practices, to assess how to best leverage existing spend capture sources and resources, and to put in place procedures and practices that will mitigate both the risk and cost associated with global compliance.

KEY FINDINGS

• 93% of respondents agree that regulatory compliance will be a major challenge in Europe

• Specifically, 82% believe that anti-corruption regulation (Foreign Corrupt Practices Act, UK Bribery Law) will impact the regulatory environment and global transparency requirements

• Almost two-thirds (62%) agree that the implementation of transparency guidelines will generate promotional spend decreases

• The European compliance function is mostly focussed on high-level compliance governance design and validation – as opposed to the US, where compliance is being implemented at an operational level, with an emphasis on data, reporting and vendor management

• The US transparency and aggregate spend model is likely to spread across Europe, leading to an increase in companies’ investments. Over half (53%) of respondents anticipate their investment in aggregate spend transparency to grow

• Data identification, consistency and quality are the major challenges in project implementation and compliance governance processes

• 22% of companies in Europe are using Excel today to monitor expenditure. This is set to drop to 10% as organisations increase their dependency on third party solutions to meet compliance requirements

• Organisations in Europe are looking to exploit greater information transparency to derive further benefits beyond compliance

• 83% agree the implementation of transparency guidelines will lead to better resource allocation.

Bill Buzzeo, VP and GM of Global Compliance Solutions, Cegedim Relationship Management: william.buzzeo@cegedim.com

Guillaume Roussel, VP Compliance Solutions EMEA, Cegedim Relationship Management , guillaume.roussel@cegedim.com

See the report by visiting: www.cegedim.com/eucompliance