The regulatory glance has never been stricter for Pharmaceutical and Life Sciences sector. Recent years saw compliance failures bringing draconian fines, reputational crises, and overwhelming media attention. OFAC BIS, DOJ and the FCPA consolidated rigorous measures on various levels, and even after the pandemic, the sector is likely to face challenges.
Pharmaceutical and Life Sciences companies face multiple risk factors that interact with and aggregate each other. From manufacturing to distribution and marketing, from pitfalls in export / import operations to license violations, risk categories vary widely.
It is a given that an industry with sizeable budgets, in close contact with decision makers overseeing entire healthcare systems in countries must remain airtight in the face of corruption and bribery.
However, the risks that threaten pharmaceutical operations are manifold, not limited to corruption. Pharmaceutical companies operate sophisticated supply chains. Thorough due diligence of each unit, in means of scope of services offered, functions and transactional history, is vital.
Mergers and Acquisitions constitute yet another risk category for pharmaceutical and medical companies. Pharma companies who acquire companies with alarming records, or with previous violations end up integrating risk into their operations.
Exemptions and Licenses, moreover, are not easy to manage. Sanction regimes accommodate several carve-outs, licenses, and exceptions for the export of pharmaceutical products most of which are regarded no to be risky. But even ‘exempted’ supplies are dangerous when routed to certain sectors or entities such as military hospitals. Unforeseen limitations, decisions that exceed authorisations, and misinterpretation of licenses result in cases of unintended violation.
Indirect exports and rerouting of products constitute another category of risk – unscrupulous Third parties can divert products destined for “clear” countries and forward them to designated destinations. International operations need to remain vigilant in identifying any flagged third parties. Furthermore, certain pharma supplies and medical devices happen to be “dual goods” forbidden for export, as they are used for the proliferation of WMDs or military end use. Companies need to go through periodic revisions and updates of dual goods regimes published by several countries. A nuanced, extensive, and well-grounded risk profiling should inform all decisions.
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