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The Scope Of Scrutiny


Contributed Commentary by Kathy Johnson

January 11, 2019 | As biotechnology, pharmaceutical, and medical device companies pursue treatment innovations to improve patient outcomes across diagnoses, many miss a significant step that has been fundamental in financial services and insurance: financial compliance risk management. Life sciences organizations need to pay closer attention to ensuring the integrity of their relationships as the federal government enforces the Foreign Corrupt Practices Act (FCPA) across all sectors.

The Cost Of Doing Business

Life sciences companies have been subject to large fines due to FCPA violations. A medical device manufacturer had to pay hundreds of millions to settle the U.S. Department of Justice (DOJ) charges. Pharmaceutical companies paid similar amounts for violations through the DOJ and Securities and Exchange Commission (SEC).

The FCPA Unit of the DOJ is continuing to enforce penalties on money-related crime. Investigators are making it a top priority to identify anti-bribery and corruption failures. I believe that companies should make it a priority to vet individuals and businesses against global sanctions, enforcement watch lists, and adverse media in an effort to identify potential risks.

Nip it in the bud

The fines for non-compliance are substantial, and the shock waves of these violations reach beyond the ledger. Any investigation and the resultant outcomes cause significant damage to a company’s brand, financial health, employee morale, and overall success. Damage control is not an effective solution; company policy should demand vigilance to identify corruption risks.

This vigilance strategy may be difficult to implement as global biotech and life sciences companies retain thousands of vendors and contractors all over the world. The companies typically only screen vendors every three to five years, based on my conversations with Chief Compliance Officers and Vendor Management SVPs in top 50 Life Sciences companies in the U.S.

To complicate matters, circumstances surrounding money-related crime are often complex with unclear or vague guidelines. In a highly regulated, global industry, corruption rules and regulations vary widely from country to country.

Once a contract is secured with an outside organization, life sciences decision-makers should proactively conduct preventive screenings to identify bad actors and potential criminal behavior.

Leaning on technology

Let’s say a company is about to spend several million dollars with a Contract Research Organization (CRO) to investigate a drug, or spend millions to acquire a small company started by a few scientists. How much confidence does a life sciences company have in the professional and personal background of these people? 

The very best thing a company can do is screen—ideally in a seamless and undisruptive way—contract manufacturers, clinical researchers and physicians, to name a few. There are automated compliance screening technology tools that can help identify potential bad actors in your network of vendors, suppliers and partners. 

For example, compliance solutions can seamlessly search associates or potential associates for criminal history in just seconds while covering over one thousand databases and law enforcement watch lists, such as Excluded Parties List System (EPLS). Compliance screening systems can help identify entities linked to over sixty risk categories including terrorism, narcotics, money laundering, fraud, and collateral crimes, as well as Politically Exposed Persons (and their relatives).

Technology allows the company to execute screenings daily, weekly, monthly, or bimonthly across 2.8 million risk entities from over 250 countries, speaking 53 languages that may represent non-compliance risk to the organization. This is far more efficient than looking up an individual doctor on SAM.gov.

Implementing the screening that includes an audit trail demonstrates intent to comply with federal rules and regulations. By developing and performing a diligent, frequent screening program, the company indicates to investigators that it has taken substantial measures to manage risk for the organization.

Please don’t wait for a crisis or a fine. Enhance your compliance protocol by leveraging advanced technology to conduct frequent and comprehensive screenings of vendors and partners. Screening brings value to your company’s relationships with regulators, consumers, and other stakeholders.

Kathy Johnson is the Vice President of Life Sciences for the Healthcare vertical of LexisNexis Risk Solutions. She can be reached at kathy.johnson@lexisnexisrisk.com.

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