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Panel: Overview of CEE Pharma Compliance Issues and Initiatives – Discussion Starter The 5th International Pharmaceutical Compliance Congress and Best Practices Forum Dr. Martin Schloh, Partner Istanbul May 4, 2011
Russia is one of the fastest growing economy with Key compliance risks in Russia typical compliance risks Key compliance risk in Russia Intermediaries • Historically international companies involve/depend on the involvement various intermediaries in order to conduct business in Russia • Examples are service providers for imports, warehousing and distribution, customs clearance procedures, products certification, licensing • Intermediaries are hardly avoidable PwC
Growing pains • Rapid business growth and market expansion did not allow the companies to build a sustainable internal controls framework for the management to monitor and oversee the business. • That resulted in poor books and records procedures and lack of monitoring and corporate governance.
Lack of transparency • Significant bureaucratic barriers and complexity of procedures, in particular in dealings with the government bodies has created lack of transparency in government related operations, such as licensing, tendering, distribution etc.
In addition the pharmaceutical industry deals with industry specific compliance risks Key compliance risks of pharma companies in Russia Lack of transparency in Procurement
Procurement remains to be one of the highest compliance focus areas. Lack of clear procurement rules and procedures creates various opportunities for fraud and corruption
Lack of transparency in Business partners selection process
Business Partners due diligence is still not widely applied in Russia. Very few companies have implemented robust, well documented Business Partners selection process
Interaction with medical professionals
Due to the low level of income in the medical industry all compensations and benefits given to medical professionals (remuneration of opinion leaders, promotion payments, free attention of the medical conferences) remains to be one of the hottest ethical and compliance topics in the industry
Tone from the top
As ethical standards were compromised in various circumstances for the sake of business growth, ethical and compliant behaviour of the companies management remains to be a high compliance focus area.
Control over books and records
Significant regional expansion did not allow many companies to set up a proper books and records platform for the sustainable growth
Gifts and entertainment
Russia has a gifts giving/receiving culture. Implementation of gifts/ entertainment limits in the companies meets resistance from the employees and sometimes local management.
Poor monitoring and internal controls framework
Compliance and internal control functions (together with other “back office� roles) were sacrificed in the economic downturn for the sake of business stability.
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What are pharmaceutical companies doing to improve compliance in Russia? Overview of compliance response to fraud and compliance risks
Gifts & Hospitality Internal Values
External Environment
Business Conduct Guidelines
Policies & procedures
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Intermediaries Political contributions Charitable Contributions Sponsorships Tender Procedures Distributors selection Record-keeping procedures
Corporate culture of zero tolerance to any types of fraud and corruption. Tone from the top – cultivating the high business Ethic and adherence to the corporate values.
How can pharmaceutical companies control and minimize compliance risks in Russia? Recommendations for mastering compliance risks in Russia • Enhance compliance behavior by setting an appropriate tone from the top and promoting compliance culture. • Develop and implement a compliance framework which would cover such areas as: − Selection and relationships with distributors − Tendering and procurement − Interaction with government authorities − Interaction with medical professionals • Create an internal Compliance manager function (if not yet done) which would be integrated in the global compliance network • Control interactions with intermediaries
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