Effective due diligence the best medicine for the pharmaceutical industry

30 Jul 2015 8:13 am by Mark Dunn

With an increased demand for cures to all manner of illnesses, management of an increasingly elderly global population and the development of a stream of new genetic techniques, there can be few industries facing so many shifting sands of change.

At the same time, demand for lower cost drugs is limiting the time between research and mass adoption, reducing the time available for research, development and testing. Globalisation is also seeing an increasing number of mergers and acquisitions as well as a more complex global supply chain for pharmaceutical companies.

Multiple issues, multiple risks

The sheer number of issues faced by due diligence professionals in the pharmaceutical industry is vast: from pricing to research; supply chain management to ethical marketing; patient safety to clinical trial management, there are so many potential risks to pharmaceutical companies, both from a reputational perspective and from a regulatory one.

Such issues can impact both on reputation and the bottom line.  In 2012, the EU's highest court upheld a fine against AstraZeneca for blocking the entry of cheaper rivals to its ulcer drug Losec.  The fine was €52.5 million.  

All of this points to the need for the highest possible level of scrutiny when it comes to due diligence.  If the industry moves rapidly, so compliance professionals and corporate officers need to move quicker still to remain on top of significant corporate risk.

Just enough is not enough
Paying lip service to due diligence matters will not cut it in this environment.  In a complex environment where there may be multiple global joint ventures taking place, sales people operating across the world and products being sourced from dozens of different countries, a proactive, comprehensive and ongoing compliance and due diligence activity is required.  
With so much information available for free or at low cost online, it is tempting for pharmaceutical companies to rely on publically available information to check third party partners, distributors and suppliers. In fact this is as good as useless.  Unless compliance officers can be sure of the source of information, it cannot be relied on.  Databases that provide access to checklists are only as effective as the regularity with which they are updated.  

Very few names are unique, so it can also be difficult to know with certainty that an individual or company is the entity with which you are working.  Databases that throw up any possible matches are only useful up to a point where manual intervention needs to take place.  Pharmaceutical companies with hundreds of customers may have to plough through thousands of potential matches, with little idea of which are correct – an extremely onerous manual task.
LexisNexis uses a complex cross referencing process to ensure the reduction of false positives and to reduce the number of matches to a far more manageable number, enabling due diligence personnel to focus on policy and implementation rather than laborious and repetitive tasks.  

Demonstrating good practice

In other industries the ability to demonstrate an effective due diligence process that has been outlined, followed and carefully catalogued has acted as mitigation to companies facing issues with third party suppliers or partners.  The very act of carrying out a thorough and effective due diligence process has counted in the company's favour.  

There have never been more reasons for pharmaceutical companies to turbo charge due diligence practice.  The complexity of the modern supply and customer chain, combined with the increasing volume of regulation and fines being issued presents perhaps the most critical risk to pharmaceutical companies today.  LexisNexis can help you to ensure that you have an effective and meaningful due diligence programme, even for the most complex companies' circumstances.

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