Nice guys finish first

The status quo of international trade is in tatters following Brexit and the election of Donald Trump. Life science companies on both sides of the Atlantic must now consider the shockwaves this could have on compliance. Michaeline Daboul digs into the reasons why, whatever the landscape, honesty and scruples win out in the end…

Life science companies are trying to figure out the state of global compliance laws now that the UK has voted for Brexit and the US has Donald Trump as its 45th president.

As the UK breaks away from the EU, many believe compliance and transparency will continue to be important

No one knows for sure how this will all play out. But history, precedent, and common sense provide the framework for thoughtful speculation. As the UK breaks away from the EU, many believe compliance and transparency will continue to be important. In fact, the election of Trump in the US puts more of a burden on the UK to be responsible for cross-border transactions.

If Trump indeed ushers in a period of deregulation, as some are predicting, then the UK will have to take on the role of moral authority. Along with the US, the UK has served as a pioneer and role model when it comes to compliance regulation. Its Bribery Act is a UK law and not a European one. Therefore, the law should remain untouched despite Brexit. While the EU’s GDPR (General Data Protection Regulation), with a May 2018 start date, would no longer necessarily apply, it behooves the UK to comply, so it remains relevant in the EU market.

Healthcare regulation will be greatly influenced by GDPR because much of the information collected from patients will fall under this protection

The GDPR is a regulation meant to strengthen and unify data protection. The idea is to have one overarching law for all EU countries about personal data in the digital age. Healthcare regulation will be greatly influenced by GDPR because much of the information collected from patients will fall under this protection. One question that still looms is what will happen to the EMA (European Medicines Agency), which provides scientific evaluation and supervision of pharmaceuticals for people and animals, and is currently headquartered in the UK. This agency could potentially move, which would mean safety checks would be carried out elsewhere. Still, it would not mean the end of compliance.

Back in the US, the markets rallied in the wake of Trump’s election, in part because companies believe he will usher in an era of deregulation. He has criticised the American government for taking a hard line with compliance, which he says has made it next to impossible to do business effectively abroad.  “The era of vigorous FCPA enforcement, which ran from about 2000 (give or take a couple years) up to the present, is over,” writes Matthew Stephenson¹, a professor at Harvard Law School. Trump has been a vociferous critic of US regulations, particularly when it comes to working with countries abroad. In a 2012 episode of CNBC’s Squawk Box², he famously referenced the FCPA (US Foreign Corrupt Practices Act) of 1977. “Every other country goes into these places and they do what they have to do,” said Trump. “It’s a horrible law, and it should be changed. We are like the policeman for the world. It’s ridiculous.”

FCPA, which is landmark legislation, addresses transparency in accounting practices and bribery of foreign officials. While the law allows for some leniency when doing business in places where “greasing” is a cultural norm, enforcement was more widespread under the administrations of George W. Bush and Barack Obama. And some life science companies have had to pay hefty fines for non-compliance and errors in judgment.

The Olympus Corporation of the Americas and Olympus Latin America, Inc., both subsidiaries of the Japanese company Olympus Corporation, recently settled multiple cases with the US Department of Justice (DOJ) that included FCPA, Anti-Kickback Statute, and false claims violations. In total, the subsidiaries paid more than $623 million in criminal and civil penalties, the vast majority of which were attributable to the anti-kickback claims. Olympus induced physicians, hospitals, and other healthcare providers to buy Olympus products by providing inappropriate grants, payments for travel and recreational activities, consulting payments, gifts, and no-charge loans of equipment, according to the Statement of Facts accompanying the deferred prosecution agreement.

The Olympus matter is significant as it represents a rare case of US enforcement of both the Anti-Kickback Statute and the False Claims Act simultaneously by the US DOJ. The recent Olympus cases come on the heels of a widespread accounting scandal, which resulted in the resignation of most of the company’s directors, multiple arrests, and the loss of more than 70 percent of the company’s market capitalisation. In response, the company has appointed a global compliance officer in the US to avoid making the same mistakes again.

One thing is certain, anti-bribery and accounting transparency in one form or another are here to stay

Still, Trump’s appointment of Republican Jeff Sessions for attorney general leaves some people imagining the end of strict interpretation of regulation laws. The absence of Mary Jo White, who headed the SEC (Securities and Exchange Commission) since 2013 and was the first Obama appointee to resign after the election, sends the signal that her stricter enforcement could be dismantled. On the other hand, Trump has flip-flopped on issues since the start of his campaign. In the days after his win, in fact, he went from having said climate change was a hoax to admitting humans might have some influence on it. In other words, no one can be sure. One thing is certain, anti-bribery and accounting transparency in one form or another are here to stay.

Companies the world over should continue to focus on improving business process workflows, transparency between organisational stakeholders, and communicating a “tone from the top” of “doing the right thing” by managing end-to-end business activities with proper controls. Here’s why:

• Compliance laws remain on the books

No matter what happens with Brexit or Trump, at least for the near future, compliance laws still exist in both countries. Unless someone gets them repealed - which in theory is possible but highly unlikely – people must follow the law. There are more than 50 pharmaceutical companies that belong to the ABPI (Association of the British Pharmaceutical Industry), a trade association for the research-based pharmaceutical industry in the UK. The ABPI “works at the heart of policy development and decision-making to ensure that patients are able to benefit from the latest and most advanced medicines,” according to the organisation’s website. These UK companies market and sell their medicines to a large US population. An obvious reason to comply with the US FCPA is that non-compliance can expose a company to a criminal or civil FCPA enforcement action by the US DOJ and/or the US SEC. Even if some experts believe the FCPA won’t be enforced with as much verve as before, it’s still risky to take any chances. Frankly, the damages could wreck a business.

“Settlement amounts in an actual FCPA enforcement action are often only a relatively minor component of the overall financial consequences that can result from FCPA scrutiny or enforcement³,” writes Mike Koehler, assistant professor at Southern Illinois University School of Law. “It shifts the FCPA conversation away from being a purely legal issue to its more proper designation as a general business issue that needs to be on the radar screen of various business managers operating in the global marketplace,” according to Koehler’s article. With so many legal variations in different parts of the world, global business leaders need help understanding the different laws and regulations and industry codes of conduct they encounter on a regular basis. A comprehensive compliance program using the latest software solutions can demonstrate a company’s commitment to a culture of compliance and provide a full audit trail and data track throughout the entire business process.

• The world is still flat

As Thomas L. Friedman explained⁴, a global marketplace means every company has to work in every country as though it is a native there. This can be overwhelming to say the least. Compliance solutions, that aggregate business data on a daily basis, allow companies to manage the constant changes in laws, currency and data differences, and multiple language cross-border interactions. In essence, streamlined compliance allows companies to be flexible and easily adapt to new regulations anywhere in the world.

• Big data rules

Everyone wants a competitive edge. By aggregating data from various business silos within a company to ensure compliance to local, regional, and global laws, companies can analyse every touch point in a business encounter or transaction and leverage the information. This can help leaders see the forest through the trees so to speak. They can better understand what’s working and what isn’t, enabling them to come up with new processes and initiatives to drive innovation and good business practices. It isn’t just about catching the bad guys or even working within the law. It’s also about recognising opportunities and maximising a company’s potential.

• Everyone wants to be the hero 

Finally, compliance is simply the right thing to do. This is how life science companies – most of which are dedicated to helping patients get the best care possible – should do business.

Life science companies that want to succeed regardless of the political situation should practice trickle-down ethics

No one can guarantee what life, work, or compliance will look like in the era of Brexit and Trump. But building an organisation with an ethical backbone makes good business sense. Life science companies that want to succeed regardless of the political situation should practice trickle-down ethics. Support of compliance – being honest and having scruples – should come from the top of the organisation and make its way down to middle management and beyond. Even if it seems hard to believe now, in the end, nice guys never finish last.

Author: Michaeline Daboul, CEO & President at MMIS.

References 1. Stephenson, Matthew, 2016, Global Anti-Corruption Blog, Page 1. https://globalanticorruptionblog.com/2016/11/10/us-anticorruption-policy-in-a-trump-administration-a-cry-of-despair-from-the-heart-of-darkness 2. CNBC’s Squawkbox video. http://video.cnbc.com/gallery/?video=3000089630&play=1 3. Koehler, Mike, 2014, FOREIGN CORRUPT PRACTICES ACT RIPPLES, American University Business Law Review Vol 3.3. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2449252. 4. Friedman, Thomas L., 2005, The World Is Flat: A Brief History of the Twenty-First Century (Farrar, Straus and Giroux)