The industry has repeatedly become embroiled in allegations with regard to marketing and sales related fraud and other lapses in compliance. Companies have been hampered by substantial risks and mounting costs associated with the prosecution by authorities. The U. Department of Justice DoJ has led the charge against the sector and they have become particularly emboldened post global financial crisis to pursue ever larger settlements.
Alongside the increased financial penalties, we have been concerned by the reputational damage and operational impact arising from stricter scrutiny of companies and enforcement of regulation in the U. Many of the leading global pharmaceutical companies have fallen foul of these violations. Neither have these breaches been confined to the major developed markets. We have seen a rapid shift in regulatory intolerance to corrupt practices in emerging markets where there had been a perception that rule of law was weak and paying bribes was a cost of doing business. This has been most notable in China, as President Xi Jinping has overseen a widescale crackdown on graft.
Breaking bad: Business ethics in the pharmaceutical sector
The focus on the financial impact has largely been on the immediate cost of dealing with the violations — namely the headline amount of the regulatory settlement. However, we consider this amount to be only a portion of the overall commercial harm that a company suffers when its employees are caught breaking bad. Much of this is also relevant to the financial industry that has struggled with similar issues.
Sales practices in the pharmaceutical sector have been an area of long-term concern to us and we have been conducting engagement on this issue for more than a decade, both one-on-one and collaboratively in the U. Our engagement intensified as the regulatory fines and settlements mounted and the poor business conduct within the industry became increasingly material to investors.
We have traveled to the U. The key recommendations we have been making to companies are:. Clawback is defined as the provision by which companies can recover bonuses and other variable pay after they have vested and have been paid out. Blumenthal, D. Doctors and drug companies.
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About the book
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Ethical Issues Associated with Pharmaceutical Innovation
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Ethical Pharmaceutical | Pharma IQ
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