BACK TO CONTENTS Coping with complexity
One response to these complexities has been to seek mergers and acquisitions, in a bid to expand clinical intellectual property, sales and marketing resources and supply chain know-how. However, this consolidation and the pressures of maintaining growth have created hugely complex, global pharmaceutical organisations and may have contributed to instances of unacceptable behaviour going unchallenged as a result of the increasing opaqueness.
In order to combat this, organisations should see new partnering relationships as an important driver to review the impact of new business models on their risk capacity and overall risk appetite. It is important that organisations consider the injection of new risks into the business as a result of evolving strategies and the potential erosion of the existing risk management culture. This should include refreshing risk appetite.
Monitoring
Effective monitoring processes could provide early warning systems to prevent serious incidents. Increasing technology enablement has made risk monitoring more complex but is not a barrier to detection. While there are concerns that individuals may conceal their wrongdoing beneath swathes of data, technology can be an important enabler for risk and control monitoring. In a recent KPMG survey nearly three quarters of our survey respondents stated that technology is critical or a very important enabler for them to successfully integrate risk management across the organisation.1
Leadership’s ability to control activities has been made more diffi cult by outsourcing and/or offshoring of manufacturing, clinical trials and research and development (R&D), along with joint ventures, extensive use of agents and distributors. Complex supply chains now mean that drugs pass through multiple distribution points en route to market, leaving numerous opportunities for improper conduct, which erodes economic value and damages the corporate reputation.
The response from authorities has been to increase the level of regulation governing R&D, clinical trials, manufacturing and sales and marketing , with
© 2014 KPMG LLP, a UK limited liability partnership, and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International Cooperative, a Swiss entity. All rights reserved. The response
from authorities has been to
increase the level of regulation
governing R&D, clinical trials,
manufacturing, and sales and
marketing, with calls for ever-
greater controls and disclosure
calls for ever-greater controls and disclosure. Any expenditure on clinicians is tightly restricted and must be clearly tracked and reported. Regulators are working more closely together to harmonise their efforts, introducing international and global standards and guidelines and sharing intelligence across borders.
Stakeholders such as governments, patient groups and the media are another growing voice, insisting on higher ethical practices and transparency. Heightened public awareness of any breaches or incidents has caused widespread indignation, and may have infl uenced the rising levels of fi nancial penalties, which annually amount to millions and sometimes billions of US dollars globally. Through the 1990’s and 2000’s, the number and value of pharmaceutical industry settlements with US State and Federal Government rose dramatically2
.
1
Kpmg.com/global/en/issuesandinsights/articlespublications/risk-management-outpacing-capabilities/pages/default.aspx 2 KPMG analysis of 2011 company fi lings, April 2012
FOCUS 34
REGULATION
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