A quick check of the global pharmaceutical (pharma) industry’s temperature shows that it is in good health: worth approximately $934.8 billion in 2017, it is estimated to reach over $1,170 billion this year. This encouraging prognosis has been aided by several factors – from rising incomes and enhanced medical infrastructures to rapid advancements in the treatment of chronic diseases and the prevalence of patented products.
However, this does not mean pharma companies are immune to the risks that arise from global growth. Inherent risks have been accentuated by the volume and complexity of change within the industry – not to mention other geopolitical and unforeseen events that have dominated headlines in recent months.
Fast-paced, and unpredictable shifts within the pharma industry have complicated vital strategic planning processes that allow decision-makers to rethink business models, products, customers, and markets. This lack of oversight can compromise key business requirements, such as the ability to properly implement and monitor activities associated with field sales and marketing.
Failure to assess internal policies and external requirements linked to sales and marketing can have serious consequences that also generate financial and compliance risks:
- Violations of various anti-bribery laws, such as the US Foreign Corrupt Practices Act.
- Violations of product marketing legislation, such as the ABPI, EFPIA, and IFPMA in the US.
- Violations of industry standards.
- Financial losses associated with loose controls around expense reporting and discretionary spending processes.
- Reputational damage with both consumers and regulators caused by non-compliance.
Pharma companies operate in a highly regulated environment, in which non-compliance can have a profound effect on cost, reputation, and, ultimately, the lives of customers or patients. This ever-present risk is being exacerbated by the challenge of finding new strategies to improve the efficacy and efficiency of products against a backdrop of new legislation, evolving interpretations of existing legislation and increased enforcement. For example, in the US, compliance with Risk Evaluation and Mitigation Strategies (REMS) – a drug safety programme that is enforced by the Food and Drug Administration – is required to ensure the benefits of a medication outweigh the risks.
The pharma industry is experiencing heightened regulatory scrutiny both in the US and globally across several areas, including: sales and marketing, government drug price reporting, privacy of patient/customer health information, clinical operations, post-marketing drug safety reporting, and quality control activities around manufacturing.
Non-compliance with industry regulations can lead to crippling financial penalties. Recent high-profile investigations and prosecutions have resulted in significant financial judgments and criminal convictions. Most notably in the US, where allegations surrounding abusive promotional practices linked to the opioid crisis have played out in courtrooms, resulting in huge settlements being extracted from pharmaceutical companies. For example, Purdue Pharma – the manufacturer of OxyContin – recently agreed to plead guilty to criminal charges related to its marketing of the addictive painkiller and faces penalties of over $8 billion.
Changes in revenue streams and cost models have also increased financial risk exposure in the industry. Pharma companies face stiff competition caused by pricing pressures, scientific breakthroughs, expanding demand for healthcare access, and emerging digital and analytic capabilities – forcing them to explore unconventional business models.
From a scarcity of new blockbuster drugs and the growing emphasis on global expansion to increased M&A activity and a shift towards outsourcing key functions, the evolution of the pharma industry is having a notable impact on operational risk.
A pervasive operational risk facing pharma companies has been brought into sharp focus by recent events: supply chains. The backbone of the industry, supply chains have become increasingly complex in a globalised economy, with third parties often playing a prominent role. Agile and resilient supply chains are vital in an industry that relies on the production and distribution of high-quality medicine to the right place at the right time – and the stakes are high for pharmaceutical companies. The repercussions of breaks or bottlenecks in this process stretch beyond brand reputation, customer satisfaction, and profit; an ineffective supply chain could disrupt the healing processes of patients and produce negative effects on public health.
This has been exacerbated by Brexit and the Covid-19 pandemic:
- Brexit: after months of negotiations, the UK and the EU reached a deal on 24 December 2020, signing a provisional UK-EU Trade and Cooperation Agreement (TCA) that will define their relations going forward. While the TCA provides significant free-trade arrangements, it marks the end of many free-market access benefits for the UK. This has triggered ‘teething problems’, leading to port delays and cross-border friction as businesses face the immediate shocks of Brexit.
- Covid-19: after the world was blindsided by the Covid-19 pandemic in 2020, the pharma industry was forced to rapidly pivot and flex to support healthcare globally – a rapid shift that magnified vulnerabilities within its supply chain. For example, the reliance on China for raw materials, intermediates, and APIs, as well as India for generic drug products, remains a significant concern. Meanwhile, industry research shows 75% of pharma supply chain leaders believe the pandemic will increase problems surrounding drug diversion, including theft and counterfeiting of critical products.
Integrated risk management
The rapidly changing pharma landscape with its rising regulatory complexity, supply chain issues, data-driven innovation, and exposure to world events has brought risk-management capabilities into sharp focus. Unfortunately, pharma companies are often poorly prepared to navigate these choppy waters because their risk controls lack the scope, data, and processes required to identify, assess, treat, monitor, and respond to these threats effectively.
With integrated solutions in risk, strategy, projects and people, Camms software helps businesses make the right decisions, manage risks, align talent, and focus on what matters. Camms.Risk – a cloud-based SaaS solution – facilitates risk, incident and compliance management across all IT systems and processes. This central point of oversight has the power to drive key risk requirements for your business:
- Risk management: embeds operational risk management into your business’s culture, so you can identify, track, and manage risks effectively.
- Incident reporting and monitoring: facilitates incident and near misses reporting in real-time, and the investigation process post-event.
- Compliance management: identifies areas of non-compliance to drive business action and address legislative changes. Enables organisations to effectively manage their compliance monitoring programme and address regulatory changes.
- Register management: allows you to access, update and maintain registers efficiently.
- Audit management: allows you to schedule and manage internal and external audits and utilise the results.
Keeping pace with change requires awareness of, understanding of, preparation for, involvement in, and reaction to the changes in question. In the context of rapid changes in the pharma industry and the subsequent impact on risk exposure for companies in this space, Camms software empowers businesses with the right level of understanding, oversight and action by integrating relevant risks into enterprise processes – making them more resilient.
Find out more about how Camms can help you achieve integrated risk management by requesting a demo of our software today.