Compliance risks within the Life Sciences industry increase during Covid-19 pandemic
More than a third (39%) of the Middle East’s Life Sciences industry leaders identify bribery and corruption as the biggest compliance risks faced by the industry, according to a new KPMG study. KPMG’s first-ever Middle East Life Sciences compliance survey polled multinational Life Sciences companies in the region, as well as large regional manufacturers and distributors, on compliance challenges that cropped up during the pandemic.
Nicholas Cameron, Head of Forensics KPMGLower Gulf said: “Life Sciences businesses have grappled with a broad spectrum of issues during the pandemic. Associated compliance risks include improper payments to healthcare professionals (HCPs) to retain product sales and distributor channel stuffing. KPMG’s inaugural report on Life Sciences compliance is an effort to bring clarity to the related issues and how Life Sciences companies can respond to these risks.”
A majority (93%) identified the US Foreign Corrupt Practices Act’s as the main anti-bribery and corruption (ABC)law driving compliance priorities for Life Sciences companies in the Middle East. Sixty-four percent of Life Sciences leaders believed their commercial, sales and marketing departments were ‘highly likely’ to be exposed to bribery and corruption because of significant interactions with HCPs.
Risks also stem from compliance officers’ reliance on the accuracy of information provided by the sales team, as well as distributors or other third parties, who deal directly with HCPs.Value transfers to HCP (61%) and misconduct vis-à-vis charitable donations(32%) were also identified as major areas of concern. When it came to risk mitigation strategies, 86% believe training and regular communication were most effective to mitigate ABC risk, followed by testing and monitoring according to71%.
Financial misstatements or companies not maintaining accurate books and records also emerged as a major compliance risk. Channel stuffing was acknowledged as a common financial statement risk (rated ‘high risk’ by 54%). According to the KPMG report, 32% said that the commercial, sales and marketing department was the most likely to be exposed to the risk of financial misstatement. The complexity of transactions was highlighted as the biggest contributing factor (43%), followed closely by financial targets and securing bonus or promotion (39%). Our survey finds that regional SOPs and guidance, training and transaction monitoring are most effective to mitigate financial misstatement risks.
More than half (57%) described their existing Middle East ABC compliance programs as ‘advanced’. While corporate functions have largely worked remotely during the pandemic period, front-end sales and distribution teams have been active in the field in order to meet patient demand and maintain HCP interactions. However, compliance monitoring appears to be reduced. Nearly half (46%) of stakeholders felt their organization’s compliance functions were adequately staffed, while one-third(32%) believed the additional investment was required. An overwhelming majority (96%)of industry professionals were investing in technology to support compliance monitoring activities. As a priority, about half (46%) of industry leaders are looking to increase the efficiency and effectiveness of their compliance programs using regional industry data points on fair market value for high-risk expenditures.
To read the full Middle East Life Sciences Compliance report please visit https://home.kpmg/ae/en/home/insights/2021/03/middle-east-life-sciences.html