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Is the Pharma Industry Paying Enough Attention to Their B2B Relationships?

February 25, 2020

Within pharmaceutical companies, compliance often dominates decision making – especially in this age of intense scrutiny and looming litigation.  During my 8+ years of pharma experience, it became obvious to me that there were certain functional areas within a company where compliance was more paramount than others.  Speaker Programs, Sales Force Training, Clinical Trials, and Sampling were all areas where compliance controls were particularly prioritized and monitored.

A commonality in all of those areas is that the compliance is focused on ‘individuals’ – i.e. making sure that a consultant, speaker, employee, healthcare provider, and/or principal investigator had proper credentials, licensure, registrations, training, etc.  What I observed during my tenure was that this same level of diligence was not being applied to ‘entity’ compliance.

All pharmaceutical companies have hundreds to thousands of business-to-business relationships.  If you consider all the vendors in procurement, all the creative agencies and market research firms working with marketing, all the wholesalers, pharmacies, and clinics within the distribution network – the numbers add up quickly.  I’ve often found that when you start to ask questions about what type of screening and monitoring is being applied to these businesses, there is not a lot of clarity.  Most pharma employees I speak with believe some type of verification and monitoring is occurring through the Procurement group, but most are not able to provide more details beyond that.

Often times Procurement groups are providing some kind of initial screening, usually for exclusions or debarments, which is important, but there are gaps in this approach.  Frequently, they do not look into ownership or other licensing or registration requirements associated with the entity.  More concerning, though, is the lack of ongoing monitoring after the initial screening has taken place.  Data is dynamic – if a company checks an entity at only a single point in time or only periodically throughout the course of the relationship – a large pharma company can expose themselves to the risks of noncompliance.

Beyond Procurement, entity screening within a pharma company becomes even more complicated.  One area rife with potential issues is Distribution.  Pharma products are distributed to literally thousands of locations, which include retail pharmacies, specialty pharmacies, long-term care pharmacies, clinics, hospitals, infusions centers, etc.  In most cases, the wholesaler coordinates the sale, availability, distribution, and warehousing of pharmaceutical products.  This complex business model involving multiple intermediaries is where B2B compliance can get very complex for the pharmaceutical industry.

A baseline assumption of many pharma clients is that the wholesaler is maintaining strict compliance controls within their distribution network.  While it is often the case that wholesalers screen and monitor their business relationships, despite these controls, noncompliant individuals and entities remain in the system undetected, leaving pharma companies vulnerable to potential litigation.

One of many examples of this occurred just last year in Loudon, Virginia. The Lansdowne Pharmacy had been owned and operated by an unlicensed pharmacist, Nader Abedinzadeh, since 2013.  Thousands of prescriptions had been processed and products across all pharmaceuticals had been dispensed illegally.  Furthermore, this pharmacy was dispensing opioids at a suspicious rate, which drew the attention of the DEA, ultimately leading to the pharmacy’s shut down in 2019.  One can assume that this pharmacy was working with multiple distributors and wholesalers across the landscape, yet their compliance controls did not catch this ongoing criminal activity.  Read the full story here.

As of yet, no pharmaceutical companies have faced litigation regarding their involvement with the Lansdowne Pharmacy, but this is the type of situation where pharma could invite more OIG scrutiny.  Asking simple questions can create awareness around the need for better compliance processes. Questions such as:

  • Do you ultimately know where your product is being sold?
  • Who is dispensing it?
  • What controls do you have in place?
  • How do these controls prevent your products from ending up in illegal pharmacies?

Relying solely on a third party’s compliance controls can be a dangerous proposition especially when you have data tied to the end user.  This is why many pharma companies are starting to implement their own verification and monitoring tools around their entity populations to bolster compliance across their business model.  Such screening and monitoring services are easy to implement, cost effective, and go a long way to protecting the optical, reputational, and financial risks inherent with thousands of B2B interactions.  When it comes to compliance and the pharma industry, an ounce of prevention is worth a pound of cure.

Please join me on Wednesday, April 1, 2020 as I present a webinar that dives deeper into Entity Verification Trends and how they are changing the way Pharma protects their organizations: Click to Register

Joe Thompson Written by Joe Thompson
VP of Pharma & Pharmacy Solutions
Results Driven Problem Solver. Healthcare. Technology. Innovation.
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