Covid-19: Mitigating the increased risks of corruption in the Life Sciences and Healthcare sector

Written on 22 Mar 2021

The pandemic, coupled with the significant economic downturn, continues to produce pressures on businesses that could prove to be fertile ground for corrupt and unethical practices. Within the life sciences and healthcare sectors, perhaps most obviously with pharmaceuticals, these pressures might be particularly acute.

In this Insight, we analyse the relevant risks and how they should be addressed to best ensure compliance with the anti-corruption provisions in the UK and more widely.

Covid products

The race to produce effective Covid-19 vaccines and treatments may tempt unethical actors to try and cut corners given the size of the potential market globally and the potential to generate significant profits. To access that profit, there may be a temptation to seek to influence efficacy testing, or to otherwise improperly fast track the production process.

Contracts for the supply of these products will be negotiated by public officials across the globe, which in itself raises a corruption red flag. Equally, the logistics associated with mass scale global production and supply chains are likely to involve regulatory consents and processes that may be susceptible to malfeasance in the rush to get products onto the market.

General products

The global pandemic also presents indirect risks. With pharmaceutical R&D currently heavily focussed on Covid products, and likely to remain so for some time, there may be increased pressure to push existing products in an attempt to retain pre-Covid income and profit levels. Similarly, lockdowns across a number of countries will have created difficulties in accessing the component parts and ingredients for those existing products, which may again induce improper behaviour in an attempt to secure revenue. Knowledge and effective oversight of supply chains therefore continues to be a key element of effective risk mitigation. It is also an area of increasing focus for healthcare customers, such as the NHS, who are making increasing demands on suppliers as part of their ESG strategy.

The anti-corruption regime

In the UK, the Bribery Act has now been in force for nearly 10 years. Leading companies including Airbus, Rolls Royce and Standard Bank have paid substantial financial penalties for failing to comply with the legislation. Of particular note, the corporate failure to prevent offence in the Bribery Act means that commercial organisation can be liable for corrupt acts committed by third parties acting on their behalf without their involvement, or even knowledge, unless the organisation can establish that it had adequate procedures in place to prevent bribery. This is likely to be particularly relevant to pharma companies that rely on agents or other intermediaries to secure significant contracts.

The increasing scale of penalties being imposed by UK courts reflects the direction of travel that has been seen in the US for many years, where the Foreign and Corrupt Practice Act continues to be enforced with considerable global reach. Significant pharma contracts will often be paid for in US dollars, which alone may enable US authorities to exercise jurisdiction. In the EU too, member states are pursuing increasingly robust anti-corruption enforcement, most obviously in France with the powerful Sapin II provisions.

Mitigating the risk

Whilst ensuring compliance carries additional difficulties in these extraordinary times, there are five critical aspects that all businesses must ensure remain in focus during the pandemic:

  1. Routinely and objectively conducting risk assessments so that additional processes and safeguards can be put in place as may be necessary.
  2. Conducting effective due diligence in relation to new business and business partners, and, additionally, in relation to existing projects or contacts where their profile might have changed.
  3. Training staff to recognise the new risks and to escalate any suspicions to compliance or legal as soon as they are spotted.
  4. Having in place financial processes aimed at identifying anomalies that may indicate a corruption red flag.
  5. Maintaining an effective means, whether by a formal whistle blowing process or otherwise, whereby staff can safely and easily report concerns of improper conduct.

How can we help?

At Osborne Clarke, we have significant expertise and experience in advising businesses in relation to their anti-corruption programmes, across a number of jurisdictions including France, the Netherlands, Spain, and through our relationship firm in India, BTG Legal.

We also routinely assist businesses in responding to investigations by law enforcement agencies including the UK’s Serious Fraud Office, France’s Agence Francaise Anticorruption and the US Department of Justice. Whilst we do not provide advice on US law, we often work closely with leading US practices with whom we have long and successful relationships.