Third-party compliance is an increasing concern for growing life sciences companies as they expand into new markets. Third parties that engage in inappropriate activity present a number of serious risks to the companies that use them. Whether the third party makes products for the supply chain, manages labs and research activities or manages sales operations, the companies using them must be aware of their exposure. This presentation will offer strategies for companies that need to better monitor transactions with vendors. We will place particular emphasis on international activity, which may be scrutinized under the Foreign Corrupt Practices Act (FCPA). Technology solutions to aid third-party monitoring will also be discussed.

1. CPE Credit is not available for viewing archived programs.
Please visit http://www.grantthornton.com/events for upcoming programs.
Third party compliance for life sciences
companies:
Issues and strategies to mitigate risk
Original Broadcast Date: October 2013
© Grant Thornton LLP. All rights reserved.

2. Presenters
Lisa Walkush
Bill Olsen
Principal and Life Sciences
Leader
Advisory Services
Philadelphia, PA
Principal and U.S. AntiCorruption Leader
Advisory Services
Washington, D.C.
Matt Ruble
Director
Advisory Services
Philadelphia, PA
© Grant Thornton LLP. All rights reserved.
2

3. Third party compliance for life sciences companies
Learning objectives
• Define the issues and potential risks related to third-party
relationships
• Describe risk-mitigation strategies
• Identify current trends in FCPA guidelines
and enforcement
• Indicate the benefits of implementing
our Third-Party Integrity Framework
© Grant Thornton LLP. All rights reserved.
3

4. Third party compliance for life sciences companies
Agenda
•
•
•
•
•
Global Corruption Overview
Current Trends
Life Sciences Specific Risk
Third Party Program Development
Compliance Program Development
© Grant Thornton LLP. All rights reserved.
4

5. Global Corruption Issues: FCPA
Overview
Foreign Corrupt Practices Act summary
Congress initially passed the FCPA in 1977 in the wake of the Watergate scandal and after
discovering that more than 400 corporations had made questionable or illegal payments to
foreign officials to gain business or ease business processes. The FCPA’s goal is to prevent
the bribery of foreign officials and encourage the establishment of certain accounting controls
and practices.
Two key provisions of the FCPA
The anti-bribery provision prohibits U.S. companies and citizens, foreign companies listed
on a U.S. stock exchange, or any person acting while in the U.S., from paying or offering to
pay — directly or indirectly — money or anything of value to a foreign official in order to
obtain or retain business.
Books and records and internal controls provisions require issuers — any
company, including foreign companies, with securities traded on a U.S. exchange, or
otherwise required to file periodic reports with the SEC — to keep books and records that
accurately reflect business transactions and maintain effective internal controls.
© Grant Thornton LLP. All rights reserved.

6. UK Bribery Act
Overview
UK Bribery Act 2010
The UK Bribery Act covers the whole spectrum of relationships, not just the bribery of officials
like the FCPA. While there are similarities to the FCPA, the act is far broader in scope — with
virtually all companies that conduct business in the UK subject to its strict regulations. The act
applies to both public and private sectors. Penalties can be as severe as 10 years in jail
and/or unlimited fines for individuals, companies and partnerships.
Four key offenses:
1. Offering, promising or giving an advantage
2. Requesting, agreeing to receive or accepting an advantage
3. Bribing a foreign public official
4. Failing to prevent bribery
© Grant Thornton LLP. All rights reserved.

7. Third party compliance for life sciences companies
Agenda
•
•
•
•
•
Global Corruption Overview
Current Trends
Life Sciences Specific Risk
Third Party Program Development
Compliance Program Development
© Grant Thornton LLP. All rights reserved.
7

8. Current trends
Enforcement approach highlights
Control person liability
– Executives penalized even without alleged knowledge of
illegal acts
• Successor liability
– Mergers and acquisitions
• Dodd-Frank whistleblower protections
• Recent DOJ Guidelines
• DPA vs. NPA
• Prosecution of third parties and individuals
© Grant Thornton LLP. All rights reserved.

9. Current Trends
Source: 2012 Corruption Perception Index
(Transparency International)
Percentage
levels of public
sector
corruption
© Grant Thornton LLP. All rights reserved.

10. Bribery and Corruption Risk Indicators
Source: Corruption Indicators
(SFO| Serious Fraud Office)
• Entity directly or through agents or representatives enters
into sales agreements or material transactions with
foreign, government-owned entities, or other officials
– Pressure to make quick or early payments to contracts
• Entity has operations in higher-risk geographies
• Operations conducted in higher-risk industries
– individual may make unexpected or impulsive decisions
accepting projects/contracts
© Grant Thornton LLP. All rights reserved.

11. Bribery and Corruption Risk Indicators Source: Corruption Indicators
(SFO| Serious Fraud Office)
• Weak or ineffective anti-bribery and anti-corruption
compliance programs
– Abuse of decision making power when dealing with
certain contractors
– Avoidance of independence checks
– Missing documentation regarding meetings and decision
process
• The entity's competitors, partners, suppliers, agents or
customers recently charged or being investigated for
bribery or corruption violations
© Grant Thornton LLP. All rights reserved.

12. Bribery and Corruption Risk Indicators (con't)
Source: Corruption Indicators
(SFO| Serious Fraud Office)
• Indications of possible bribery or corruption violations by
employees, agents, contractors, or other affiliates
– company procedures or guidelines not being followed
– abnormally high commission payments being paid
• The entity uses third-party agents, consultants, or
intermediaries when performing general business in other
countries
© Grant Thornton LLP. All rights reserved.

13. Third party compliance for life sciences companies
Agenda
•
•
•
•
•
Global Corruption Overview
Current Trends
Life Sciences Specific Risk
Third Party Program Development
Compliance Program Development
© Grant Thornton LLP. All rights reserved.
13

14. Life sciences companies and risks
In almost every country across the
world, healthcare is a socialized program.
Hospitals are government entities and doctors and
other healthcare professionals are government
employees.
Pharmaceutical companies with a global reach are
especially exposed to risk in this environment.
© Grant Thornton LLP. All rights reserved.

15. Pharmaceutical and medical device companies
FCPA
As of today, the Department of Justice and the SEC have
prosecuted eighteen drug and device companies for FCPA
violations. Three companies have publicly disclosed
declinations (of course, there may be more which were never
made public). And sixteen companies are currently under
investigation.
Source: JD Spura Law News
© Grant Thornton LLP. All rights reserved.

16. FCPA Settlements
Pharmaceutical and medical device companies
FCPA Settlements in Millions
4.5
2013
142.2
2012
70
2011
23
2010
18.6
2009
0
20
40
© Grant Thornton LLP. All rights reserved.
60
80
100
120
140
160

17. Top 10 FCPA settlements
Pharmaceutical and medical device companies
Settlements
80
70
60
50
40
30
20
10
0
Johnson &
Johson
(2011)
Pfizer
(2012)
Eli Lilly
(2012)
© Grant Thornton LLP. All rights reserved.
GE (2010)
Biomet
(2012)
Smith &
Nephew
(2012)
17
Novo
Nordisk
(2009)
Orthofix
(2012)
Diagnostic
Products
(2005)
Phillips
(2013)

18. What can today's pharmaceutical and medical device
companies do mitigate the risk of corruption in their
businesses?
Proactively remediate risk by globally
identifying, assessing, investigating, and
training existing and proposed new third party
intermediaries.
© Grant Thornton LLP. All rights reserved.

19. Third party compliance for life sciences companies
Agenda
•
•
•
•
•
FCPA/UK BA Overview
Current Trends
Risk Management
Third Party Program Development
Compliance Program Development
© Grant Thornton LLP. All rights reserved.
19

20. Third party due diligence programs
• Develop a standardized on-boarding process for new third parties
• Assess the risk of existing third parties relationships
• Identify Business Sponsors within the business to manage the third
party relationships and their contracts
• Configure a technology solution complete with efficient workflow
capabilities and robust business-specific reporting
• Develop contracting system and training program for third parties
© Grant Thornton LLP. All rights reserved.

21. Existing Relationships
• Address/Examine Data Privacy concerns
• Extract, cleanse, and standardize third party data existing in
business's systems, databases, etc.
• Confirm relationship status
• Conduct risk assessments and investigations
• Analyze risk and recommend remediation of any red flags
identified within the investigative risk reports
• Issue contract to mitigate any existing or potential risk
© Grant Thornton LLP. All rights reserved.

22. New Relationships
• Completes and submits onboarding forms to initiate the onboarding process of a new third party relationship
• Examine risks of the proposed relationship
– name check
– geographic risks
– relationship risks
• Risk score is determined and categorized as low, medium, or high
• Any high risk relationships are sent for further investigation
© Grant Thornton LLP. All rights reserved.

23. New Relationships (con't)
• Once investigative report is generated, the risks present are
analyzed and any identified red flags
– make determination whether to proceed with engaging
third party relationship
• Issue contract to mitigate potential risks
• Train third party contact(s) on both business and
governmental compliance policies and procedures
© Grant Thornton LLP. All rights reserved.

24. Third party compliance for life sciences companies
Agenda
•
•
•
•
•
Global Corruption Overview
Current Trends
Life Sciences Specific Risk
Third Party Program Development
Compliance Program Development
© Grant Thornton LLP. All rights reserved.
24

25. Top recommendations
Establishing an effective and sustainable
compliance program
1.
2.
3.
4.
5.
Strong tone at the top
Alignment with DoJ "best practices"
Strong internal global support network that includes legal and HR
teams
Create awareness around developing a culture of compliance through
effective communication and training
Keep your finger on the pulse through ongoing monitoring and
reporting of all programs and implement corrective actions
© Grant Thornton LLP. All rights reserved.

26. Recent DOJ Guidance
Hallmarks of Effective Compliance Program
•
•
•
•
•
•
•
•
•
•
Commitment from senior management and clearly articulated policy against corruption
Code of Conduct and Compliance Policies and Procedures
Oversight, Autonomy, and Resources
Risk Assessment
Training and Continuing Advice
Incentives and Disciplinary Measures
Third-Party Due Diligence and Payments
Confidential Reporting and Internal Investigation
Continuous Improvement: Periodic Testing and Review
Mergers and Acquisitions: Pre-Acquisition Due Diligence and Post-Acquisition Integration
© Grant Thornton LLP. All rights reserved.

27. Sustainable program:
Representative timeline
Create: Understand current state.
Operationalize: Roll out all elements of
Maintain: Integrate all processes
Build approach Use external expertise (where
needed)
program. Finish all ―existing Third-Party‖ work.
into business-as-usual
4. Carry out Action Plan to
address risks
3. Design and implement a
strategy to respond to
identified risks
5. Report on results
2. Identify and assess risks
All new and
existing ThirdParties in
common
management
process/program
1. Establish strong company
management systems
Program Management & Governance
Change Management
© Grant Thornton LLP. All rights reserved.

28. Comments?
Questions?
© Grant Thornton LLP. All rights reserved.
28
28

29. Presenters
Lisa Walkush
Bill Olsen
Principal and Life Sciences
Leader
Advisory Services
Philadelphia, PA
Principal and U.S. AntiCorruption Leader
Advisory Services
Washington, D.C.
Matt Ruble
Director
Advisory Services
Philadelphia, PA
© Grant Thornton LLP. All rights reserved.
29

30. Disclaimer
This Grant Thornton LLP presentation is not a comprehensive analysis of the
subject matters covered and may include proposed guidance that is subject to
change before it is issued in final form. All relevant facts and
circumstances, including the pertinent authoritative literature, need to be
considered to arrive at conclusions that comply with matters addressed in this
presentation. The views and interpretations expressed in the presentation are
those of the presenters and the presentation is not intended to provide accounting
or other advice or guidance with respect to the matters covered.
For additional information on matters covered in this presentation, contact your
Grant Thornton LLP adviser.
© Grant Thornton LLP. All rights reserved.
30

31. Thank you for viewing this presentation.
Visit us online at:
www.GrantThornton.com
twitter.com/GrantThorntonUS
linkd.in/GrantThorntonUS
© Grant Thornton LLP. All rights reserved.