Let me be clear, I am talking about corporate compliance in the life sciences industry here. Why is compliance important? In short, it helps corporate businesses keep their money and avoid lawsuits.
TL; DR – Why is compliance important?
Compliance makes sure your salespeople work in a legal, ethical and monitored way, which eliminates the risk of the above-mentioned lawsuits and other inconveniences. In cases where a company’s employee is implicated in money laundering or conflict of interests, the whole company loses money as well as trust. For a longer explanation, you can go to Diligent and check out their article on why compliance monitoring is important.
The US, for example, introduced an anti-money laundering law as a part of the USA Patriot Act. The Act itself focuses more on terrorism, but also impacts the U.S. community of financial professionals and financial institutions with its Title III provision, entitled „International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001.” The money laundering law includes bribing, tax evasion, and other questionable practices.
In the EU, “The European Commission carries out risk assessments in order to identify and respond to risks affecting the EU internal market. It promotes the adoption of global solutions to respond to these threats at the international level.
The European Union adopted robust legislation to fight against money laundering and terrorist financing which contributes to those international efforts. The Commission ensures effective application of this legislation by reviewing transposition of EU acquis and working with networks of competent authorities.”
How salespeople interact with doctors/physicians
When you hear about corporate compliance it is most often related to sales and then maybe marketing, though not as much. Sales reps are the ones interacting with clients. Depending on what they do and how they do it, you can get anything from a happy client to corporate lawsuits.
The easiest rule? Don’t let sales lie to compliance. Is it doable? Depends. Let’s look at the typical channels used by sales reps to communicate with clients and report to compliance.
This one is easy. You can monitor communications and make sure that they’re compliant. A popular sales practice is to send several emails to the customer’s inbox (work email or personal email, depending on the nature of your business). This you can track.
The tricky part comes when your sales rep gets a request for more information, a slide deck most often. In most companies building sales and marketing collateral takes time and resources, which are often scarce. So, a sales rep is told to wait, probably until the customer loses interest. This is how you get your people angry. What do they do? Come up with their own materials, often not compliant with the company policies.
Phone call and text
Similar to email but harder to track. You often have no control over what your sales reps do and which sales practices they use. Persuasion is an art, but it still needs to be kept compliant.
When your sales team’s bonuses depend on the sale, they may be prone to push a bit too much, to get a bit out of line, to bend the truth just a little. Although probably untraceable, these moments stay in the heads of your leads for a long time.
Meetings
A common practice in the life sciences industry is to take the client (doctor or physician) out for dinner. The practice is completely legal but has its own regulations. Many countries have government regulations that prohibit excessive expenses made by sales to doctors, which applies to both total yearly spending for a single doctor/hospital, as well as individual meal amounts.
Moreover, companies are required to report to the government all their HCP and HCO-related expenses, so the individual transactions need to blend with the rest of the expenses, and not stand out as excessive. In order to avoid getting in trouble with the law, many companies have adopted tighter internal limits related to individual meals and doctors. BI tools can help considerably here, by allowing companies to compare their expenses with the ones made by the competitors (for which data is publicly accessible) and fine-tune their internal rules.
Gifts and goodies
Through the years the “innocent” gifting tradition has become more regulated to promote transparency and legitimate business practices. Expensive watches and the likes became prohibited by the law and remain so in the whole of Europe, the USA, and Canada.
In 2019, IFPMA imposed a complete ban on gifts and promotional aids for prescription medicines globally. In 2020, France prohibited companies manufacturing or marketing healthcare products or providing healthcare services from providing benefits to HCPs and HCOs. Marketing materials, the so-called “goodies” that are directly related to the HCP’s professional activities are excerpted in this case.
The above-mentioned acts criminalize (among other behavior) the giving of cash or gifts to foreign government officials intended to influence them or improperly secure business. In countries with state-run health systems, including China and various countries throughout Europe and South America, HCPs often qualify as foreign government officials. This has led to criminal enforcement and millions of dollars in penalties for numerous pay-to-prescribe schemes in the recent past.
The general rule for European Union states that
“No gifts or other benefits may be given to healthcare professionals unless they are inexpensive and relevant to the practice of medicine. Any hospitality provided in conjunction with an event must be limited to the main purpose of the event and given only to healthcare professionals.
Directive 2001/83/EC also provides rules restricting the supply of medicine samples, promotional aids, gifts, and hospitality to healthcare professionals. There is a general prohibition on inducements to prescribe and companies may only supply inexpensive gifts to healthcare professionals.
Companies may provide reasonable hospitality to healthcare professionals provided that it is strictly limited to the main purpose of a promotional or scientific meeting and never extended to persons other than healthcare professionals. Because most healthcare professionals in the EEA are also government employees or contractors, companies must also consider anti-bribery laws.”
How your sales reps probably lie to compliance
Compliance exists to help corporations make sure the laws and regulations are respected and the law enforcement agencies won’t interfere in day-to-day operations.
However, there are always people who know the laws and how to get around them, which allows them to move under the radar and never get caught.
Until now.
The goal of the compliance team is to find these risky people and track them to avoid compliance breaches. Machine learning and other algorithms can detect high-risk employees and alert the compliance office when they behave atypically.
Whether you have an internal compliance department or an external service provider, or your legal department keeps track of compliance, you need to know how to prevent and mitigate corporate compliance risks.
So how do sales reps lie to compliance?
Unapproved collateral
Remember those emails we just talked about? Well, what happens when a sales representative gets a lead that wants more information, but there isn’t any appropriate collateral available? They make it themselves. Or alter the existing. And sometimes it can work really well but other times it can highly increase the risks associated with sales compliance.
If the collateral doesn’t align with the brand image, spreads misinformation, or creates a false impression it is considered a breach of corporate compliance. Is it a lie? Maybe. Will it cause compliance issues? Most certainly.
Client bribing
This goes back to the gifts and goodies part I talked so much about. And if you are picturing someone giving money in an envelope under a literal table – that is not exactly it. Excessively expensive dinners and gifts are not only business compliance breaches but also legal crimes, as you have seen above. The company compliance department needs to keep track of all expenses and check whether an illegal gift has been made – before law enforcement does so.
Splitting the bill
The dinner bill is too big. Clever sales reps came up with a scheme. Two sales reps go to dinner with a client. Each of them records this dinner separately. In the system, you end up having two dinner meetings and the numbers add up, while in fact, it was the same dinner recorded twice.
Money laundering
This is about the fake transactions that never happened. Your sales rep logs in a dinner at restaurant X, with the invoice and all other details. Everything looks good, besides the fact that the dinner never happened. Restaurant X is owned by the sales rep’s friend and the invoice was fake. The money that the company paid was very real though, and the restaurant owner probably split it with the sales rep.
Unjustifiable medical professionals
Is the money spent on a doctor? Of course. Is it the right doctor? Here is an example from the medical industry. Your potential client is the intensive care division. The sales rep goes to dinner with a doctor but turns out the doctor is an acupuncturist. As far from intensive care as it may be.
So now you are paying for a dinner with a doctor who has nothing in common with the direct business of the corporation. This dinner is never meant to bring a sale, but the person is a doctor/medical care specialist hence your sales rep finds a way to spend the company money on them.
How to make your people and your company compliant
I’m sure you want to know the ways to avoid and mitigate the above. Corporate compliance is no joke, and these are some very serious solutions.
Leave compliance out of it
Make your Sales and Marketing departments collaborate. Put Marketing and Sales in the same room and make them figure out a comprehensive system that will ensure:
- There is enough collateral covering new topics
- There is a quick reaction time for the new request
- The collateral is easy to adjust while keeping it compliant
- Compliance department vets all collateral
But do not let them make friends with compliance.
Compliance shouldn’t be friends with Sales and Marketing. Compliance should be the big and scary monster that everyone tries to avoid. That is what keeps people from breaking the rules.
Often in big corporations, psychologists suggest not bringing the whole company to the same teambuilding but doing teambuilding activities team by team. Usually in this case Accounting and Auditing do not gather for the same teambuilding because they might get friendly and then possibly start helping each other with covering money laundering schemes.
The same goes for Sales and Compliance. I’m not saying there should be a silent war between them. But as one of them is supposed to monitor and report the activities of the other one, it is for the common good that these two don’t end up being friends.
Ethics and legal course
Make sure everyone understands what you are talking about when you say “compliance” and that they also understand why it is important to comply. You will be surprised how many of your employees don’t know that some things they do are a compliance risk and sometimes even a corporate crime.
There are many resources online, people specializing in corporate compliance, or your own department that can help. Although, I find that using an external voice when conducting lectures and courses has a bigger influence on people. Whichever you choose, make sure your people understand the ethics, the legalities, and the importance of corporate compliance.
Monitor with a dashboard
Get a dashboard. Not just any dashboard but the one that monitors your sales compliance risks proactively identifies the compliance issues, and assists in taking corrective actions. Sounds too good to be true? It gets even better when you see how it can also track the important KPIs and highlight trends.
B EYE has already built a compliance risk monitoring dashboard for a client in the life sciences industry. It involved a bit of machine learning and a smart team of developers, but the results were worth it.
Using a machine learning algorithm, the system applies rule-based monitoring on known compliance risks to easily detect anomalies. These actionable insights can provide you with the necessary information to investigate the underlying details across multiple systems.
The dashboard provides different levels of granularity based on the employee level and responsibilities.
Let’s get to the bottom of how a compliance dashboard can help your company stay on top of the finances and regulations.
Timely reporting
There are regulations stating that corporations need to report on time all Sales- and Marketing-related expenses on time. The Compliance team can use a dashboard to track every team’s reporting and show whether the expenses report is done on time. This significantly reduces the reaction time to delays and leaves more time to comply with the regulations.
High spenders
There is a type of potential breachers who have bigger expenses than the rest of the team but are not significant enough to break the law or get under the compliance monitoring radar. A compliance dashboard can monitor the employees who spend, for example, two standard deviations more than the average and add them to a risk group. It is advisable to have an internal investigation to determine whether the people on the list are compliant with the rules and legislation.
Comparable spending
Due to the heavy industry regulations, a corporation can only legally spend a certain amount per medical professional. Another compliance mechanism is to compare how much other corporations are spending on the same doctor.
If there is competition between the two corporations, you can discover that your competitor is spending a lot bigger budget on a doctor and is not sanctioned by the government. You can take advantage of this information and increase your budget. By comparing the spending of different companies, you get a fair game and a chance to win the deal.
Cross-checking medical professionals
Going back to the unjustifiable medical professionals’ case, a compliance dashboard can monitor the invitees to dinners and cross-check them with a database of medical professionals to track whether a certain medical professional is relevant to the current sales project.
What-if analysis
Do you often ask yourself “What will happen if we set this rule with such parameters, and how this will reflect our overall budgets?” or “How could we transform a specific policy and make it more efficient?”
A compliance monitoring dashboard gathers past data and behavior of the employees and the relations with sales numbers to give a data-driven answer to these questions.
Event management
You have the power to investigate the perpetrators, events, locations, etc. The analytics behind the dashboard enables you to identify the outliers with risky behavior. The compliance officer can drill down to the lowest level of transaction, date, or event and investigate the reason for going over the budget.
You can now easily check if there is an attempt to cover up fraud. For example, if an employee has filled the bill in the system but separated it into three – so that each invoice is completely compliant with the rules. Although when summed up – we have a problem. The system is trained to find and cross-check these inconsistencies and bring them to the attention of the compliance managers.
Profiling
The dashboard uses the information of every employee, client, and partner (like restaurants or events) to create profiles of the most common rule breakers and outliers. This is called risk-ranking, and it enables the compliance team to take timely precautions, like banning a specific restaurant, event, or partner from the company list, for example.
Fictional attendees
The machine-learning algorithm of the dashboard is trained to catch suspicious reductions of the invoice value. It is close to impossible to manually track when the sales reps add fictional attendees to a dinner event report to reduce the individual spending amount.
Thanks to the ML algorithm, the system identifies the breachers and notifies you of the fraud, the individuals involved, and the items that need corrections. The compliance team, sales managers, and top managers can all make sure that internal policies are followed in regards to the spending on medical professionals.
Preventing excessive spending
The compliance team together with the sales management need to keep track of key accounts and the spending on each account. When the spending limits are soon-to-be-crossed, the team would receive a notification, stating the account, who the most frequent over-spender is, and whether any of the related accounts are under or over-targeted by the sales reps.
The system helps reduce the number of policy breachers, can immediately identify violators, and balances the targeting of key accounts. It also sends automated messages to the teams when a limit is reached or is about to be reached.
