The Cost of Non-Compliance within the Pharmaceutical Industry

By: Karen Brown, Senior Director, Marketing
karenbrown@cis-partners.com

In a time when congress is seeking more scrutiny through stringent audits of its own government bail-out programs, words like transparency and accountability are becoming colloquial favorites of corporate leadership.

One example is a recent full page letter that GM has placed in papers around the globe, promising customers that they are making fundamental changes from top to bottom. The letter went on to provide a website to track their progress on this commitment.[1]

When we think about a similar strategy for the pharmaceutical industry, we need to pause and consider all of the areas that are impacted: patient, shareholder, community, organization, and determine whether the solution lies in corporate candor or in fundamental changes – top to bottom.

Let’s start by examining two areas where non-compliance has the most impact:
First, there is patient non-compliance. where it is estimated that 70% of all prescriptions are never consumed and 20% of all new drug prescriptions are never filled the first time. This costs US Pharma nearly $30 billion a year in lost revenue. And, most serious, the loss of 125,000 lives each year.[2]

Second, achieving regulatory compliance is crucial and costly; non-compliance can lead to imprisonment, large fines, product recalls or delays in product approval, reputational harm and plant shutdowns.

One extreme example is a large pharmaceutical manufacturer that recently paid nearly $1.5 billion in fines for marketing one of its drugs for uses not approved by the FDA; the Justice Department called this the "largest criminal fine for an individual corporation ever imposed in the United States.”[3]

So what do we really know about the cost of non-compliance, and where does pharma begin to address these issues? One approach may be to start seeking answers to some serious compliance questions:

• Do we know what our total cost of compliance is?
• Do we understand where we may be exposed to non-compliance risks, and at what level?
• Do we have the visibility to see how one compliance issue impacts another?
• Do we have the infrastructure to manage a corporate compliance department across the organization?

According to one recent study by a business intelligence firm, only 59% of pharmaceutical companies currently own departments dedicated to compliance.[4]

Having a corporate compliance office or implementing one may not solve the issues surrounding patient medication compliance, but it’s a start by showing corporate responsibility, visibility and accountability.

Perhaps GM is on to something. We may see the demise of some historic auto brands, but if they hold true to their commitment to not just rebuild the company, but to reinvent it, we may see an industry that is smarter, leaner, faster and more focused on the customer.

Sources:
1. The Financial Times, June 5 2009 http://www.ft.com/home/us
2. http://social.eyeforpharma.com/story/real-cost-patient-non-adherence
3. http://money.cnn.com/2009/01/15/news/companies/eli_lilly/
4. http://www.medicalnewstoday.com/articles/127236.php