Companies have made important efforts over the past two decades to combat the problem of transnational corruption. What was once a relatively obscure regulatory niche has become a major concern for multinational corporations worldwide.
The emergence and spread of Covid-19 has exacerbated the risk of transnational corruption for most industries. But given the extraordinary pressure the pandemic has placed on the health care and life sciences industries to quickly develop and deliver solutions, these companies face a heightened risk. The pharmaceutical industry has increasingly taken proactive steps to guard against transnational corruption, but to address the amplified scope of the risk, industry leaders will need to recalibrate the way they prioritize and address it.
As president of TRACE, the global anti-bribery business association I founded 20 years ago to advance commercial transparency, I have seen that the way companies approach the risk of corruption has developed alongside economic shifts. Globalization has led to the creation of internationally accepted anti-bribery standards that require companies to perform adequate due diligence on their business agents and third-party intermediaries or face liability for any involvement in corrupt actions. But the pandemic’s widespread disruption of global supply chains introduces a danger that, out of necessity, new supply channels will be established without that due diligence. The financial pressures of an economy in recession can also heighten the temptation to secure sales contracts by illegitimate means.
Pharmaceutical companies are particularly vulnerable to these risks. The suspension of most non-Covid-19 research and clinical trials may lead to greater-than-usual pressure to maximize sales of established products. Globalized production and dependence on foreign-made active pharmaceutical ingredients also subjects the industry to the unpredictable interference of pandemic-related shutdowns in different regions at different times.
The global race to develop effective treatments and vaccines for the virus presents its own corruption risks. We have seen how political pressure can influence the promotion of drug regimens like hydroxychloroquine without adequate testing or scientific grounding. It’s all too easy to imagine the opportunities for unscrupulous actors to exploit the acute demand for immediate solutions. But even with due regard for scientific and ethical protocols, combining an intensely competitive environment with severe uncertainty about which pharmaceuticals will ultimately succeed leaves the door wide open for malfeasance.
The sheer scale of the crisis also amplifies the risk for corruption. Under more normal circumstances, bad actors might illicitly influence medical providers or health system administrators to promote a treatment of limited scope. But in the context of the global spread of an infectious disease, the demand is universal and the procurement undertakings are exponentially larger — not just from individual doctors or hospitals, but from governments and global health organizations. When government officials are involved in the negotiating process, the risk for corruption skyrockets. And the potential returns for securing the right contracts in response to Covid-19 are tremendous, as is the potential for wasted investment should an opportunity be missed. These factors constitute red flags for bribery risk.
There are secondary risks as well. Any successful treatment or vaccine will need to be produced quickly, reliably, and on a massive scale. Companies may not have the logistical framework to rely on foreign outsourcing and may find themselves reassuming a domestic manufacturing role. That means building factories, securing labor and supplies, and adhering to all the accompanying regulatory requirements. Working under intense pressure, pharmaceutical companies may fail to anticipate and properly prepare for the corruption risks they will face, leaving themselves open to exploitation by unscrupulous officials and contractors.
The combined effect of these conditions will be substantial, and companies in the industry will need to brace themselves. At the most basic level, compliance — strong ethical messaging, robust policies and procedures, training, due diligence, helplines, and audits — must remain a budgetary priority. Leaders in the pharmaceutical industry should maintain commensurate levels of staffing and resources to guard against pressure to cut ethical corners.
The effort should also include familiar compliance tools. Companies’ employees and agents should receive appropriate training to identify, resist, and report corruption risk, along with clear messages about the importance of business ethics from the company’s leadership. The process of vetting potential business partners should be maintained, even though some flexibility may be required in the degree of scrutiny exercised. Where deals must be advanced quickly, it’s important to compensate for any reduced vetting with heightened monitoring for unusual expenditures and other irregularities. Above all, time should be invested to carefully assess the specific risks brought on by the pandemic, to formulate a reasoned plan to address those risks, and to ensure consistent and thorough implementation.
Taking a long-term view can also help. The current turbulent conditions may be seen by some to justify lower ethical standards. But the turbulence will eventually pass and, when it does, there will be an insistence on accountability for public investment and enforcement agencies will not hesitate to scrutinize the books and records of the businesses that profited from that investment.
Building and strengthening compliance mechanisms now — even when there are competing pressures and priorities to attend to — is more than just prudent. It will help companies emerge from this pandemic with their integrity unscathed.
Alexandra Wrage is president of TRACE, a globally recognized nonprofit business association dedicated to anti-bribery, compliance, and good governance.
