For Compliance's Sake

There are side effects to compliance efforts—but they're not all bad. In fact, it's easy to see how new rules and regs help companies run their businesses better. Let us count the ways.
Sep 01, 2007
By Pharmaceutical Executive Editors

David Davidovic
Much has been said about the need and imperative for life science companies to comply with the various laws and regulations that govern our industry. More recently, state-level marketing laws have proliferated, adding new rules of the road and resulting in thousands of hours and millions of dollars for training, tracking, reporting, consulting, analysis, and support systems.

If you work anywhere close to the industry, you are undoubtedly exposed to lots of compliance training, presentations, reminders, audits, reports, disciplinary actions, and more. As a leader, you probably worry not only about your organization doing business the right way, but also about the burden and the direct and opportunity costs that all this effort represents.

There have been several attempts to quantify the financial benefits of compliance, but aside from those tied to the downside costs of investigations, fines, and settlements, little research has been completed on the overall business or bottom-line value. There are cross-industry efforts underway, such as a study looking to link a company's stock price to its reputation, but this research is complex and definitive answers may be some time away. In the meantime, here's a list of 10 benefits companies can gain from their compliance efforts.


1 Avoiding legal troubles and fines—which can cost a company hundreds of millions of dollars—is a good thing. (That doesn't even take into account the business disruption that comes from investigations, subpoenas, and other corrective actions.) These dollars are better spent on research, patient education, or in showing a return to shareholders. Strong compliance efforts can also reduce reputational risk by allowing companies to focus on the positive aspects of their missions and increasing investor confidence and shareholder value.


2 Essentially, a good compliance program prevents paralysis. Imagine a city intersection with no traffic lights or stop signs. People driving through that intersection would come to a standstill because they wouldn't have the confidence to know how to act. In the same way, marketers who know the rules of the road can be more confident about doing their jobs. They can execute programs more rapidly and, as a result, more effectively.


3 Effective marketing is all about making the best strategic choices. When there are fewer choices, executives can spend less time guessing and more time analyzing the possible options and choosing the right one. For example, years ago, companies tended to lump promotional speaker programs and independent grant-based CME under "medical education." This blended bucket made it very difficult to make business decisions because the med ed and CME tactics were intended to reach different goals. These days, clearer definitions put limits on what tactics managers can execute and how they execute them, thus narrowing the breadth of options.


4 Of course, creativity and innovation are critical for every business. But executives are better served when they direct their creativity where it makes the most impact. For example, without guidelines, every product and marketing team is likely to come up with its own unique ways of addressing the logistics and mechanics of things like sampling or speaker programs. But these methods are probably more alike than different. More recently, pharmaceutical companies have established more standardized platforms to address the common systematic needs, like planning, scheduling, and tracking, while shifting their innovative efforts to design more effective education and promotion programs.


5 It may seem like just extra paperwork, but the additional documentation required by compliance measures can help companies with their business analytics. (Just think how difficult it is to calculate an activity's return-on-investment when the data is incomplete, inaccurate, intermingled, or nonexistent.) Compliance requirements call for data to be collected in a more complete, accurate, and timely fashion. In turn, these enhanced data sets can be used to make better business decisions regarding asset allocations, operational efficiencies, and resource investments.

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