Human Rights on the Pharma Risk Management Agenda

November 3, 2016

Milana Chamberlain and George Cameron ask: is it time for pharma to start using human rights language?

Milana Chamberlain and George Cameron ask: is it time for pharma to start using human rights language?

The pharmaceutical sector is one of the largest industries with an estimated US$1 trillion in global sales every year. Given its size and its role in developing, producing and marketing essential health products, it is one of the most powerful exponents of safeguarding the right to health of millions of people around the globe.

It would appear that pharmaceutical companies are fairly advanced in their respect for human rights, a role assigned to all companies under the United Nations Guiding Principles on Business and Human Rights endorsed by the UN Human Rights Council in 2011 (UNGP).

The results of the Human Rights Due Diligence Study by the British Institute of International & Comparative Law (BIICL) and the global law firm Norton Rose Fulbright, launched last month, showed that many of the companies surveyed from the pharmaceutical industry had conducted a human rights due diligence process or human rights impact assessment. In fact, Pharma was the second highest result by industry sector across the whole survey of 152 multi-national organizations.

But, is the right to health - and the underlying access to medicine - the only aspect of human rights with which pharmaceutical companies need to engage?

Companies carrying on a business or part of their business in the UK with a turnover above £36 million ($44m) are in the process of publishing their first annual statements on the steps they have taken to eradicate slavery and human trafficking in their business and supply chains under the Modern Slavery Act. Slavery and human trafficking are two of the salient human rights issues which the legislature in the UK has, because of the prevalence and devastating effects of these phenomena in the modern world, put firmly on the agenda of companies of appreciable size which operate in the UK.

When considering the full spectrum of human rights in a pharmaceutical company, apart from slavery and human trafficking, other salient human rights issues will need to be considered. In the company’s own business these issues would include internal employment issues as well as access to medicine, environmental issues, safety of patients taking medicines, conduct of clinical research and clinical trials, and privacy. A wider human rights compliance review in supply chains would include child labor, issues of minimum versus living wage, safe and hygienic conditions, working hours, no discrimination; in each category responsibilities over and above strict legal requirements may need to be considered.

The scope above suggests that it would be difficult to implement a proper human rights risk management system without undertaking full human rights due diligence in accordance with the main principles comprised in the UNGPs. This process would comprise appropriate policies, risk assessment, due diligence, tracking, monitoring and reporting. This is evidenced in . Over three quarters (77 per cent) of companies who performed express human rights due diligence identified actual or potential human rights impacts and 72 per cent identified adverse impacts linked to the activities of their third party relationships. In stark contrast, only 19 per cent of companies who used other non-express human rights due diligence mechanisms identified potential or adverse impacts, and only 29 per cent identified adverse impacts linked to the activities of their third party relationships.

Where human rights considerations are limited to existing processes - such as those relating to health and safety, equality, or labor rights - companies fail to identify other human rights impacts and serious impacts may be overlooked. A dedicated human rights due diligence process should, as a starting point, take into account all internationally recognized human rights as well as the business’ impacts across all its operations and supply chain.

Practical tips suggested by the Human Rights Due Diligence Study

Human rights due diligence is most effective where it is cross-departmental, including involvement from CSR, HR, legal, procurement with the Board’s responsibility and oversight. The main methods for identifying human rights impacts are desktop research and studies, audits (internal or external), investigations, independent expert reports and stakeholder and supplier consultations. Human rights-specific training can act as an important preventative measure.

Contractual provisions (including specific human rights clauses) are currently the most common action used to prevent, mitigate or remedy adverse impacts, followed by codes of conduct, inspections and training. The effectiveness of these other tools can be facilitated through clauses in contracts with counterparties (e.g. requiring inspection rights or compliance with codes). Codes of conduct and contractual provisions are most effective in pre-contractual stages. At that point the bargaining power of the purchaser can bring about change in supplier behaviour. Ignoring the potential for change before a contract is signed misses the main goal of the obligation of companies to respect human rights – in this particular case, the improvement of lives of millions of people in supply chains globally.

Furthermore, the law in this area is changing from a soft, non-legally binding instrument in the form of the UNGP into hard law. Legal claims currently focusing on the mining, energy and garment industry may well spread into other sectors as the rights-holders are becoming better informed and helped by litigation funders and expertise providers. For this reason, it is not enough to look only at where the law is now, but businesses need to look at the direction of travel and ensure that  their current behaviour will not be considered to fall short of standards which will be applied in the future.

Milana Chamberlain is a Partner specialising in business and human rights and George Cameron is Of Counsel, both at Norton Rose Fulbright.