This blog is another in a series providing an analysis of legislative initiatives that may impact your business.  Q4 is the time of year when many pharmaceutical companies scan the horizon and develop their enterprise risk assessments and mitigation plans, which should trigger a review of these initiatives.

The Economic Crime and Corporate Transparency Act (ECCTA) is a landmark UK legislation aimed at combating economic crime and enhancing corporate transparency.  This Act goes beyond the UK and typical regulations governing pharma in that it introduces criminal penalties in addition to the regulatory action of debarment.

Scope

The Act applies to large organizations (defined as having > 250 employees, > £36M turnover, or > £18M in assets).

Impact

  • Organizations can be criminally liable if an employee, agent, or subsidiary commits fraud intending to benefit the organization or its clients.
  • Liability applies even if senior management was unaware of the fraud.
  • Defense is available if the organization had “reasonable fraud prevention procedures” in place.

Implications for the Global Pharmaceutical and Biopharmaceutical Industry

Much has been written about fraud and data integrity; however, this Act takes the consequences of fraud to a new level.  Additionally, it doesn’t apply only to UK-based organizations.  Section 2.5 is clear in stating, “If an employee or associated person of an overseas-based organization commits fraud in the UK, or targets victims in the UK, the organisation could be prosecuted.”

Let’s examine some examples of vulnerable areas:

Complex Global Supply Chains

  • Third-party vendors, CROs, and distributors may be considered “associated persons.”
  • Fraudulent data (e.g., clinical trial results, regulatory filings) could trigger liability.

Regulatory Risk

Misrepresentations of drug efficacy, falsified environmental data, or improper financial disclosures could fall under base fraud offences (e.g., false representation, abuse of position).

Data Integrity and Scientific Misconduct

The Act directly links to data fraud, e.g., falsified lab results, manipulated trial data, or fraudulent grant applications, especially when intended to benefit the company or its clients.

Related and Existing Regulatory Misconduct Reporting Processes (FDA and EMA)

Some regulatory processes already exist and outline reporting processes directly to the affected agencies.  For example:

Examples of regulatory consequences can be found on the FDA Debarment List.  Many of these debarments are associated with data falsification.

These processes provide a channel for reporting when internal controls are ineffective or non-existent.  The Act provides for “Defense” if the internal controls and procedures are in place and in use.

Three Actions to Take Now

  1. Conduct a site-specific fraud risk assessment with an independent entity to avoid hidden bias.
  • Map out high-risk roles.
  • Include risks like falsification of clinical data, misrepresentation in regulatory filings, or areas of pressure on employees.
  • Review results from quality culture assessments.
    (Read Speak Up! Does Your Quality Culture Have a Voice?)
  • Implement and document reasonable fraud prevention procedures.
  1. Develop proportionate, risk-based controls.
  • Do due diligence on CROs, suppliers, and partners
  • Include anti-fraud clauses in contracts and quality agreements
  • Enact whistleblowing mechanisms and training
  • Ensure procedures are tested, monitored, and reviewed regularly.
  1. Align data governance and quality culture.
  • Secure top-level commitment from senior leadership.
  • Embed anti-fraud messaging in ethics policies and performance reviews.
  • Ensure fraud prevention is integrated into your company’s quality system.

How confident are you that your internal governance programs cover these areas?  Lachman can evaluate your existing programs and mitigate risks such as these.  Contact us at LCS@LachmanConsultants.com to explore how Lachman can help you.