Decoding unique anti-corruption challenges in the life sciences sector

Jieni Ji
A&O Shearman, Hong Kong and Shanghai
jieni.ji@aoshearman.com

The life sciences sector, which directly impacts human health and wellbeing, demands unparalleled levels of integrity and professionalism. This sector is currently navigating a landscape marked by unique challenges, including the growth of digital health and the substantial influx of investments post-Covid-19. Additionally, the sector is contending with rapid legislative and enforcement updates worldwide. In this context, anti-corruption has emerged as a critical concern, not only from an ethical standpoint, but also as a significant commercial imperative. The increasing regulatory scrutiny and the need for robust compliance measures underscore the importance of addressing anti-corruption risks to maintain the sector’s integrity and public trust.

Background

Between 2010 and 2015, the United States Department of Justice (DOJ) conducted industry sweeps targeting life sciences companies for violations of the Foreign Corrupt Practices Act (FCPA) and the False Claims Act (FCA). These investigations primarily focused on payments made by healthcare companies to healthcare professionals (HCPs) at hospitals in relation to sales and marketing activities. Such actions underscore the critical need for establishing compliance programmes in the industry during the era of Compliance 1.0.

Recently, in July 2023, the Chinese government launched a nationwide inter-agency anti-corruption healthcare campaign focusing on hospital and pharmaceutical executives and the use of national insurance funds. This initiative was further strengthened in February 2025 with the introduction of the Compliance Guidelines for Healthcare Companies to Prevent Commercial Bribery Risks. These guidelines represent China’s first comprehensive industry-oriented anti-corruption framework, addressing the growing concerns around commercial bribery in the healthcare sector. With the continued development of technology, business models and legislative requirements, the sector is moving towards the era of Compliance 2.0.

The current global anti-corruption landscape

The regulatory background has significantly influenced the global anti-corruption landscape and practices in the life sciences sector. This section explores the key components of this evolving landscape.

Tailored risk prevention

There is no one-size-fits-all risk prevention programme in the life sciences industry. Life sciences companies typically design tailored risk prevention approaches and review them regularly. These approaches are based on the specific level of risk associated with the company’s business model and the nature of its products. By customising their risk prevention strategies, companies can more effectively mitigate the unique challenges they face in different markets and regulatory environments.

Proactive detection

The best way to prevent risks is to detect them at an early stage. The prior industry sweeps have prompted life sciences companies to enhance their compliance programmes, shifting from reactive to proactive measures. A key aspect of this shift was the enhancement of backend monitoring to detect issues at an early stage. Companies have improved their data analytics and artificial intelligence (AI) capabilities to monitor various activities, including travel and reimbursement expenses, sales incentives, marketing expenses, interactions with HCPs and healthcare organisations (HCOs) and charitable donations.

Industry guidelines offering up-to-date benchmarking

The anti-corruption statutes in most countries are generally high level and principle based, focusing on two elements: mens rea (ie, corruption intention) and quid pro quo (ie, the exchange of benefits). Given the broadness of the laws, global ethical standards, such as those produced by the International Federation of Pharmaceutical Manufacturers and Associations (IFPMA) and the Advanced Medical Technology Association (AdvaMed), provide detailed and updated guidelines to supplement anti-corruption statutes. These guidelines are industry standards applicable to members and supplement the anti-corruption statutes in major countries. The members of international industry associations are typically major pharmaceutical, biotech and medical device companies.

Key anti-corruption Risk Areas

Gifts and entertainment

The provision of gifts and entertainment to HCPs is generally prohibited. Guidelines from IFPMA and AdvaMed restrict promotional aids and entertainment activities to ensure compliance. Laws in many countries prohibit providing anything of value in exchange for improper commercial benefits. However, the interpretation of ‘anything of value’ is often subject to debate, especially in the absence of clear statutory monetary thresholds. In 2019, the IFPMA implemented a global ban on gifts for its members through its Code of Practice, prohibiting low-value promotional aids like mouse pads and calendars. Pens and notepads of minimal value can be provided during company-organised or third-party scientific events for the purpose of notetaking, but must not bear the name of any medicine or therapeutic area logos. AdvaMed also prohibits branded promotional items or ‘gifts’ to HCPs, including pens, notepads, mugs and gift cards. Under the AdvaMed guidelines, companies may provide modest educational items that benefit patients or serve a genuine educational function. These items must have a fair market value of less than $100 and can include medical textbooks or anatomical models. Both the IFPMA and AdvaMed guidelines prohibit any form of entertainment or recreational activities being given to HCPs.

Travel

The US DOJ scrutinises the purpose of business travel that involves HCPs and the appropriateness of travel arrangements sponsored by healthcare companies. Extravagant travel arrangements are likely to be viewed as non-compliant. For instance, the DOJ found organising detours to Disneyland after international medical conferences lacked a business-related purpose. Similarly, booking luxury resort hotels is also likely viewed as extravagant.

Notably, it was once common for companies to subsidise HCPs for time lost attending international conferences before 2010. However, it is no longer a widespread practice for companies to compensate HCPs for time lost or pay per diem allowances to HCPs in connection with their attendance at conferences. To mitigate the risk of non-compliance, most leading healthcare companies require the pre-approval of travel expenses and specifications on the flight or train class or hotel choices.

Health donations

Life sciences companies play a pivotal role in global humanitarian efforts by donating funds and medical supplies to international organisations, as well as governmental and non-governmental healthcare entities. These contributions are particularly crucial during natural disasters and pandemics. However, the improper use of donation funds poses significant anti-corruption risks.

Thorough due diligence on charitable projects and recipient organisations is essential to ensure that donations serve a bona fide purpose. This process involves verifying the legitimacy and capability of the recipient to effectively utilise the donations. It is imperative that donors conduct comprehensive background checks and assessments to confirm that the recipient organisations have the necessary infrastructure, expertise and track record to manage and deploy the donated resources effectively.

Furthermore, to safeguard the proper use of donated resources, donors often establish specific representations and warranties in the donation agreement before the commencement of the project. These contractual provisions are designed to ensure that the recipient organisations adhere to the agreed-upon terms and conditions. Representations and warranties may include commitments regarding the use of funds, compliance with applicable laws and regulations and the implementation of internal controls to prevent the misuse or diversion of resources.

During the implementation phase, donors exercise their contractual audit rights to monitor and verify that the funds or supplies are being used appropriately and in accordance with the agreed-upon terms. This oversight is essential to maintain the transparency and integrity of the donation process. Regular audits and reviews help identify any discrepancies or irregularities, enabling donors to take corrective actions promptly.

Sponsorship

In practice, channelling speaker fees to HCPs through sponsorship payments to HCOs remains one of the top anti-corruption risks in the industry. Additionally, the shift to online and hybrid events during and after the pandemic has heightened fraud risks, necessitating the implementation of new technological monitoring measures. Therefore, companies must ensure the authenticity and independence of HCOs organising events sponsored by life sciences companies to prevent sponsorship funds from being channelled to HCPs for illegitimate reasons.

Public education

Life sciences companies collaborate with patient support groups and public welfare organisations to promote disease awareness. These public education campaigns, either online or in person, usually involve third-party patient support groups and event planners. Careful monitoring of funds and the behaviour of third parties is necessary to avoid influencing prescribing decisions.

Patient assistance programmes (PAPs)

Life sciences companies work with charities and insurance companies to offer financial aid to patients through PAPs, particularly in oncology and rare disease sectors. When designing PAP terms, companies should avoid the perception that they are able to influence prescription decisions.

Market access

New drug and medical device approvals, pricing and reimbursement are areas where lobbying efforts can intersect with anti-corruption concerns.

Collaborations

Third-party business partners, such as contract research organisations (CROs) and contract sales organisations (CSOs), can pose significant anti-corruption risks to life sciences companies, especially concerning the promotional expenses incurred by these third parties. Therefore, it is crucial for companies to thoroughly vet the backgrounds of potential third-party partners before entering into collaborations. Additionally, healthcare companies should monitor third parties' adherence to compliance programmes by establishing robust contractual safeguards.

Conclusion

The life sciences sector’s commitment to fighting corruption and promoting compliance will sustain its positive impact on global health. As we move from Compliance 1.0 to Compliance 2.0, companies must innovate and adapt their risk prevention strategies. By adhering to compliance principles, the industry can effectively navigate modern regulations and become stronger, more resilient and more trustworthy.