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Compliance Challenges

By Bill Adams, SC&H Group | January 26, 2017

The importance of contract compliance during regulatory change

Increasing regulations are posing significant compliance challenges for pharmaceutical executives. For instance, executives face the daunting task of complying with the FDA’s Federal Drug Supply Chain Security Act (DSCSA). Enacted to help reduce drug counterfeiting, DSCSA calls for companies to track, trace, and serialize their drug products—from manufacture to distribution.

To comply with DSCSA, many executives are engaging IT consultants to develop electronic tracking and tracing systems that address this new compliance mandate.

To further the success of this effort, forward-thinking procurement professionals are guiding executives to also conduct contract compliance audits. In addition to improving the IT vendor relationship and performance, the audits are optimizing transparency and efficiency with third parties throughout the supply chain.

In large part, the difficulty in complying with DSCSA is being driven by contract manufacturing organization (CMO) risk, complexity of vendor partnerships, and inconsistency of local standards.

CMO risk
Many pharmaceutical executives are concerned that CMOs will not be ready or engaged enough with implementation to comply and maintain compliance with DSCSA’s track and trace requirements.

Therefore, some executives may push ahead deadlines for CMOs to develop compliance capabilities, or move manufacturing to more capable suppliers. Others may cease manufacture of some products after the deadline, such as low-value products where compliance is not justifiable. These actions may complicate contracts, joint intellectual property, and transparency with new suppliers.

Complex vendor partnerships and inconsistent local standards
In addition, compliance is complicated by varied track and trace regulations in countries where vendors are located. With the expansion of global supply chains, executives are now faced with increased complexity, cost, and risk in how they implement strategies in different countries, as well as how they ensure transparency and communication with and between suppliers.

For example, companies are exploring growth opportunities and supply chain partners in emerging markets, such as Brazil, Russia, India, China, Mexico, and Turkey. However, each country requires different serialization methods and testing due to their unique technological, government, regulatory, and policy structures.

Engaging an IT consultant to ensure compliance
As a result of the difficulty and complexity in complying with DSCSA and satisfying local serialization requirements, many executives are engaging an IT consultant to develop a strategy and software solution for product reporting and serialization.

For instance, with the aid of an IT consultant, some executives are exploring the use of cloud-based tracking systems that combine their business processes, data, and supply chain information into one network. Meanwhile, others are making necessary adjustments to their own infrastructure to maximize performance and reduce potential risk.

Achieving compliance with more efficiency and transparency
Given the importance and potential impact of DSCSA, forward-thinking procurement professionals are guiding executives to also perform contract compliance audits. When performed during the latter stages of an IT consultant project or immediately thereafter, audits are improving transparency and validating compliance. And, with the substantial investment required for most product reporting and serialization solutions, audits are serving as a key tool for ensuring maximum ROI.

Moreover, performing an independent contract compliance audit during this time is enabling executives to develop and maintain a more productive IT consultant relationship. In particular, by enhancing communication and collaboration, audits are ensuring accountability, oversight, and trust.

In addition, procurement professionals are conducting audits throughout the extended supply chain to help executives reduce risk, enhance efficiency, and boost overall infrastructure.

Ultimately, by conducting contract compliance audits, procurement professionals are helping executives to address these challenges by promoting visibility, transparency, and accountability among third parties. In addition, they are developing governance throughout their supplier contract lifecycles, thereby improving communication, compliance monitoring, and third-party relationships.

Bill Adams
SC&H Group

Bill Adams is the leader of SC&H Group’s Contract Compliance Audit Services practice. He specializes in performing contract compliance audits that produce greater transparency, supplier trust, cost savings, contract strength, and accountability.