In the latest of our weekly Q&As with governance and compliance executives, we talk to Brent Saunders, senior vice president of global compliance and business practices at pharmaceutical giant Schering-Plough. An index of previous conversations is available here.
Describe your role in Schering-Plough’s compliance function.
My role is relatively new. It was created by our chairman and CEO, Fred Hassan, when he joined the company in 2003. It’s a full and equal member of the executive management team, which really puts compliance on par with the other global functions within the company.
How did that evolve? Why was the decision made to situate compliance that way?
When Fred came to Schering-Plough, the company was in need of a turnaround. It had just lost patent protection on Claritin, which produced a big revenue hole. We had just entered into a [Food and Drug Administration] consent decree around manufacturing and paid a $500 million fine, and the company had several open investigations from the Department of Justice.
He laid out a five-phase action agenda that would take us five to seven years to accomplish. One of the tenets was to build a strong base of business integrity, compliance and quality. He would say, “Business integrity, compliance and quality have to become a part of the company’s DNA …” His thought was that, like anything else, if you want to be excellent in it, it has to be managed. It’s my responsibility to help manage and lead that [compliance] initiative.
So you’re three years into the role and the action plan. How’s it going?
This is something where I think our actions speak louder than our words. When you think of something elementary in compliance, like tone at the top, we have that here in spades. We have a board that is absolutely committed and supportive and involved in our compliance program. We have a dedicated business practices oversight committee that has oversight for our compliance program. I meet with them four or five times a year. They’re very engaged in the discussion around our compliance program.
We have a senior executive and chairman who lives and breathes compliance; it really is part of his DNA, and people see that. It was important enough to him to carve out a spot on his executive management team and to give me the resources to build a compliance department that is world class, even at a time when we were going through a financial turnaround. Investing in compliance during a period of financial turnaround sends a very sharp message to colleagues, partners and customers that this is top of mind.
Tell us about the “business practices” portion of your title.
It was a deliberate choice to add that. We wanted to vastly improve our compliance program. One of the key improvements we wanted to make was to move away from “bolt-on” compliance and to focus on embedding compliance and business integrity into our company’s DNA. At the time, I don’t think Schering-Plough was unique. What I mean is, people would do things, they would come to decisions, and compliance would come in after the fact and assess the situation. We wanted to build compliance upstream in all of our processes.
Take sales training, for example. When a new sales rep came on board, typically they’d have two or three weeks training on the products and the company. At the end of those three weeks, the compliance officer would talk to them for an hour about all of the things they can’t do. We looked at that and said, “That’s crazy. Why would you say, ‘You’ve been trained for three weeks, now here are the rules of the road.’ Why can’t we just build that in to how they do business from the get-go? Why can’t the compliance elements and cultural, code of conduct elements and attitudinal elements be built in throughout the training program?”
We did that in a variety of different instances. One issue facing the pharma industry focused on giving grants to physicians. There were some U.S. attorneys who would argue that giving grants to physicians was an improper inducement to prescribe products. We looked at that and said there’s a better and more efficient way to give out grants: Take the sales force out of the equation. We’ll be more efficient in how we review, administer and approve grants, and let’s have people who are qualified from a medical and scientific perspective decide whether a grant is worthy of supporting. Compliance led the way in changing that entire business practice. We gained a lot of efficiency. We now run that group a lot tighter and we’ve got a great compliance result because now the sales force has nothing to do with the grants …
Does Schering-Plough have a centralized compliance and ethics function, or is it managed across several departments?
It’s centralized. We have compliance that, like HR or law or IT, is what we call a global function. The compliance organization reports solid-line into me throughout the world. They also have secondary responsibility to their local management in the countries they’re in.
How many employees are we talking about?
In full-time equivalents, we’re roughly over 200 people.
With whom do you work most closely?
I work equally closely with all my colleagues on the executive management team. I interact with the leaders in the business or the other global functions on a daily basis.
We intentionally didn’t create a compliance committee. As an executive management team, we meet every two weeks. I report on the status of our compliance program and what we’re doing. I was concerned about my colleagues saying, “We’ll let the compliance committee deal with that.” I wanted everyone to know that the executive management team had the ultimate responsibility for the compliance posture of the company. I didn’t want there to be a way for that responsibility to be delegated.
How often do you report to the audit committee?
Every audit committee meeting; sometimes they meet five times a year, sometimes six. And every business practices oversight committee meeting. Also, in our model, internal audit and all of our other regulatory audit functions report to me.
How do you measure your compliance efforts? That’s always a tough chore.
There are a variety of key performance indicators we look at to evaluate success. I don’t think there’s any one KPI you can look at as a full marker of success. We do surveys and compare our results year over year to look for progress around culture: how our colleagues perceive our culture, business integrity, the ability to speak up when they see something wrong.
Another way is the feedback I get from colleagues around the world from managers, about specific projects we work on where we re-engineer a practice like the grant process or the training that I spoke of. We also track specific pharmaceutical KPIs. When you put those all together you can start to get a measure of how well you’re doing.
Lastly, and probably as important, it’s how customers and patients and physicians perceive us. From what we can tell from feedback from our customers and patients, our perception is going in the right direction.
What are your priorities these days?
The three big components of a pharmaceutical company are a science and research and development group, a manufacturing and supply chain group, and sales and marketing group. When I came here three years ago, we spent a lot of time with the sales and marketing group. First we had to deal with the programmatic issues, then we had to deal with the substantive issues. Today we’re very focused on our R&D side and really bringing them into the fold and also building our international programs.
What’s on your agenda for next year?
By the end of this year, we’ll have balanced the programmatic pieces of our compliance program, the sales and marketing issues, the R&D issues, and the manufacturing issues. We’ve hired a lot of international compliance officers this year, so we’re feeling really good about that. So the question is how do you take compliance to the next level? When we look at our aspirations in ’07, it’s how do we get better at being fire preventers versus fire fighters? How do we continue to add more value to the company by making our business processes more compliant and more efficient? And then, how do we begin to benchmark outside of our industry, so that we don’t just become complacent that we’re doing well against our peer group companies, but that we’re also looking outside of the industry?
Thanks, Brent.
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