Compliance in the Pharmaceutical Supply Chain

School of Management

Royal Holloway, University of London

Compliance in the Pharmaceutical Supply Chain

- From Fulfilling Minimum Requirements to Striving for Excellence -

A Case Study

MN 5252 Independent Research Paper

MSc. in International Management

Supervisor: Dr José Córdoba-Pachón

September 2011

This Independent Research Paper is submitted as part of the requirement for the

award of the Master of Science (MSc) in International Management

at Royal Holloway, University of London

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Compliance in the Pharmaceutical Supply Chain - A Case Study 2

Declaration of Authenticity

Herewith I declare that this Independent Research Paper titled ‘Compliance in the

Pharmaceutical Supply Chain – From Fulfilling Minimum Requirements to Striving for

Excellence - A Case Study’ has been prepared on the basis of my own work and that

where other published and unpublished sources have been used, these have been

acknowledged appropriately.

This Independent Research Paper consists of 9.768 words.

1 September 2011

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Executive Summary

This Independent Research Paper aims to explore if there is a business case for

compliance excellence in the pharmaceutical supply chain. Furthermore, categories of

compliance in the pharmaceutical supply chain will be discussed alongside the

motivational factors and the challenges that arise.

A three-month case study including five interviews has been conducted to uncover if

there is potential for competitive advantage as a result of compliance excellence in the

pharmaceutical supply chain. Compliance in the pharmaceutical supply chain has been

categorized by the author to highlight the ways in which efforts could be better

channelled, thus, resulting in competitive advantage. The outcomes of the research

were that there is no uniform understanding of compliance in company X (named

‘company X’, as they requested to remain anonymous). Nonetheless, the awareness of

the importance of compliance in company X is not debatable and business

opportunities have been identified. The principal motivational factor to excel in

compliance is to improve patient safety.

There were limitations in the research because it was based on a single case study

instead of a multiple case study and the sample size of the interviewees was small. This

cannot embody the views of the entire industry; nevertheless, this paper represents an

initial step to further explore this research field.

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Acknowledgements

Firstly, I would like to thank my parents, who allowed me to fulfil my dream of studying

in England. Thanks to their financial and moral support, I was able to develop as a

postgraduate student this year. Their confidence in me strengthened my own belief to

overcome many challenges. In addition, I would like to thank my girlfriend for her

continuous love and support. Her patience in our relationship never faltered, even

when my focus was not with her.

Secondly, I would like to thank my superiors, all the interviewees and other colleagues

at the company of my internship, who contributed greatly to the primary research

sections of this paper. Without their generous help I would not have been able to

collect the information needed.

Finally, I am grateful for the support and guidance of Dr José Córdoba-Pachón. The

valuable feedback I received from him helped me to complete this Independent

Research Paper. I appreciate his dedication and patience.

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Content

Declaration of Authenticity ............................................................................................................ 2

Executive Summary ........................................................................................................................ 3

Acknowledgements ........................................................................................................................ 4

List of Abbreviations....................................................................................................................... 7

List of Figures ................................................................................................................................. 8

List of Tables ................................................................................................................................... 9

1 Introduction .............................................................................................................................. 10

1.1 Research Rationale and Objectives .................................................................................... 10

1.1 Patient Safety ..................................................................................................................... 12

1.3 Structure ............................................................................................................................ 15

2 Literature Review ...................................................................................................................... 16

2.1 Supply Chain and Supply Chain Management ................................................................... 16

2.2 The Pharmaceutical Supply Chain – Two Worlds in Contrast ............................................ 18

2.3 Managing Compliance – The Current State in the Pharmaceuticals Supply Chain ............ 20

2.4 Notions of Compliance ....................................................................................................... 21

2.4.1 Regulatory Compliance ............................................................................................... 22

2.4.2 Voluntary Compliance – A Case for Competitive Advantage ...................................... 25

2.4.2 Compliance and Organizational Learning ................................................................... 26

3 Methodology ............................................................................................................................. 29

3.1 Applied Research Method ................................................................................................. 29

3.2 Practical Limitations ........................................................................................................... 30

3.3 Data Validity, Reliability and Transferability ...................................................................... 32

3.4 Data Collection ................................................................................................................... 33

3.5 Alternative Research Methods .......................................................................................... 34

4 Findings ..................................................................................................................................... 36

4.1 Compliance in the Pharmaceutical Supply Chain............................................................... 36

4.2 Compliance Categories ...................................................................................................... 39

4.3 Compliance as a Source of Competitive Advantage .......................................................... 41

4.4 Motivational Factors to Excel in Compliance ..................................................................... 44

4.5 Challenges in Implementing Compliance ........................................................................... 46

5 Analysis and Discussion ............................................................................................................. 49

6 Conclusion ................................................................................................................................. 53

Reference List ............................................................................................................................... 56

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Index............................................................................................................................................. 60

Appendix A: Interview Consent Form .......................................................................................... 61

Appendix B: Outline of the Interview Questions ......................................................................... 62

Appendix C: Transcription of Interview No. 4 .............................................................................. 63

Appendix D: Summary of Interview No. 1 ................................................................................... 68

Appendix E: Summary of Interview No. 2 .................................................................................... 70

Appendix F: Summary of Interview No. 3 .................................................................................... 72

Appendix G: Summary of Interview No. 5 ................................................................................... 74

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List of Abbreviations

API – Active Pharmaceutical Ingredient

EC – European Commission

EEC – European Economic Community

ELM – European Logistics Manager

EMA – European Medicines Agency

EQSM – European Quality Systems Manager

GDP – Good Distribution Practice

GMP – Good Manufacturing Practice

GSP – Good Storage Practice

ICH – International Conference on Harmonisation of Technical Requirements for

Registration of Pharmaceuticals for Human Use

KPI – Key Performance Indicator

LC – Legal Counsel

PSC – Pharmaceutical Supply Chain

QCM – Quality Compliance Manager

SC – Supply Chain

SCD – Supply Chain Director

SCM – Supply Chain Management

SOP – Standard Operation Procedure

SOX – Sarbanes-Oxley Act

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List of Figures

Figure 1: Company X’s Distribution Channels ............................................................................. 13

Figure 2: The Five Patient Rights ................................................................................................. 14

Figure 3: A Generic Supply Chain ................................................................................................ 17

Figure 4: Supply Chain Network .................................................................................................. 18

Figure 5: Company X Supply Chain Set Up .................................................................................. 19

Figure 6: Non-Compliant Supply Chain ....................................................................................... 24

Figure 7: Compliant Supply Chain ............................................................................................... 24

Figure 8: Single-Loop Organizational Learning ........................................................................... 26

Figure 9: Double-Loop Organizational Learning ......................................................................... 27

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List of Tables

Table 1: Categories of Pharmaceutical Regulations ................................................................... 22

Table 2: Aspects of GDP .............................................................................................................. 23

Table 3: The Five Misunderstandings about Case-Study Research ............................................ 35

Table 4: Compliance in the Pharmaceutical Supply Chain .......................................................... 36

Table 5: Compliance Categories .................................................................................................. 39

Table 6: Compliance as a Source of Competitive Advantage ..................................................... 42

Table 7: Motivational Factors to Excel in Compliance ................................................................ 44

Table 8: Challenges in Implementing Compliance ...................................................................... 46

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1 Introduction

The pharmaceutical industry had a bad reputation in terms of safety in 1939 when

Faddis wrote the article ‘Eliminating Errors in Medications’. Publications such as ‘The

problems with detecting medication errors in hospitals’ (Barker & McConnell, 1962)

and more recent publications such as ‘To Err is Human’ (Kohn, et al., 2000) and ‘Patient

Safety’ (Vincent, 2010) prove that problems, often due to non-compliances in the

supply chain (SC), can still be detected. According to Handfield, et al. (2011), reforms in

healthcare and the pharmaceutical supply chain (PSC) are being transformed

significantly. This is why the most integral aspects of the PSC need to be strengthened

(Singh, 2005); delivering products from A to B in a ‘timely, safe, cost-effective and

compliant’ manner (Cook, 2011: 1). According to Whewell (2010), the unique nature of

pharmaceutical products, their mode of use and the potential for abuse require special

attention on compliance in the PSC. Whewell (2010: 149) states that compliance ‘*…+ is

the responsibility of any sustainable business to observe and operate within the

structure of financial, operational and moral imperatives that are appropriate to the

country and culture in which they carry out their business. These can be defined either

by legislation […] or described in the form of guidelines’. Pharmaceuticals are

prescribed and administered by specialists for a customer who does not know about

their use, misuse and application (Bix, et al., 2007).

1.1 Research Rationale and Objectives

As per Hutter (1997: 9), the concept of compliance is fundamental to regulate

economic activities and he states, ‘Compliance with laws, rules, and regulations is

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assumed to be a straightforward and uncomplicated matter which simply denotes

whether or not individuals and organizations have fulfilled the demands of the law’.

However, if it was that easy, why would companies increasingly create job positions

dedicated to compliance and more importantly, why would companies still have

compliance issues (Silverman, 2008)? Complexity is added constantly to the industry

due to a progressively global PSC and a growing amount of rules and regulations (Rees,

2011). Hence, this topic is relevant for international managers to conduct business

globally, and also to align the needs of the pharmaceutical industry with the ones of

the SC strategically. A categorization of compliance to address the different fields of

the PSC could add to the manageability of the aforementioned complexity.

The central research question is: Can aiming for excellence in compliance lead to

competitive advantage in the PSC? This question will be explored by presenting the

following sub questions:

What does compliance mean in the PSC?

Which compliance categories exist that are relevant to the PSC?

What are the ways in which compliance leads to competitive advantage?

What are the motivational factors to excel in compliance?

What are the challenges in implementing compliance?

As per Clarkson (1995), fulfilling minimum requirements means the acceptance of the

need for compliance; that a company does all that is required. In contrast to this,

excellence refers to the genuine will to anticipate responsibility and thus to do more

than is required to gain competitive advantage.

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In the literature review it will be shown that an increasing amount of SC literature

focuses on the uniqueness of the PSC. The aspect of compliance is also addressed,

however, not detailed enough in all its facets. Business opportunities, in the form of

competitive advantage based on compliance, are barely mentioned in the literature.

Therefore, the main objective of this paper is to represent an initial step for in-depth

research on compliance as a business opportunity in the dynamic environment of the

PSC. The next section highlights the importance of patient safety within the PSC.

1.1 Patient Safety

According to Rees (2011), patient safety is paramount in the PSC. This section

describes how company X tries to ensure patient safety throughout its distribution

channels. The following figure illustrates the different channels:

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Figure 1: Company X’s Distribution Channels (Brümmer1, 2011)

Company X delivers products to pre-wholesalers, which then deliver to pharmacies,

wholesalers and hospitals. This process will be referred to in more detail in figure 5.

Mangan, et al. (2008: 9) describe logistics within a SC as ‘getting, in the right way, the

right product, in the right quantity and right quality, in the right place in the right time,

for the right customer at the right cost’. In the PSC those aspects could be replaced by

the five patient rights, developed for the correct administration of medication in

hospitals, to highlight the importance of patient safety throughout the entire SC (MA

Pharm, 2011). The following figure illustrates the five patient rights:

1 This figure was produced during the author’s internship at company X for a company presentation.

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Figure 2: The Five Patient Rights (Adapted from MA Pharm, 2011)

To fulfil these rights, according to Good Distribution Practice (GDP) and Good Storage

Practice (GSP), the warehouse facilities throughout the SC must perform at the

maximum picking and packing accuracy and a reliable transportation system should be

established (Mangan, et al., 2008). These aspects contribute to the compliance of the

SC and need to be implemented according to the standards previously mentioned.

GDP also entails making sure that the ‘Right Drug’ is unexpired and belongs to a

confirmed batch (EMA, 2011).

Most of the SC activities, such as warehousing and transportation, are isolated from

the end customer. Furthermore, these activities encompass multiple intermediary

processes. Thus, according to Vincent (2010), there is the likelihood that

intermediaries, such as warehouse staff and freight forwarders, oversee that the

products will ultimately be used by a patient who needs it for serious medical reasons.

This is why the development of patient safety must play an integral part for the

efficiency of the PSC. Next, the structural outline of this paper will be presented.

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1.3 Structure

The following section (chapter 2) encompasses a literature review including published

research of authors, scholars and recognized writers. Sources are comprised of books,

academic journals, and Internet websites. Chapter 3 represents the research

methodology applied in this paper. It mentions the research methods used and

explains the rationale behind choosing this method as well as its limitations. The

section thereafter comprises the findings of the primary research conducted, including

key themes identified in relation to the research questions. The subsequent section

portrays the discussion and interpretation of the findings referring back to the

literature review. Implications for management will also be given in this section. The

outcomes are then related to the literature review for comparison. The final section

concludes the results by summarizing what has been gained from this research. This

section also provides an outlook for further research and recommendations for

company X.

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2 Literature Review

This section will review the literature about the main themes of this research paper.

Firstly, it will portray literature about the SC and SCM. Secondly, the uniqueness of the

PSC will be highlighted. Thirdly, different notions of compliance will be explored.

2.1 Supply Chain and Supply Chain Management

As per Christopher (2005), the idea of SCs dates back several thousands of years when

pyramids were being built with the help of material and information flows. SCs can be

differentiated from logistics in that logistics represent a planning framework to plan a

single flow of information and products. In contrast, the idea of the SC builds upon this

platform by expanding the idea to incorporate the interaction of several entities

including suppliers, customers and the focal organization itself (Hugos, 2011).

Christopher’s (2005: 5) definition of SCM, ‘The management of upstream and

downstream relationships with suppliers and customers to deliver superior customer

value at less cost to the supply chain as a whole’ illustrates that the well-functioning of

the whole SC is more crucial than the functioning of single logistics processes. This

poses a remarkable challenge on the SC as single interests need to be mitigated.

According to Whewell (2010), all SC activities are meant to create value. Thus, value is

constantly added to products on their way through the SC towards the customer. This

idea of customer value-adding activities is depicted in the following generic SC figure:

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Figure 3: A Generic Supply Chain (Brümmer2, 2011)

This figure shows the basic functions of each company. Value-adding activities occur

within each company, leading to a single company’s increase in value. Cross company

increase in value occurs because several companies are connected within a SC. Finally,

there is an overall appreciation in value throughout the entire SC (Blanchard, 2007).

However, Whewell (2010) also mentions that the mitigation of single interests in the

PSC is hard to achieve as eventually every firm wants to maximize its own profits.

Whewell (2010: 95) states, ‘There is only one pot of money, and the balance is about

who is able to get the biggest share’. This was due to the different goals of the SC

partners. Since there are various chains interlinked, the word chain could be replaced

by network (Simchi-Levi, et al., 2003). The latter will be illustrated by figure 4:


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Figure 4: Supply Chain Network (Adapted from Simchi-Levi, et al., 2003)

The starting point in this figure is the focal company. Tier 1 suppliers are often referred

to as the principal contractor of the focal company to which they deliver directly. From

the focal company’s point of view Tier 2 suppliers supply Tier 1 suppliers and so on

(Wisner, et al., 2008). The role of SCM becomes apparent in the integration of this

network. Choosing SC partners, aligning them, extending process integration to

second, third and fourth tier suppliers and re-evaluating the SC regularly are main roles

of SCM (Elkins, et al., 2005). The SCM integration model by Wisner, et al. (2008)

summarizes this. The next section focuses on the uniqueness of the PSC.

2.2 The Pharmaceutical Supply Chain – Two Worlds in Contrast

The basic idea of a SC is to deliver products from A to B and to create value. As per

Rees (2011), this becomes complex considering that the world of SC and SCM stands

for high risk and uncertainty, delivery deadlines, demand fluctuations and

dysfunctional partnerships. Besides, in the PSC this world meets another complex

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world that is characterized by ethics, scientific rigor, patient safety and high standards,

and also a world of blockbuster drugs and significantly large profits – business and

science often clash. What differentiates the PSC from other SCs is the high risk of

failure as the ultimate customer is always a patient (Rees, 2011).

Apart from four different flows – product, financial, planning, permit – it is the number

of SC intermediaries, authorities and bureaucratic institutions that make the PSC so

unique. Moreover, the industry is heavily regulated and global, thus the PSC tends to

be even more fragmented (Pharma Suppliers & News, 2011). The next figure, the SC of

company X, illustrates this complexity:

Figure 5: Company X Supply Chain Set Up (Brümmer3, 2011)

External factors such as pricing or competitors’ regulatory actions result in

unpredictable changes in the entire SC (Shah, 2004). Improving technology, the


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commoditization of healthcare and rising demands from more senior populations all

influence an effective PSC (PwC, 2011). The latter exploits intellectual property,

provides safe delivery of drugs and is still flexible and cost efficient (PR Newswire,

2011). The recent global financial crisis illustrates the importance of regulations. The

pharmaceutical industry is similarly widespread and complex, but the implications of

error are life threatening (Vincent, 2010). Consequently the issue of compliance

becomes more important in the PSC. In the following section the current state of

compliance in the pharmaceuticals industry will be described.

2.3 Managing Compliance – The Current State in the Pharmaceuticals Supply Chain

According to Whewell (2010), more than in any other industry the deontological

principal holds that the means have to justify the end. The majority of pharmaceutical

providers and professionals adhere to this principal recognizing the importance of

patient safety and fulfilling compliant processes. However, the cases of, for example,

Seroxat, revealed in 2001, or Vioxx, revealed in 2004, show that despite all regulation

and scrutiny companies find ways to avoid compliant processes (McGoey & Jackson,

2009; Steen, 2011). The PSC is inefficient and does not perform. According to Rees

(2011), this is the case for other SCs as well, however, in the SC of pharmaceuticals this

was due to the complex compliance processes that must be adhered to. This aspect is

emphasized in the majority of literature dedicated to the PSC and gets nurtured by the

fact that many companies do not see the purpose of being compliant with Sarbanes-

Oxley Act (SOX) (Blount, 2006). Mangan, et al. (2008) point out the importance of GDP

in today’s PSC as counterfeiting, commercial pressures and complexity are growing.

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Moreover, monitoring temperature control from frozen to ambient temperatures will

be challenging due to global warming. According to Pharma Suppliers & News (2011),

the PSC will shift towards emerging countries because of progressive pharmaceutical

legislation, lower costs, skilled personnel and treatment-inexperienced patients. It has

been pointed out in the PSC literature that people dealing with compliance issues

hardly ever have sufficient background and skills in SC matters (Rees, 2011). The

industry has recognized this and therefore compliance, ethics and quality profession

evolves increasingly fast recently (Biegelman & Biegelman, 2008).

2.4 Notions of Compliance

In the reviewed literature two major notions of compliance can be identified,

regulatory and voluntary compliance. Compliance is generically described as obeying

laws, rules and regulations. This can be adopted for the PSC as well. However, the

question needs to be asked if this is sufficient to grasp the complexity of the industry.

In the following, the two above-mentioned types of compliance will be explored for

the PSC.

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2.4.1 Regulatory Compliance

According to Cachon (2003), regulatory compliance can also be called forced

compliance, as it is always either based on mandatory external laws and regulations or

contracts between business partners. As per Silverman (2008), regulatory compliance

and its execution cause a constantly changing business environment. This poses the

immense legal, organizational and financial challenge on businesses to fulfil regulatory

requirements, although resources, time, experience and funds are limited (Vincent,

2010). Requirements range from environmental issues over wage and hour regulations

to health and safety issues. In the PSC the most widespread requirements comprise

the following six categories, generally referred to as GxPs (EMA, 2011):

Table 1: Categories of Pharmaceutical Regulations (EMA, 2011)

The ‘x’ in GxP can replace any of the middle letters from the abbreviations in the table

above and all of the practices strive for patient safety. GDP and Good Manufacturing

Practice (GMP) are most important for the PSC (Mangan, et al., 2008). This is why this

section will focus on these standards. Company X follows the principles and guidelines

for GDP and GMP of Medicinal Products for Human Use that are stated in the

respective Directives; Directive 92/25/EEC for GDP and Directive 2003/94/EC for GMP

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(EMA, 2011). For company X GMP is incorporated in the regulations outlined by the

health authorities. Furthermore, it encompasses regulations aimed to serve as quality

control measures outlining general rules for aspects of pharmaceutical manufacturing

such as buildings and facilities, personnel, equipment, packaging, labelling, and

contamination (EMA, 2011). This is summarized by the following table:

Table 2: Aspects of GDP (EMA, 2011)

As per Rees (2011), the pharmaceutical industry has failed to also place focus on the

SC. That is why the regulator has tried to guide the industry. Regulations are supposed

to secure and improve patient safety. However, those attempts often lead to the

opposite. The regulator has followed the principle, ‘The more, and stricter, the pharma

regulations, the better’ (Rees, 2011: 116). Agents of this say that these developments

show that society is willing to pay the costs of compliance. However, according to Rees

(2011), this principle can also be contested because keeping up with compliance

regulations becomes increasingly unpractical and costly. Moreover, it is unfair that

compliant manufacturers have to compete with other non-compliant manufacturers.

Finally, the more regulations issued, the higher the costs for authorities to observe

them. Rees (2011: 117) calls this the ‘competitive advantage of noncompliance’ or the

‘regulatory paradox’. He mentions regulations requiring compliance with ICH Q7 GMP

as an example where the fulfilment has led to a decrease in patient safety.

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Nevertheless, regulatory compliance, based on SOX, has brought several benefits such

as reduced risk, improved efficiency, business and decision-making processes (Blount,

2006). Compliance in terms of risk reduction and improved efficiency resulting in value

will be illustrated in the next two figures:

Figure 6: Non-Compliant Supply Chain (Brümmer4, 2011)

In this non-compliant SC the risk towards the patient increases and endangers the five

patient rights. Value increases only slightly since non-compliance leads to problems

whose resolving is costly.

Figure 7: Compliant Supply Chain (Brümmer5, 2011)

This compliant SC resembles a decrease in risk towards the patient and simultaneously

an increase in value as compliance prevents mistakes. The five patient rights can be



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fulfilled in a compliant SC in contrast to a non-compliant SC. The next section reviews

literature about voluntary compliance.

2.4.2 Voluntary Compliance – A Case for Competitive Advantage

The second notion of compliance is voluntary compliance. This type of compliance has

two facets, which are not explicitly highlighted in the literature. One is implementing

standards such as ISO norms, for example ISO 9000:2008, ISO 14001 or ISO 18001 (ISO,

2011). As per Cachon (2003), these quality management systems can be considered

voluntary compliance because to comply with these standards is not mandatory, but

rather a voluntary business requirement. However, as business partners require these

standards as a basic to conduct business, it might also be referred to as regulatory or

forced compliance (Cachon, 2003). When these systems lead to a well-structured

continuous improvement process, this might as well lead to a competitive advantage

over industry rivals (Oliver, 2009). The second facet of voluntary compliance is the

genuine will of companies to anticipate trends and developments and comply with

them before they are officially required. This automatically leads to a heightened state

of compliance in the SC (Whewell, 2010). The case of Premier, Inc. shows that

excellence in compliance can have wide-ranging positive ramifications, which lead to

competitive advantage. According to Biegelman and Biegelman (2008), Premier, Inc., a

company from the healthcare industry, has won the Baldrige Award6 as the result of

their outstanding compliance and ethics program. Their program can be seen as a

model of how compliance can add value to a company. However, Blount (2006: 1)

6 The Baldrige Award is given to companies that participate in the Baldrige Performance Excellence

Program. There are three versions of criteria, one of which is Health Care (NIST, 2011).

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states, ‘Compliance isn’t something done by the external auditors who come in

periodically and review progress. It should be done daily by everyone in the enterprise

whose job responsibilities touch any of the defined internal controls’. The challenge in

this is to show that compliance can lead to tangible benefits rather than just avoiding

problems on paper. Organizational learning plays a decisive role in compliance

(Tarantino, 2008), thus the following section is dedicated to exploring compliance and

organizational learning within the literature.

2.4.2 Compliance and Organizational Learning

The reviewed literature does not explicitly address operational compliance. However,

contracts and business agreements are mainly subjected to operational procedures

and performance measurements, which are often represented by Key Performance

Indicators (KPIs) (Loader, 2004). Apart from using KPIs as performance measurements,

they can also be used as a method of organizational SC learning (Mangan, et al., 2008).

A company internally or two business parties agree upon minimum and target values

to measure operational performance. Regarding organizational learning, KPIs relate to

single-loop learning (McPhee, et al. 2002). This is illustrated in the picture below:

Figure 8: Single-Loop Organizational Learning (Adapted from Choo, 2002)

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Process performances are measured by KPIs. If there is an underperformance, the

action or the process is changed to improve the KPIs. This means that the problem is

tried to be resolved via a single loop. As per Choo (2002), it is likely that the problem

arises again because the root-cause of the problem has not been detected yet. Since

underperformances can have further ramifications the company learns effectively if it

implements a second loop to the learning process. This might even include a previous

step in the SC, for example, identifying the planning or procurement process (Choo,

2002). If this is done the company reveals if it does the right things, hence it learns

more effectively (Bourne, 2008). This is illustrated in the following picture:

Figure 9: Double-Loop Organizational Learning (Adapted from Choo, 2002)

According to Choo (2002), learning is single-loop when the action taken to improve

performance is sufficient to correct the error without altering existing norms in the

organization. Single-loop learning aims to increase effectiveness within current norms.

In contrast to this, learning is double-loop when performance can only be increased

when norms are changed, which is connected to a restructuring process of strategies

and assumptions related to the norms (Choo, 2002). Therefore, the goal of double-

loop learning is to resolve incorrect norms. While single-loop is adaptive and is

concerned with coping, double-loop is generative learning and has to do with creating

new mind-sets (Blackman, et al., 2004). However, there has been raised critique about

the reliability of double-loop learning by Henderson (1997), who believes effective

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learning is mainly based on the organizational culture that allows for trial and error

and mistakes.

The literature review demonstrates that compliance is gaining importance in the PSC

and that companies and authors are aware of this. However, the underlying theme is

that compliance is a burden that companies have to take on. The literature does not

highlight enough the positive potential involved in compliance. Questions arise such as

‘How can excellence in compliance improve the performance of companies’? or ‘What

benefits can be achieved by exceeding compliance requirements’? . In the next section,

the author explains the methodology of the primary research to explore parts of the

answers of these questions on the basis of a real-life business case study.

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3 Methodology

This section critically analyses the primary research method applied for the

information collection and the reasoning for selecting it. First, the applied research

method and the sampling frame will be presented. Next, practical limitations will be

discussed. Then, the data validity, reliability and transferability will be explored prior to

explaining the data collection. Finally, alternative research methods will be highlighted.

3.1 Applied Research Method

The author chose a holistic single case study design to conduct this research. The

rationale behind this is twofold. To begin with, conducting a multiple case study would

have exceeded the means of only one independent researcher in terms of resources

and time (Yin, 2011). Furthermore, company X can be considered to be a

representative company within the pharmaceutical industry. Thus, the outcomes of

this research are assumed to be valid for the average pharmaceutical company. In

addition, as per Yin (2009), case studies are used to understand aspects of

organizations that are particularly complex. Case studies provide a blend of qualitative

methods allowing the complexity of this research topic to be grasped. The author’s

personal experiences and observations, gained during a three-month internship at

company X, were used to contribute to the appropriateness and validity of the

interview questions asked. Within the scope of this research the author endeavours to

shed light on the spectrum of compliance in the PSC. This will include compliance

categories, both prevailing and less established ones, opportunities for competitive

advantage, motivations to excel in compliance and challenges in implementing it.

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Finally, recommendations in the form of best practices will be given to company X.

Semi-structured interviews were conducted to gain the opinions of people who work

in the focal research field day by day. Open questions were asked in order not to

restrict the interviewees, to limit their responses, or to set the answers in advance.

According to McDaniel and Gates (2010), open questions have several advantages such

as receiving rich information in an everyday language rather than in jargon. The sample

consists of five interviewees who are employees with different job positions in

company X’s PSC. These are all related to compliance. However, the results from the

interviews cannot be considered definite, as this sample size is not representative,

even if the interviewees are selected carefully (Piekkari & Welch, 2011). This leads to

the next section; practical limitations.

3.2 Practical Limitations

The qualitative research was realized as a single case study within one company.

Hence, the interviews represent the opinion from only this one company and cannot

represent the entire industry’s opinions about the topic. The latter could have been

achieved by conducting a multiple case study (Yin, 2009).

Additionally, the author conducted interviews of this kind for the first time.

Interviewing depends on the interviewer’s ability, which might influence the objectivity

and the validity of the interviews (Cohen, et al., 2011). Conducting only five interviews

did not allow for a complete learning curve for the interviewer. Therefore, the results

might not be as appropriate as they could have been with more time to practice

interviewing.

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Besides, the interviewees might answer euphemistically, especially because

compliance is a sensitive topic. To underperform in compliance could backfire because

official and public scrutiny could arise. McDaniel and Gates (2010) call this

‘unconscious misrepresentation’, which is classified as response bias.

Furthermore, compliance is a vague and abstract term. This is why the interviewees

tended to have difficulties articulating their thoughts about compliance. As a result,

while transcribing the interviews the author occasionally had to read between the lines

in order to understand the main point. Naturally, this might have let to watering of the

original idea of the interviewees.

While an interviewee’s point of view may change over time, validity could have been

increased through second interviews. It would also have met methodological rigor

criteria for prolonged engagement and it would have enabled the participants to

confirm or clarify information given initially (Cassell, & Symon 2004). More trust could

also have been built between the interviewer and the interviewees, thus enabling

further disclosure of deeper thoughts. However, this was not feasible due to time

constraints.

Moreover, interviews with key employees such as key account managers from the pre-

wholesalers would have been valuable. Their perspectives would also have increased

the validity of this research; again, time proved to be a constraint.

Finally, pilot interviews would have been an adequate way to improve on several

aspects; refining the interview questions, practicing and improving active listening

skills such as paraphrasing and summarizing (Cohen, et al., 2011). This would also have

increased the validity of the interview results.

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3.3 Data Validity, Reliability and Transferability

In this section the author will show why the collected information can be considered

valid, reliable and transferable. Qualitative research is often challenged in terms of

these aspects since it is said to be based on non-probability samples (Seale, et al.,

2004). This is done by highlighting the applied criteria for validity, reliability and

transferability based on Duk & Hak (2008) and Seale, et al. (2004).

Referring to validity, the case study approach allows the use of several research

methods such as personal observation, structured and semi-structured interviews,

data analysis or questionnaires and therefore provides for a high validity of the

research outcome (Dul & Hak, 2008).

Regarding reliability the author followed the case study approach since most studies

conducted in the past have applied this methodology as well, which will provide

consistency of this paper with former research. According to Seale, et al. (2004),

reliability is given if results are equally repeated using the same methods. Due to the

small sample size, the reliability may be questioned. Even if the method is applied

again, the range of variance might be high. Nevertheless, the standardized approach of

conducting the interviews and the reflexivity realized by the author in evaluating the

results provided a reasonable level of reliability.

Concerning transferability, Seale, et al. (2004), contest the commonplaces of the

agents of quantitative research methods. The latter ask for representativeness of

samples that consecutively would lead to generalizability. From the agents’ point of

view, qualitative research that is not representative cannot be generalizable and

therefore lacks transferability. However, Seale, et al. (2004), also state that probability

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samples are hardly ever realistic, even in quantitative research. Furthermore, they

mention that much renowned research is based on non-probability samples as well. As

recommended by Seale, et al. (2004), the author defined practical criteria such as the

transferability of the job positions that were interviewed to other companies to face

the problem of representativeness. Hence, considering the small scope of this paper

the results can be considered relatively transferable to other companies and contexts.

3.4 Data Collection

Interviewing is one of the most common methods for collecting data in qualitative

research and it allows participants to provide rich, contextual descriptions of events

(McDaniel & Gates, 2010). In the following, preparing and implementing the

interviews, as well as strategies for transcribing and analysing the collected data will be

addressed. Ethical issues are also taken into consideration. Following the

recommendations of Phelps, et al. (2007), the interviewees were informed about

confidentiality and anonymity matters as well as the possibility to refuse to participate.

Thus, the interviews were only conducted after the interviewees gave their informed

consent. On company request, the author will not mention names, ages and length of

employment of the interviewees.

Firstly, the author determined that the research question could be answered

appropriately by the interviewing method. Following Patton (2002), the author

decided upon some sample criteria such as accessibility of the interviewees, relation of

job positions to compliance in the PSC and length of employment in order to

guarantee the highest level of validity possible.

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Secondly, the author contacted the potential interviewees and sent them a consent

form via email. This email and consent form provided information about the research

topic, the main aims and the structure of the interview, an assurance of the protection

of privacy and confidentiality of information and how the data will be used or not

used. After confirmation, the author arranged a time and a quiet environment with no

distractions for the interviews. The interviewer’s sitting position enabled him to

recognize body language and make easy eye contact.

Then, as per Cohen, et al.’s recommendation (2011), the author decided to conduct

semi-structured, focused interviews as the author wanted to ask specific questions to

all of the interviewees consistently as well as to ask open and follow-up questions

related to their field of work. Selecting people the author knew reduced the trust-

building introductory time to emphasize the integral middle part of the interview

where the majority of worthwhile data is gained. As per McDaniel and Gate’s

suggestion (2010), the author designed the third part of the interview to summarize

the answers and leave room for additional information. The limitations mentioned in

3.2 imply that there could be alternative research methods for this topic. These will be

addressed in the following section.

3.5 Alternative Research Methods

The following table summarizes the five major misunderstandings about case study

research, which is why different research approaches should also be considered:

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Table 3: The Five Misunderstandings about Case-Study Research (Flyvbjerg, 2006)

Structured questionnaires and focus groups were thought of in addition to the single

case study. According to McDaniel and Gates (2010), in focus groups, the interviewer

covers more people at the same time and is supposed to be more time efficient.

Furthermore, the dynamics of interaction and mutual creativity exchanges lead to the

creation of new ideas (Phelps, 2007). However, focus group conversations require

multitasking skills, which complicate the data collection and conversation monitoring.

Quantitative research could have been added to the research as it is a descriptive

research method that represents a larger sample size in comparison to qualitative

research. A questionnaire, for example, translates the research objective into specific

questions to gain the desired information from participants (Saunders, et al., 2009).

The next chapter represents the findings that have been revealed based upon the

research method that has been described in this chapter.

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4 Findings

Five semi-structured, in-depth interviews with employees working in different parts of

the PSC of company X were conducted for this research paper. The interviews lasted

approximately one hour and major parts were either put in the main text or the

appendix. Three interviews were done in person in the headquarters of company X and

two were done via telephone. Company X is world-leading in sectors such as

household, health and personal care. This company has more than 25,000 employees

operating in over 50 countries. Products are sold in approximately 180 countries. This

section presents the findings of the primary research, identifies key themes related to

the research questions and indicates majority and minority perspectives of the

interviewees.

4.1 Compliance in the Pharmaceutical Supply Chain

The first question explored the meaning of compliance in the PSC. The table below

summarizes the interviewees’ answers:

Table 4: Compliance in the Pharmaceutical Supply Chain

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The first interview was with the Supply Chain Director of company X, who is in charge

of the entire physical distribution processes of the pharmaceuticals from the factory to

the patient. According to him, compliance in the PSC meant the fulfilment of legal and

regulatory requirements of pharmaceutical products. The second interview was with

the Legal Counsel of company X, who is in charge of everything legally related to the

business. The LC describes compliance in the PSC similarly as ‘acting in accordance

with local legal requirements and regulatory guidance’. The LC mentions the local

aspect of compliance, which shows that compliance has different meanings in different

settings. In a global SC this meant a company has to cope with a range of different

compliance understandings as well as with the different extents of compliance. A

statement of the QCM also mirrors this aspect, ‘You might have different types of

compliance in different countries’. These two interviewees describe compliance from a

legal and reactive point of view.

The third interview was with the European Quality Systems Manager of company X,

who is in charge of all compliance and quality related issues. According to him,

compliance meant having to do the things you must do to remain in business. That was

being compliant with laws that a company has to comply with in order to sell products

and to ensure safe product use. There were external minimum requirements that

could be turned into a competitive advantage internally. The latter distinguishes

between external and internal aspects. This view is more business driven and considers

compliance as something mandatory that can actively be turned into a business

opportunity at the same time.

The fourth interview was with the Quality Compliance Manager of company X, who is

in charge of quality compliance at the manufacturing site. The QCM describes

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compliance as a process by which a company conforms to legal and regulatory

systems, business policies, standards and guidelines, for example, ISO norms. Business

policies were implemented to achieve business objectives that included operational,

performance and quality aspects of the business. In his position, he was only

interested in GMP policies that were drawn by regulations and medicines’ law. This

opinion is a combination of the first three interviewees’ points of view, whereas he

becomes more specific and highlights the operational component of compliance as

well as the notion of quality.

The fifth interview was with the European Logistics Manager of company X, who is in

charge of the entire physical distribution processes of the pharmaceuticals from the

factory to the patients in Europe. According to him, compliance meant conforming to

laws, specifications, policies or standards. The PSC was faced with a number of

regulatory requirements such as GMP and GDP. This view also focuses more on the

legal and mandatory aspects of compliance. By mentioning the specific requirements

for the PSC, his view resembles the QCM’s opinion.

The variety of answers shows how abstract this term still is, even for the professionals

working in this field. This is why there should be an in-depth categorization of the term

to identify the whole range of compliance fields. Identifying different categories of

compliance facilitates the undertaking of well mapped-out compliance strategies

instead of trying to tackle everything at once under the vague term of compliance.

Through this the multi-layered PSC can better be managed.

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4.2 Compliance Categories

The next question addressed different categories of compliance. The responses are

summarized in the following table:

Table 5: Compliance Categories

All of the respondents’ answers include regulatory compliance. Since this is the most

general and mandatory type of compliance this result was predictable. The SCD says,

‘Regulatory compliance in the pharmaceutical supply chain is given and consists of, for

example, European laws and GxPs’. The QCM shares this view mentioning the basic

characters of GMP and GDP. The former was mandatory in order to manufacture

controlled drugs, whereas the latter was mandatory to market them. The LC relates

regulatory compliance mainly with product ownership since, in a multiple SC that

processes such sensible and valuable goods, it was always important to specify who

the owner and the risk taker were. These answers indicate that the interviewees are

aware of the importance of the fulfilment of minimum requirements represented by

regulatory compliance.

Three interviewees mentioned operational compliance. The answers to what

operational compliance meant ranged from getting products to the customer

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efficiently (LC) to KPI databases (EQSM & ELM). In particular, the EQSM points out lead

and lag KPIs in order to improve organizational learning and to move towards double-

loop learning to change procedures and underlying norms where necessary. This

corresponds with Choo’s (2002) view about double-loop learning. However, the SCD

challenges the existence of an operational compliance. He says it was merely a

function of regulatory compliance, ‘Operational compliance simply makes regulatory

compliance digestible’. This is reinforced by the EQSM, who says operational

compliance was not a single category, as it should be driven by a company’s strategic

business goals.

Four interviewees stated that voluntary compliance was a single compliance form. For

the SCD it meant fulfilling future compliance requirements already today. The QCM

mentions ISO certifications and quality improvement tools. The EQSM and the ELM

perceive voluntary compliance as the anticipation of future requirements and trying to

act upon it to gain competitive advantage.

Other types of compliances, which are crucial for the PSC, that have not been

mentioned in the literature explicitly, are medical, quality, and safety compliance.

According to the LC, medical compliance consisted of three aspects. Firstly, it included

promotional compliance, which meant the continuous assessment of in-country

product use. Secondly, it included pharmacovigilance7 encompassing monitoring

adverse events and complaints. Thirdly, it included medical information, which meant

the ability to answer queries that doctors may have and provide a medicinal advice

service. The QCM highlights quality and safety compliance, which meant stipulating

7 Pharmacovigilance concerns the assessment and prevention of adverse events of medicines (EC, 2011).

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what the vision, mission, and quality objectives were, as this was an important aspect

when supplying to patients.

Moreover, financial accounting and business requirements compliance (ethical

compliance) were mentioned. However, these are cross sectional and more

departmental compliance categories, which are not unique for the PSC. A

categorization of compliance is beneficial because it makes the process of compliance

more manageable, measurable and transparent as the persons in charge can better

focus, monitor and report on one category of compliance rather than on compliance as

a whole. The next section addresses compliance in relation to competitive advantage.

4.3 Compliance as a Source of Competitive Advantage

The next question raised the aspect of competitive advantages. The answers are

presented in the following table:

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Table 6: Compliance as a Source of Competitive Advantage

The answers show a clear result. All the interviewees share the opinion that

compliance can lead to competitive advantage. This was mirrored through comments

such as, ‘Definitely, due to the nature of the product safety is very important. Thus the

ability to actively demonstrate that the focus is laid on safety makes it easier to talk to

authorities and opinion leaders’. The SCD gave the example that in Malaysia a

competitor got rejected during the application process for import permits and got

referred to company X to see how to manage a product and the accompanying

processes excellently. As a result, company X got more import permits and therefore a

larger market share. Considering this answer being a role model is the underlying

source for the competitive advantage.

Another example was given by the QCM. In 2010, in Brazil, company X ensured that

regulatory expectations were adapted one year before an external audit was

conducted and the site, people, procedures and system were compliant in all respects.

When the Brazilian agency came to audit company X they were completely satisfied,

no critical observations were identified and the licence was awarded five days before

the end of the audit. He also says that compliance was very complex due to global

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needs and the global scale of the PSC. However, as company X is present in so many

countries around the world, this allows for the facilitation of handling this complexity

due to organizational learning. The more often a company was confronted, the better

it could handle it; this should lead to a marketing advantage. Secondly, ISO and GMP,

for example, were very closely related. ISO 9000:2008 was all about continuous

improvement and if company X integrated those philosophies into the business, it

would achieve higher quality levels leading to greater customer satisfaction and

enhanced organizational learning.

According to the LC, compliance could lead to a competitive advantage if, for example,

there were requirements in one country but not in others, however, the company

implements the higher requirements everywhere. This resulted in advantages of

consistency and transparency. The approach of dealing with a problem or a crisis could

lead to a competitive advantage through having increased information. If a company

handled a product recall better than others because of superior information through

‘knowing two steps further down in the supply chain’, it would leave a company in a

much better position. However, a company could also loose a competitive advantage

through being over-compliant when investments were invested into a wrong trend.

The EQSM’s and the ELM’s answers are efficiency and cost driven and focus on the

right processes and investments in order to bring costs down and enhance quality.

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4.4 Motivational Factors to Excel in Compliance

The next question brought to light the motivational factors to excel in compliance. The

table below illustrates a summary of the answers:

Table 7: Motivational Factors to Excel in Compliance

All interviewees mentioned patient safety, which shows the awareness that the well-

being of the patients should be the focus in the PSC. This is recognized by statements

such as, ‘That’s what it’s all about’ (SCD). The SCD also mentions that following

external requirements was motivating as well, however, less significant. Finally, rising

profits due to compliance excellence just motivated slightly, ‘This would be more a

philosophical debate’.

Three interviewees pointed out enhanced reputation as a motivational factor. It led to

more trust in the product, which successively made it easier to sell it. Furthermore,

according to the QCM, a reputation of being very compliant could demonstrate

excellence. If authorities saw process excellence through, for example, very effective

submission of dossiers8, less scrutiny would be applied and the SC could run more

smoothly. This consecutively simplified the process of getting access to markets.

8 A dossier is a collection of relevant documents to get approval to market pharmaceuticals (ICPC, 2011)

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Nevertheless the QCM also says, ‘If you don’t have a driver’s license you cannot drive a

car’. In other words, in the PSC compliance was a mandatory requirement to achieve

market share. Two other interviewees also identified this external motivation.

According to the LC, company X tried to excel in compliance to achieve higher process

efficiency and to avoid problems. This then would lead to a smooth supply to patients.

The EQSM says that the key principle was that the customer is at the heart of

everything. Therefore, compliance could not be economically driven if it brought down

customer satisfaction. Thus, economic reasons came second. Furthermore, company X

considered quality as a strategic aspect. To increase the quality level, high motivation

by the senior management was required which would consecutively motivate the rest

of the company.

Finally, if company X excelled in compliance it would have excellent quality and

performance levels as well, says the QCM. Company X could not achieve compliance

alone without having a good quality balance and a high performance. So, when

company X excelled in compliance it would ensure high quality and performance levels

which would generate more satisfied customers and profit. Companies face challenges

while implementing and assuring compliant processes, which are presented next.

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4.5 Challenges in Implementing Compliance

The closing question focused on challenges in implementing compliance. The answers

are presented in the table below:

Table 8: Challenges in Implementing Compliance

Four interviewees mentioned resource scarcity in terms of workforce and time as one

of the main challenges in implementing compliance. The EQSM points out that any

company had to ensure it carried out its daily activities. The QCM says that a company

had to find a balance because to exceed compliance requirements a company may

need a large number of people to work full time on compliance issues. However,

smaller companies may not be able to provide that much of headcount. In addition,

the ELM points out that people needed to be trained appropriately and that took time,

‘It is not a one day job. It is a big challenge as it is an endless story. Things like training

and know-how transfer are necessary to become aligned and the same values need to

be shared. It is as much a cultural issue’. Results and benefits had to be made visible.

Compliance was a long-term investment and task, ‘You can’t just send an email and

wait for it to happen immediately. It takes time’ (ELM).

Three interviewees mentioned complexity. Complexity was caused by different local

regulatory requirements, ‘Aspects that have been locally approved to be compliant

cause resistance if the parent country tries to implement further compliance processes

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proactively’ (SCD). Moreover, cultural differences caused by parent- and host-country

effects amplified this resistance. According to the LC, the main challenge was getting a

clearer understanding of the local requirements. Another challenge was structuring

the business accordingly. The QCM says, ‘Fundamentally, the complexity. It’s a

laborious task. It requires a phenomenal amount of effort, time and cost’.

In addition, according to the EQSM, people would always resist doing something

differently to how or what they did before. Thus, it caused difficulties to get people to

change their working practices. This represented the emotional aspect of it. Finally,

different cultures would naturally comply more than others as cultures more closely

resembling that of the parent company hold views that are closer linked as opposed to

cultures that are further apart from that of the parent company.

The LC also mentions that there was a high risk involved in implementing compliance.

When a company tried to anticipate and manage complex compliance activities it may

sometimes fail which consecutively could create non-compliance. This could affect the

product, the marketing, regulatory and legal bindings. Figure 6 illustrates how

eventually patient safety would be at risk as well.

To conclude, there is a strong awareness of the importance of compliance in the PSC.

The definition of the term, particularly internally within the company, must be clarified

and standardized. Due to the small sample size it is arguable if these findings can be

generalized. Nevertheless, the transferability of the interviewees’ job positions and the

objectivity of the answers provide for a relative high generalizability of the findings.

Implications for the management of compliance based on these findings are to lay

more emphasis on compliance and the different categories it involves. Compliance

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together with quality builds a strategic aspect of a company that needs to be trained

and accompanied with a stringent change management. Compliance can be planned

centrally, but needs to be implemented and realized locally. Hence, the top

management needs to be made culturally aware of differences and at the same time

local managers need to be empowered. Furthermore, expertise in terms of compliance

and local knowledge needs to be gathered. When these aspects are being taken into

consideration, benefits such as consistency, transparency, efficiency, and safety can

result. Seeing compliance as a business opportunity holds unpredictable potential for

competitive advantage and performance increase. Nonetheless, management need to

be patient and sustainable to undertake the endeavour to excel in compliance since

compliance represents a process rather than an action. This has particularly come clear

in the section about challenges where it has been mentioned that compliance is a

never-ending task. The next section will discuss the central findings from the primary

research in the context of the literature review from chapter 2.

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5 Analysis and Discussion

Reviewing the answers to the meaning of compliance in the PSC revealed that there is

no unified understanding about compliance in terms of the PSC. However, the majority

of the answers focused on legal aspects in terms of complying with external laws, rules

and regulations. This bias in the answers is similar to the literature, which also mainly

talks about regulatory compliance, for example, Whewell’s (2010) definition of

compliance points out local aspects. The LC has also mentioned these. This aspect of

act local, impact global (Mangan, et al., 2008; Levitt, 1983) represents a major source

of complexity in the PSC. The focus on GDP and GMP is another commonality between

literature and the outcomes of the primary research. The literature about compliance

in the PSC does not explicitly mention the business opportunity that compliance,

particularly voluntary compliance, can represent when excelled. However, the findings

have revealed that the management of compliance can lead to competitive advantage

in multiple ways. Hence, literature should emphasize this aspect more strongly. In

particular the strategic aspect of compliance needs to be pointed out, as appropriate

compliance management will ensure competitiveness in the PSC in the future

(Handfield, et al., 2011). Turning external requirements into competitive advantage

internally is often referred to as quality in literature (Rees, 2011). This can be

considered as a commonality of literature and practice as job titles such as Quality

Compliance Manager have evolved recently.

The literature mentions the two types of compliance that are addressed in chapter 2;

regulatory and voluntary compliance. The interviews have revealed that there are

more categories that can be identified. Medical compliance, for example, should be

addressed in the literature about the PSC more clearly, as it is a very unique and

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specific category of compliance. The aspects that are subjected to medical compliance

are promotional compliance, Pharmacovigilance and medical information. This can be

linked back to what Rees (2011) said about the world of SC clashing with the world of

science. Medical compliance is a result of this clash and should be addressed

separately from regulatory compliance because of its extensive, cross-sectional

ramifications. Promotional compliance in terms of pharmaceuticals includes marketing

aspects and Pharmacovigilance while medical information include medicinal aspects

(LC). All these mentioned aspects must be covered by the PSC, it is not enough to

employ a general compliance manager to observe whether all the processes across the

different fields are being compliant; the skill set of such an individual would be too

broad to be qualified to a high standard in every field. Thus, depending on the size of

the company there should be a compliance manager for each of the different

compliance categories. However, as per Silverman (2008), resources of companies are

limited and restrict the employment of highly specialized overhead staff. What the

EQSM and the QCM said supports Silverman (2008) as they say that resources,

particularly of smaller firms, were scarce and needed to be used in a way to ensure

that the daily business runs smoothly. At this stage it can be argued that excellence in

compliance that lead to competitive advantage can only be achieved when a company

obtains the wherewithal to increase headcount. However, an increase in headcount is

not always necessary to gain competitive advantage. There is proof for this in the

literature as well as in practice. According to Biegelman and Biegelman (2008) Premier,

Inc. received the Baldrige Award because of their outstanding ethics and compliance

program. Admittedly, one reason why Premier, Inc. could realize this program was

because they were able to increase the number of newly employed people that were

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in charge of the program. However, many aspects were feasible with the existing

employees. Their code of conduct exceeded the industry-wide standard in several

aspects. Regular compliance trainings, for example, could also be realized without an

increase of staff. Finally, the employees received information about compliance and

ethical issues regularly. The interviewees have unanimously answered that excellence

in compliance can lead to competitive advantage, however, three of them consider

time and resource restrictions to be limiting the potential of competitive advantage.

Nonetheless, there are examples in company X as to how competitive advantage was

achieved as a result of excellence in compliance. One reason for this was excellent

product management and the ability to demonstrate this under the eyes of the local

authority in Malaysia. This has led to an increase in market share as company X

outcompeted a rival for the import permit application. Another reason was the

excellent preparation of an external audit that has impressed the local authorities in

Brazil. This reputation will increase productivity in the realm of administrative

procedures because the authority will exert less scrutiny. This contradicts Rees (2011),

who claims that compliance always comes with costs.

The literature is limited in writing about motivational factors to excel in compliance.

Patient safety can be identified as the most important factor, even though the

literature looks at it from a business point of view. In contrast to this, the primary

research has also revealed that patient safety is most important, but the interviewees

see patient safety as a moral obligation rather than a business need. In addition to this,

the interviewees also mentioned increased reputation. A good compliance reputation

has many benefits that are not addressed in the literature about compliance in the

PSC. However, the interviewees point out that a positive reputation can even lead to a

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greater market share. This point needs proof in the coming years and the actual impact

of an enhanced compliance reputation needs to be made measurable. Giving proof of

actual benefits resulting from excellence in compliance makes sure that compliance is

more than a token gesture.

Challenges in implementing compliance are addressed in the literature. However, the

primary research has revealed that there are aspects that are missing in the literature.

Since compliance does not stop at the borders of one country (Mangan, et al., 2008),

but also has to be implemented according to local conditions, cultural implications

should be considered more explicitly in the literature. In the enforcement of

compliance, home- and host-country effects will play an increasingly important role.

Change management and strategies on how to tackle these challenges could

contribute positively to the literature about compliance in the PSC as well. Having

discussed major commonalities and differences of literature and practice, the next

chapter will conclude this paper, give recommendations in terms of best practices to

company X and provide an outlook of the pharmaceutical industry.

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6 Conclusion

To conclude, compliance and patient safety are paramount in the PSC. An increasing

amount of challenges arise for the PSC such as counterfeit drugs or global warming,

therefore GDP and GMP must be realized in the best way possible. To loosen the

pressure of regulatory compliance, voluntary compliance must be realized proactively

throughout the whole industry in order to reduce the number of regulations. Company

X has clearly prioritized compliance and it has realized that compliance is not just a

necessary burden, but also an opportunity to be distinguishable from rivals. Hence, the

research question if excellence in compliance could lead to a competitive advantage

can clearly be confirmed. However, this answer cannot be considered definite, as the

scope of this paper does not allow generalizing the findings per se. Nonetheless, this

result can be taken as a starting point for further research on this topic. Specially,

when looking at the outlook it becomes clear that compliance will rise in importance

over the coming years. Research on compliance has only just begun, thus companies

should not miss to take a leading role in developing it because it bears great potential.

During the internship, areas for improvement have been recognised which will be

addressed in the following part in the form of short-term and long-term

recommendations:

Company X should develop an organizational compliance code of conduct to

have a general document to refer to and work in line with. This could be started

soon.

Company X should start to develop a non-compliance database to be able to

learn from historical non-compliance solutions. This could result in a yearly

best-practice handbook. This could also be started soon.

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Company X should strategically recruit employees with knowledge in the

different compliance categories. This could be started after priorities for

recruitment have been outlined.

Company X should implement regular trainings for all employees to discuss and

train compliance-related issues. This could be started when a compliance code

of conduct is written.

Company X should integrate compliant and ethical behaviour into the

company’s reward system. This could be developed when resources are

available and criteria for compliance are defined within the company.

Company X should decentralize compliance processes to be closer to the

process owners paying tribute to the fact that compliance needs to be adhered

to locally. However, the compliance strategy and monitoring should be

centralized.

Outlook of the pharmaceutical industry:

Health reforms will increasingly emphasize patient outcomes than product

features. This will require pharmaceutical companies to combine product

offerings with value-added services to improve outcomes and efficiencies (PR

Newswire, 2011).

The development of new products such as biologics will attribute products to

the portfolio that have a higher turnover requiring more complex processes of

manufacturing and distribution (Whewell, 2010).

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The development of new modes of healthcare delivery, such as e-prescribing

and remote monitoring, will move healthcare delivery into communities and

direct to patients. To manage demand-driven manufacturing and distribution

processes and widespread distribution networks pharmaceutical companies

will need real-time information (PwC, 2011).

The development of evolving markets will entail pharmaceutical companies to

recognise new patients’ needs and preferences and likewise adapt cost and

design of products and services (Rees, 2011; Boer, 2008).

Globalization, international sourcing and the handling of regulated products will

lead to a growing public scrutiny. Hence, the pharmaceutical SCM needs to

monitor the risk of contamination and counterfeits at all times. Regulators will

raise requirements for SC safety, demanding the latest technologies for

technologies such as tracking & tracing and temperature control (Handfield, et

al., 2011).

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Index

Baldrige Award ......................................... 25

biologics ................................................... 54

case study................................................. 29

code of conduct ....................................... 53

Company X ............................................... 36

competitive advantages ........................... 41

Complexity ............................................... 46

compliance ............................................... 10

Cross company increase in value ............. 17

deontological principal ............................ 20

distribution channels ............................... 12

double-loop learning ................................ 27

e-prescribing ............................................ 55

ethical compliance ................................... 41

evolving markets ...................................... 55

five patient rights ..................................... 13

GDP .......................................................... 22

global warming......................................... 21

GMP ......................................................... 22

GxPs .......................................................... 22

ISO 9000:2008 .......................................... 43

ISO norms ................................................. 25

logistics ..................................................... 13

medical compliance ................................. 40

non-compliance database ........................ 53

operational compliance ........................... 26

organizational learning ............................ 26

patient safety .......................................... 12

Pharmaceutical Supply Chain .................. 18

Pharmaceuticals ...................................... 10

pharmacovigilance .................................. 40

Premier, Inc. ............................................ 25

process owners ........................................ 54

promotional compliance ......................... 40

public scrutiny ......................................... 55

regulatory compliance ............................. 22

regulatory requirements ......................... 22

reliability .................................................. 32

response bias ........................................... 31

reward system ......................................... 54

single company increase in value ............ 17

Single-loop learning ................................. 27

Supply Chain ............................................ 16

Supply Chain Management ..................... 16

temperature control ................................ 55

Tier 1 suppliers ........................................ 18

transferability .......................................... 32

unconscious misrepresentation .............. 31

validity ..................................................... 32

value-added services ............................... 54

Value-adding activities ............................ 17

voluntary compliance .............................. 25

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Appendix A: Interview Consent Form

Dear Participants,

My name is , and I'm currently studying MSc International

Management at Royal Holloway, University of London. I’m in the process of writing my

Independent Research Paper (IRP), which focuses on Compliance in the

Pharmaceutical Supply Chain. My main research aim is to analyse the current state of

compliance in the pharmaceutical supply chain, to categorise different notions of

compliance, to discuss the possibility of achieving competitive advantage based on

compliance and to examine challenges in implementing compliance. This topic is

interesting as previously there has been conducted only little research about this topic

and currently the term of compliance is rather vague than based on clear definitions. I

would like to thank you for taking part in this recorded interview and would like to

inform you of the following information:

Interviews will last approximately 45-60 minutes.

Pseudonyms will be used upon request.

Your contribution to this research is important and very much appreciated.

Should you require further information, please contact me on

Thanking you,

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Appendix B: Outline of the Interview Questions

1. From your perspective, what does compliance mean?

2. What does compliance mean in the PSC?

3. If you had to categorize compliance, what would the categories be?

Guide to the answer of question 3:

- Operational compliance (KPIs etc.)

- Regulatory compliance (GDP, SOPs etc.)

- Voluntary compliance (being a step ahead, heightened compliance, temperature

control etc.)

3a. What other sorts of compliance exist which are relevant for the PSC?

4. What is the current state of compliance in the PSC?


- Adaptive (fulfilling minimum requirements)

- Proactive (being a step ahead, anticipating trends etc.)?

5. What is company X’s stand on compliance, adaptive or proactive? Can you give

examples?

6. Can compliance lead to a competitive advantage? In what respect it can? Can you

give examples?

7. What are the trends in compliance?

8. What are the motivational factors why company X tries to excel in compliance?


Economics motives: Reduce costs, Enhance profit, External requirements (competitors,

governments)

Marketing motives: Enhance reputation, Improve customer binding and patient safety

9. How does company X develop a compliance strategy?


Economic concerns, Marketing concerns, Regulatory concerns

10. What are challenges in implementing compliance?

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Appendix C: Transcription of Interview No. 4

Interviewer (Ir): Hello, thank you very much for taking some time to give me this

interview. I assume you have received the consent form and you agree to the

conditions stated in it.

Interviewee (Ie): Yes, I have and I’m fine with it.

Ir: Ok, let’s start with the first question. From your perspective, what does compliance

mean?

Ie: In general terminology, compliance is a process by which you’re conforming to

laws, regulations, policies and standards. It could be any one of those. In my current

role, I’d define compliance in three categories; number one; compliance with a legal

and regulatory system, number two; compliance with business policies, number three;

compliance with standards and guidelines, for example, ISO. ISO is a guideline, it is not

mandatorily required, but an ISO quality system is a nice to have system for obvious

reasons.

Ir: What do you mean by business policies?

Ie: Business policies are a range of things. They are implemented to achieve business

objectives, which mean operational, performance and quality aspects of the business.

It can be, for example, compliant HR policies. So compliance encompasses a very broad

spectrum. From my current role’s point of view, I’m only interested in GMP policies

which, are drawn by regulations and medicines’ law. Number two is a company’s

pharmaceutical policy, which stipulates how the company should run, manage and

control its pharmaceutical business. I’d say the last thing is the subsidiaries of those

policies, which are ISO, and some of the national regulations. To give you an example;

when you export to Turkey, they may have a different law compared to Brazil, Mexico

or India. In Europe, GMP is a mandatory requirement for a healthcare manufacturer.

So, as a primary manufacturer and distributor of pharmaceutical products I must be

compliant with GMP.

Ir: Ok, that was really detailed. Let’s move on. When you had to categorize compliance,

what would be the categories?

Ie: I would put it into a priority order in the pharmaceutical sector. The primary one is

regulatory compliance. This is defined into two branches; GMP, so in that there are

two aspects, every manufacturing site must have a manufacturing authorization. That

is a license from the ministry of health, in our case the Medicines and Healthcare

products Regulatory Agency (MHRA). The MHRA has to approve your ability to produce

medicinal products. Second to all, once you have a manufacturing authorisation, to sell

a product you need a marketing authorisation, which is unique for each and every

product and each and every format of the product. Moreover, a company needs a

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license for every country. So, in terms of medicines’ law a company needs a

manufacturing and marketing authorisation. The second bit is GDP, which is Good

Distribution Practice. Again, if a company produces medicines or pharmaceuticals, it

needs to ensure that the product does not get spoiled or tampered. The next aspects

are health and safety and environmental policies and finally national laws. That means

a company needs to comply with national laws, for example Code of Federal

Regulations (CFR).

The second one is business requirements compliance. So, one aspect is business

policies comprising all HR related and all ethical policies.

The third one is quality compliance. Every business will stipulate its vision, mission and

objectives of quality. There will be quality guidelines and manuals within every

business the company must be compliant with.

The next ones are operational and safety compliance. We must be covering

operational aspects and safety aspects of compliance. These are business-based tools.

The last one is voluntary compliance encompassing, for example, ISO certifications and

quality improvement tools and techniques.

Ir: That is a lot to be considered. Thanks. What is the current state of compliance in the

PSC?

Ie: The current state of compliance in pharmaceuticals is very complex, very laborious

and very difficult to manage. The regulations keep changing, and the industry

developments are very dynamic and especially in a global business like ours, we need

to be compliant with different markets in different ways. So you might have different

types of compliance in different countries. Generally, compliance from a business

point of view is a necessary evil. You need it, but the amount of effort, time, and

money the industry spends on it, is phenomenal. So how does compliance work? The

majority of the industry is very reactive. Every company wants to be proactive, but

only very few are really proactive because you need to be a company with a massive

infrastructure and a massive compliance team. It’s very tricky to be ahead of the game

and to be proactive. However, companies do achieve that level, but it is the minority.

In terms of mandatory compliance, the must you have for patient safety and license, I

would say many companies would be in a state of what we call basic compliance.

Ir: What do you think is company X’s stand on compliance, is it more adaptive or

proactive?

Ie: I would say realistically we are more adaptive; we face compliance when we’re

required to and it’s based on our business needs. However, we have a typical example

of being proactive. So, I would not say we’re ahead in the game in being proactive. We

are in compliance with mandatory requirements. But we are not very proactive in

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compliance at the moment. That is our drive to reach there. A typical example is a

Brazilian compliance inspection. What we did was being compliant with requirements

one year ahead of an audit. We ensured that we adapt the regulatory expectation and

we prepared our site, people, procedures and system for compliance. When the

Brazilian agency came to audit us they were completely satisfied, we did not have any

observations, we had a clear sweep five days before the end of the audit and they

were very happy. We straight got our license through.

Ir: Do you think compliance can lead to a competitive advantage?

Without a doubt, obviously. As we know compliance is a necessary evil. Everything you

use for your advantage is always an opportunity. Firstly, compliance is very complex

due to global needs and supply chains. However, our company is present in so many

countries all around the world. This gives us a competitive advantage as the company

is at a learning advantage in handling all these complexities daily. It also leads to

marketing advantages. Secondly, our company’s strength is based on certain brands.

These brands are based on equity of the quality of the brands. Therefore we’re trying

to increase quality and customer satisfaction levels steadily. A typical example is ISO

and GMP. Both are very closely associated, ISO 9000:2008 is all about continuous

improvement and if we adopt those philosophies into the business it will lead to higher

efficiency and quality levels and the customer will be satisfied. So if the customer is

sufficiently satisfied, quality differences are minimal and the brand equity will increase.

So definitely compliance and quality have got a remarkable potential for a competitive

advantage.

Ir: Ok, I can see your point. Let’s move on with trends in compliance. What are the

trends in compliance in the PSC?

Ie: In that aspect, compliance is getting more and more complex and more and more

strengthened because the compliance expectation if we look 25 years ago has

dramatically changed. The good news is universally it’s reaching getting to some sort of

standards. However, different countries have different requirements. The market is

getting very much regulated, more complexity is added. However, you can see another

trend of more unifying approaches. To name a few there are, for example, Intelligence

Connection Handling (ICH) or Mutual Recognition Agreement (MRA). It means in the

case of, for example, Australia or New Zealand, even though they are outside Europe

they have an agreement with Europe so if we manufacture something In Europe or

vice versa we may be able to do the trading. The third one is that compliance is meant

to become more practical and pragmatic. Going for a more risk based approach. In the

past it was simply said do x,y,z. Now, risk assessments are conducted first and science-

and fact-based rationalization is increasingly applied. Even though the regulators will

push for some strengthening requirement the industry has to agree with it. Normally

when regulators come with a new guideline it will be publicized as a guideline and the

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industry has to give feedback and agree upon it. Then only it will be approved as

legislation.

Ir: What are the motivational factors why company X tries to excel in compliance?

Ie: If you don’t have a driver’s license you cannot drive a car. So in our case compliance

is a mandatory requirement to achieve market share. In terms of exceeding

compliance I want to focus on brand equity primarily. If we excel in compliance there

are fewer disadvantages. To have a reputation of being very compliant makes external

audits more smooth and talking to regulatory institutions is becoming easier as well.

They will have seen how effectively we submit variations and dossiers; that allows for

full proof. Secondly, excelling in compliance facilitates getting into multiple complex

markets because authorities recognize a company’s skills and background. Thirdly,

because we excel in compliance we will be excellent in quality and excellent in

operations, too. We can’t achieve compliance alone without having good operations

and a good quality balance. So when we excel in compliance we excel in quality and

operations, which generate more profit, revenue and satisfied customers. However,

the primary motivation to excel in compliance is to improve patient safety. Second is

quality and third is compliance with the law.

Ir: Do you think company X has some kind of compliance strategy in place?

Yes, there are various levels. We have a global compliance team. We have a

compliance policy for the business. Then we have lots of compliance teams within the

factories. So, we have a strategy. However, we all have lots of priorities to manage.

The strategy works through number one as a policy, number two as a global

compliance system, number three as the local compliance management system within

each factory of each business unit.

Ir: What do you think are the challenges in implementing compliance?

Ie: Fundamentally, the complexity. It’s a laborious task. It requires a phenomenal

amount of effort, time and cost. So somehow you have to find a balance because to

achieve outstanding compliance you may need thirty people to work full time. And a

company of our size may not be able to provide that much of headcount. What we are

doing is picking the mandatory ones and the nice to have may not be done. So, the first

challenge is the cost of it, second is the complexity, third is the time-delay involved in

it, the fourth one is the risk involved in it because when we try to manage such a

complex activity we may sometimes mis-think which can create non-compliance which

can affect the product, marketing, regulatory and legal bindings.

Ir: Ok, that was very structured. You answered in very much detail. Thank you very

much.

Ie: Not a problem. So if you have any questions left just give me a shout.

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Ir: Ok, great, thank you very much. I appreciate it. Have a good day, bye.

Ie: Same for you, bye.

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Appendix D: Summary of Interview No. 1

The Supply Chain Director of company X is in charge of the entire physical distribution

processes of the controlled drugs from the factory to the patient.

1+(2). From your perspective, what does compliance mean (in the PSC)?

Ie: Compliance in the PSC means the fulfilment of legal and regulatory requirements of

pharmaceutical products.


Ie: The so-called operational compliance is merely a function of regulatory compliance.

KPIs measure regulatory relevant aspects. It simply makes regulatory compliance

digestible. While regulatory compliance is given and consisted of European Laws, GxPs

and ISO norms. The second category of compliance, according to the Director, is

voluntary compliance. It means fulfilling future compliance requirements today.


Ie: According to many of the pre-wholesalers, there were far more issues with generics

providers than with branded companies. Most of the controlled drugs providers follow

legal requirements, thus they are adaptive. This is what the legal requirements are for.


examples?

Ie: We fulfil legal and regulatory requirements like other branded manufacturers.

However, we try to be more proactive in some aspects of the supply chain. There is

nothing that can be done in terms of storage as given requirements already go very

far; secured storage, locked away products and deviation reporting. Only the stock

count frequency could be adjusted. On the contrary, regarding transport the

requirements are less specific. When it comes to transport we have something in place

called ‘Safe Road Transport’. This encompasses GPS tracked and temperature

controlled vehicles with a compulsory second driver. All those aspects are not

prescribed by any laws or regulations. However, I believe that within the next five

years they will be.


give examples?

Ie: Definitely, due to the nature of the product safety is very important. Thus the

ability to actively demonstrate that the focus is laid on safety makes it easier to talk to

authorities and opinion leaders. He gave the example that in Malaysia a competitor got

rejected during the application process for import permits and got referred to

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company X to see how to manage a product and the accompanying processes

excellently.


Ie: I can’t see any radical changes nearby, but trends will probably focus on transport,

as requirements are less strict compared to reporting or storage. A lot will be about

temperature monitoring.


Ie: We mainly get motivation to excel in compliance to improve patient safety. That’s

what it’s all about. To enhance the reputation comes second. Naturally, following

external requirements are a motivation as well. Finally, profits just motivate slightly,

this is more a philosophical debate.


Ie: The strategy towards compliance is drawn by expected future regulatory

developments. Having a good link to opinion leaders and authorities is crucial in order

to better anticipate developments. However, there is not yet a compliance strategy

program.


Ie: First of all to have enough human resources. Secondly, the complexity is a challenge

because of different local regulatory requirements. Aspects that have been locally

approved to be compliant in one country cause resistance if the parent country tries to

implement other compliance processes proactively in that country. Cultural differences

caused by parent and host country effects amplify this resistance.

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Appendix E: Summary of Interview No. 2


Ie: Acting in accordance with local legal requirements and regulatory guidance. There

is always a grey area between laws and regulations.


Ie: There are four major categories of compliance in the PSC. Operational compliance

covers getting products to customers efficiently. KPIs help here to an extent.

Regulatory compliance was mainly about product ownership. SOPs are a part of

regulatory requirements. They can be enough in order to get the controlled drugs

distribution license. Financial compliance (financial accounting compliance) determines

who is responsible for the product. Medical compliance is another crucial category of

compliance. It consists of 1. Promotional compliance, continuous assessment of in

country use 2. Pharmacovigilance; monitoring adverse events and complaints 3.

Medical information; answer queries that doctors may have, provide medicinal advice

service.


Ie: UK is quite advanced compared to Europe. It is in the top quarter from a structural

point of view in terms of having a practical sensible system, which is effective without

being overly complicated. Ultimately the industry is still reactive in its compliance

approach, however I think it is quite proactive in actively discussing with the regulator.

The regulator gives guidance quite far in advance, so a cooperative partnership with

between the regulator and the industry is possible.


give examples?

Ie: Yes it can. However, a company can also loose competitive advantage through

being over-compliant. Advantages can arise when there are requirements in one

country but not in others and you implement it everywhere. These are advantage of

consistency and understanding. Advantages can also arise when a company complies

with aspects, which are not required yet, but soon will be. Finally, dealing with a

problem or a crisis in the most appropriate way can lead to a competitive advantage

through increased information.


Ie: I think there will be requirements further down the supply chain. In the USA, for

example, we are reacting to this with a project called e-pedigree in order to be able to

track the products till further down the supply chain.

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Ie: Firstly, it is patient safety and to enhance the reputation. Then, it is increased

efficiency and to avoiding problems in order to realize a smooth supply to patients.


Ie: In the future that will change to a system that drives more efficiencies and it will

become a more integrated part of the business. As soon as everything is working, we

can implement something that is consistent throughout all countries.


Ie: To get a clearer understanding of what the local requirements are, understanding

the local requirements in detail and to structuring the business accordingly.

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Appendix F: Summary of Interview No. 3


Ie: Compliance is not just about having to do something. In the first place, it means

meeting minimum requirements set by externally regulatory bodies. Compliance

further means to be compliant with laws in order to sell our products and product

safety use. Compliance to me means having to do the things we must do to remain in

business. There are minimum requirements which can be turned into a competitive

advantage internally. However, the notion of quality puts compliance in a far bigger

context. Good quality defines if you do your business right and if you are giving the

customers what they expect (very important word). This in turn has a financial impact.

Eventually, we should comply with strategic requirements because we can anticipate

trends from a regulatory point of view.


Ie: For me there are only two types of categories, operational compliance should be

driven by our strategic business goals. There are operational and lag KPIs (e.g. number

of complaints you have in the market). They show you how you perform today. There

are also lead KPIs (e.g. time taken to close out complaints investigations, KPSs on

improvement projects, KPIs to track project progress). They show you which

preventative actions to take because they tell you about trends.


Ie: There is no such thing as a 100% compliance. The majority of companies is lagging

behind, but not in a significant way. From an economic point of view a company will

wait until authorities will dictate requirements. The focus is on the fulfilment of

minimum requirements before companies focus strategically on compliance issues

that give you better customer satisfaction. Many companies think to be proactively

compliant makes you lose the business focus. A good businessperson needs to know

what it has to do and what the risks are, but customer satisfaction is paramount.


examples?

Ie: It’s all about risk and the awareness of a company’s risks in the marketplace. That is

what your Quality Management System needs to ensure. You must document and

judge the risk from a scientific point of view and mitigate it. There is always room for

interpretations; shades of grey come in with the risk of your product. At company X we

are fully aware of our risks; there aren’t any critical non-compliant issues. There are

some major issues, but we’re dealing with them, we’re aware of them. We have a

project running called ‘project queen’ that deals with those issues.

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give examples?

Ie: Efficacious and efficient processes can bring your costs down.


Ie: We have people in the different countries analyzing and reporting trends, but at the

moment I’m not aware of any.


Ie: Key value is that the customer is at the heart of everything. Therefore, compliance

cannot be economically driven if it brings down customer satisfaction. Thus, economic

reasons come second. Further, company X considers quality as a strategic aspect. To

increase the quality level a high motivation by the senior management is required

which then will motivate the rest of the company.


Ie: Our quality management system states what our standards and policies are in order

to meet minimum requirements. In addition, we have a business working manual also

stating minimum standards and policies. According to them, we will be audited. We

have systems in place to build continuous improvement. These are mainly based on

KPIs. Our KPIs stretch our compliance goals. If we have product complaints, for

example, and want them to reduce, we implement KPIs that track the progress of

complaint reductions. We have corrective actions and preventative actions (CAPA) KPIs

in place that focus on this. They help us to stop mistakes to happen again and again

and they facilitate investigations. They are a key part of our quality management

system. That might also give you a competitive advantage. Our European lead team

monitors this KPI system. Additionally, we have standard operation procedures stating

who does what, where and how. Finally, we have a compliance group that looks at

medical (code of conduct), marketing (promotional material) and regulatory risks.


Ie: Resources, because if you take company X we have to make sure meeting what we

have to do on a daily basis. Furthermore, people will always resist doing something

differently. Thus, to get people change there working practices is where the difficult

emotional part comes in. Finally, different cultures will naturally comply more than

others.

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Appendix G: Summary of Interview No. 5

1. From your perspective, what does compliance mean?

Ie: In general, compliance means conforming to a rule such as specification, policy,

standard or law.

2. What does compliance mean in the PSC?

Ie: The pharmaceutical industry is faced with a number of regulatory requirements,

e.g. Food and Drug Administration (FDA), United States Pharmacopeia (USP), EP,

ASTM. In the supply chain it mainly means GMP, GDP, Logistics manuals.


Ie: Operational, regulatory and voluntary compliance. Operational compliance

encompasses KPI scorecards, for example. Regulatory compliance involves information

flow and document management to ensure that persons are aware of and take steps to

comply with relevant laws and regulations such as FDA, USP, EP, ASTM. Voluntary

compliance consists of anticipating and implementing future compliance requirements

proactively.


Ie: The top ten companies in this industry are role models I’d say, they are taking the

lead and invest proactively in the future. That requires money and resources. You have

to have know-how as well. They influence the rest. Anyway, if you are in the pharma

industry you have to be compliant because of external audits by external authorities.


examples?

Ie: We are trying to be proactive. We bought a technology in 2010 to check the

temperature in the supply chain. So, we started to monitor temperature before it was

required.


give examples?

Ie: I believe you always have an advantage over your rivals if you realize voluntary

compliance because investments in the future are very valuable. It’s a big advantage,

I’m 100% sure.


Ie: One thing that is really important is sustainability. Nature is having difficulties right

now. So, if we’re trying to be compliant we have to have environmental aspects in

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mind. I think temperature control for freight out and security level will increase. A

second driver is very dependent on the value of the products and the geographical

distance. So, a second driver might not become a general requirement.


Ie: External requirements are definitely important. Trying to be a role model makes

you special and outstands from the market. More importantly is to improve patient

safety. To enhance the reputation is another motivational factor because it leads to

more trust in the product, which in turn makes it easier to sell the product.


Ie: It is not a one-day job. It is a cultural thing. It is a big challenge as it is an endless

story. Training and know-how transfer are necessary to become aligned and share the

same values. This is an endless story. Results and benefits have to be made visible. It is

a long-term investment. You can’t just send an email and wait for it to happen

immediately. It takes time. However, I’m not talking about regulatory compliance, but

about voluntary compliance. Since regulatory compliance you have to have in place in

order to stay in the industry.

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Compliance in the Pharmaceutical Supply Chain

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