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Enhancing SME Business Ethics in the Healthcare Industry

26 June 2014

The relationship between healthcare companies and physicians is complex, presenting potential conflicts of interest that require oversight. Biopharmaceutical and medical device companies operate in a highly competitive market.  As a result, some companies may seek an advantage by extending gifts or other inappropriate inducements to healthcare professionals to promote a specific drug or medical equipment. This practice hurts ethical enterprises seeking to grow local operations or engage in cross-border trade. It stifles the ability of small and medium enterprises (SMEs) to invest their limited resources in health innovation. And it can result in higher costs for patients. 

SMEs most impacted by corruption

More than USD 1 trillion dollars are paid in bribes every year by the private sector, according to the World Bank Institute.  Moreover, small and medium enterprises pay a much higher percentage of their annual revenue to bribes than large companies. More than 70 per cent of SMEs in economies transitioning to a market-oriented environment perceived corruption as an impediment to their business.

APEC project on SME business ethics

Beginning in 2011, the Asia Pacific Economic Cooperation (APEC) multi-year initiative on Business Ethics for SMEs has helped small and medium enterprises in the biopharmaceutical and medical device industries develop codes of ethics to self-regulate their business practices.  

Today, as a result of the APEC initiative, codes of ethics have been adopted and are undergoing implementation by around 60 biopharmaceutical and medical device industry associations and their member companies from 19 economies across the Asia-Pacific, representing more than 14,000 firms.

“The medical device and biopharmaceutical sectors were specifically chosen because ethical business practices have a direct and substantial impact on thousands of SMEs, the well-being of patients, consumers and innovation,” said Lynn Costa, Senior Trade Development Advisor for Market Access and Compliance with the US Department of Commerce, who oversees the multi-year APEC project.

“The medical device sector has unique needs in the area of business practices. This is driven by its high levels of interactions with healthcare professionals,” continued Ms Costa.

Medical device companies employ royalty and consulting arrangements, research grants, and other forms of collaboration with individual physicians to acquire new medical technology. In many cases, physicians may be involved in the company’s development and testing of innovative technologies. Effective delivery of new medical devices and equipment is also highly dependent on demonstrations and product training with healthcare professionals.

“As a result, SMEs in the medical device industry require transparent guidelines or codes to govern how they interact with healthcare professionals,” added Ms Costa.

APEC developed principles for ethics codes

In 2011, the APEC project convened expert working groups to develop APEC principles for codes of ethics which resulted in the Kuala Lumpur Principles for the medical device sector and the Mexico City Principles for the biopharmaceutical sector. These APEC principles were intended to serve as guidelines to assist industry associations within each APEC economy develop and implement codes of their own.

“We engaged industry experts, regulators, and academics in the biopharmaceutical and medical device sectors across APEC economies to contribute valuable input during the code drafting process,” explained Dato’ Hafsah Hashim, Chief Executive Officer of SME Corporation Malaysia, who co-chaired the expert working group for the medical device sector and helped draft the codes.

“We took into account the economic and regulatory situation in participating APEC economies and came up with a code that could be implemented in these economies alongside their regulations and laws,” added Dato’ Hafsah.

The codes focus on three key ethical principles—Integrity, Independence and Transparency. For example, an important provision prohibits companies from providing inappropriate inducements to healthcare professionals of any monetary value, including gifts, entertainment, commissions or gratuities. Other provisions include ensuring promotional and marketing materials on drugs or devices are based on scientific evidence and not false information.

“Commitment to ethical practices is more than a business strategy,” said Russell Williams, President of Rx&D, Canada’s Research Based Pharmaceutical Companies, who co-chaired the expert working group for the biopharmaceutical sector and helped draft the APEC principles. “As a healthcare industry, we have a responsibility to adhere to the highest ethical standards.”

“Self-regulation in this area is essential and we need to involve all stakeholders in its advancement including industry, health care professionals, governments and patients,” he explained. “A commitment to and application of the APEC Principles will greatly benefit us all.”

Industry associations adopt ethics codes

In 2012, APEC organized capacity building workshops and mentor teams to assist medical device and biopharmaceutical industry associations in the Asia-Pacific region draft their own codes based on the APEC Principles.

The China Pharmaceutical Industry Association (CPIA) was one of the industry groups that attended the workshops. CPIA promoted the implementation of the Mexico City Principles for the pharmaceutical industry in China.

“In 2012, we worked together with the China Chamber of Commerce for Import and Export of Medicine and Health Products and the China Pharmaceutical Industry Research and Development Association to develop our codes known as the ‘Pharmaceutical Enterprise Ethical Practices in China’, the Chinese version of the APEC Mexico City Principles,” said Hong Zheng, Executive Chairman of the China Pharmaceutical Industry Association.

“We jointly launched our codes in 2013 with eight other Chinese pharmaceutical industry associations, together with support from relevant government ministries and departments in China,” added Ms Zheng.

Training SMEs on implementing ethics codes

In 2013, as a critical next step “to bring these codes into life” and ensure SMEs implement the codes, the APEC initiative organized a train-the-trainer workshop in Malaysia and created a network of over 100 ethics trainers across all 21 APEC economies to help familiarize individual SMEs with codes of ethics aligned with the APEC principles.

SME training programs have since been held in Chile, China, Indonesia, Malaysia, Mexico, Singapore, Peru, Philippines, Russia and Viet Nam and several more are planned throughout the region.

The Mexican Association of Innovative Medical Devices (AMID) conducted training programs for its companies earlier this year.

“The Code was adopted by all 23 member companies of our association and the general managers from the companies gave their written consent and statement to comply with the Code. We consider the ‘tone at the top’ really important to bring everyone on board,” said Andrea Perez-Figueroa, Ethics and Compliance Manager for Latin America at Baxter and Head of the Ethics Committee of the Mexican Association of Innovative Medical Devices Industries.

“These 23 companies are also united as a common front to fight corruption in the medical device sector in Mexico and we expect the number of companies to keep on growing,” added Ms Perez-Figueroa.

SMEs benefit from ethics codes

Xian-Janssen Pharmaceutical Ltd is a member of the China Pharmaceutical Industry Association who attended the ethics trainings and has been operating their business in China under the highest level of ethics codes. Since the training program, the company has continued to regularly update their codes.

“We have had many discussions internally in our company and have updated the working process and standards for our employees,” said Tongyan Wang, Vice President of Xian-Janssen Pharmaceutical Ltd.

“For example, if our company sponsors a doctor’s research with the aim of collecting more clinical data, there are clear rules that this sponsorship should be regulated by the medical department separately, and not influenced by the marketing and sales department so as to ensure compliance,” explained Ms Wang.

AdvaMed, a medical device industry association in the United States, also ensured their code was aligned with APEC’s Kuala Lumpur Principles for the medical device sector. The association provides a robust training program for member companies and online compliance resources to help them implement the code. To date, 67 SMEs have certified that they are complying with the AdvaMed Code of Ethics, which is based on the APEC Principles.

“A medical device company that has adopted, implemented and proactively follows a code of ethics aligned with the Kuala Lumpur Principles can openly hold itself as an enterprise abiding by the highest ethical standards,” explained Mr White, AdvaMed’s Senior Executive Vice President and General Counsel, who played an active role in drafting the APEC Kuala Lumpur Principles and sharing best practices with other industry associations in the Asia-Pacific.

“This builds a predictable business environment across the region and facilitates regional trade and patient access to advanced medical technologies. It also helps build the confidence required in long-term relationships that is necessary for business expansion and innovative research and collaboration,” concluded Mr White.

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