Minimizing Corruption Risks in your Supply Chain Where Interaction - - PowerPoint PPT Presentation

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ACI’s 4th Mexico Summit on Anti-Corruption

Minimizing Corruption Risks in your Supply Chain Where Interaction with Government and Public Officials is High

• Dr. Alejandro Galván

Illanes Legal and Operations Director for Transparency for the Secretary of Governance Ministry of the Interior (Mexico) Cory LaBarge Chief Compliance Officer - LATAM Grunenthal Services, Inc. (USA) March 28 - 29, 2017

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William Gordon Associate General Counsel and Chief Compliance Officer Hercules Offshore (USA)

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Marco Normativo Anticorrupción

Se crearon:  Ley de Fiscalización y Rendición de Cuentas de la Federación  Ley General del Sistema Nacional Anticorrupción  Ley Orgánica del Tribunal Federal de Justicia Administrativa  Ley General de Responsabilidades Administrativas Se modificaron:  Ley Orgánica de la Administración Pública Federal (en torno a la recuperación de la SFP como Contraloría)  Ley Orgánica de la PGR (en torno a la creación de la Fiscalía Especializada Anticorrupción) Además:  Código Penal Federal  Convenciones internacionales (OEA, OCDE, ONU)

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Muchas gracias…

agalvan@segob.gob.mx agillanes@gmail.com

@agillanes

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Disclaimer

• The views and opinions expressed in this presentation are from the

authors and do not reflect the official policy or position of any

• company. Examples of analysis performed within this presentation

are only examples. Assumptions made within the analysis are not reflective of the position of any company.

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Backgrounds of Panel Members

• Alejandro Galvan
• Legal and Operations Director for Transparency for the Secretary of Governance,

Ministry of the Interior (Mexico)

• 15+ years in National and Local Government
• Administrative Law, Universidad Panamericana
• William Gordon
• Associate General Counsel & Chief Compliance Officer at Hercules Offshore
• 7 years at Steptoe & Johnson LLP in Washington, DC
• JD from Harvard Law School
• Cory LaBarge
• Chief Compliance Officer LATAM for Grünenthal Group
• 20+ years Compliance and Life Science Consulting, Merck & Company
• MBA from University of Chicago

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Introduction - Pharma Supply Chain

• Pharma supply chains are among the most sophisticated / complex in the world
• End to End Value Chain requirements:
• Regulatory Compliant Suppliers - Bulks, API’s and Packaging elements (foils, plastics,

bottles, tubes, caps, vials, syringes, etc.)

• Bulks, API and Packaging Elements Shipments to Main Production Facilities
• Special Production Facilities for Certain Products (Vaccines, Liquids, Gels, Hormones, etc.)
• Cold Chain Warehousing and Shipment Capability for Vaccines and Biologics
• Customs Clearing Services and 3PL Providers to manage border clearances
• Semi-Finished product shipments to secondary packaging sites in local markets
• Finished product shipments to country affiliates
• Final Release Product Testing (Customs Warehouse or on Company Premises)
• Distribution from Company Warehouses to Customers: Wholesalers, Distributors,

Government Institutions, Pharmacy chains and Independent pharmacies

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Regulatory Update

• Increasing requirements for lot level tracking and unique packaging

identifiers or RFID tags in US (Drug Supply Chain Security Act), Europe and Brazil (serialization) to increase product traceability, combat counterfeiting and to aid in safety investigations and product recalls

• Safety features also mandated – tamperproof external packaging
• Brazil – Recipient Acknowledgement Process through the

Manifestacion do Destinario for inbound shipments (electronic invoicing, tax collection and credit notes via NF-e)

• Growing use of biologics and biosimilars
• Time and temperature sensitivity
• Release testing: when products are not quite the same

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Mexico Specific Update

• Increasing presence and influence of large international companies

like Ryder and UPS

• Nearshoring international production in Mexico for US Markets to

save labor costs and shorten time to customer

• Increasing investment in transportation infrastructure by Mexican

government (highway construction, modernization and conservation)

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LATAM Pharma Supply Chain Risks

• Third Party Risk:
• Lack of Regulatory Compliance by Product or Packaging Materials Suppliers (Quality systems and processes)
• Corruption of Customs Agents or Government Customs Officials
• Corruption of Distribution Customers
• Legal Issues Involving Other Suppliers or Competitors (Teva/Rimsa example)
• Internal Process Risks:
• Lack of Regulatory Compliance in Production, Finishing, Warehousing or Distribution processes
• Release Testing at Customs Warehouse (Mexico, Brazil, Argentina, Chile) – Longer Lead Times
• Geography Risk : natural disasters, conflicts, etc.
• Financial: Currency and interest rate fluctuations, taxes, tariffs and other fees
• Product Risk
• Managing Controlled Substances
• Stability/Temperature/Damage/Spoilage
• Adequate Product Dating
• Demand and Inventory Management: Returns/Destructions
• Smuggling/Counterfeiting/Product Thefts

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Third Party Risk Mitigation

• Supplier Risk Assessments
• Supplier Audits (Quality and Supply Chain)
• Raw Materials Supplier Quality
• Validated Systems and Processes
• Product Costing
• Warehousing and Distribution
• Secondary sourcing for raw materials, semi-finished or finished products
• Supplier Relationship Management Systems
• Regular Business Review Meetings to Assess/Monitor compliance
• KPI’s:
• Service Level (On time and full)
• Quality Assurance (Product deviations, complaints, recalls)

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Case Study: Customs Release Testing Issues

• In Mexico, Brazil, Argentina and Chile product release testing is required

at the customs warehouse or on premises using a certified laboratory

• Release testing includes taking samples from lots sent and subjecting

them to a variety of tests to demonstrate it is the correct product and that it meets stability and product quality specifications

• Any issues identified during the testing must be resolved
• Product is retained in quarantine until issues resolved
• Product can be rejected and must then be returned to country of
• rigin
• Delays in product release (quarantine or rejection) result in lost sales
• Potential for corruption in these markets:
• Diversion of product into local markets for sale or for illegal use (ex:

Chemo pseudoephederine retention in Argentina customs)

• Bribes to Laboratory or Customs agents to influence release process

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Case Study: Supply Interruption due to Teva/Rimsa Legal Conflicts

• Legal suits between Teva and Rimsa related to Teva acquisition
• Cofepris invokes local regulations and shuts down local production site
• Rimsa is our source of supply for a branded product (gabapentin) that we sell in

Mexico for treating diabetic neuropathic pain

• No quick ability to shift suppliers as any changes in source of supply must be

reviewed and approved by Cofepris

• Given uncertainty around conflict resolution, we explored other potential sources
• However, changes would have required a lengthy submission review by Cofepris
• Cofepris eventually lifted the production restriction but we lost sales

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QUESTIONS/COMMENTS?