Risk Mitigation for Pharmaceutical Companies

Risk Minimization

Contract, international law, and business law for WorldWide

Before entering into any legal agreement, it is essential to have our legal staff carefully review the provisions of the contract. The contract must be both legal and enforceable. Both state and, in the case of interstate commerce, federal law, should be reviewed to ensure that the agreement does not run afoul of existing regulations (Meiners, Ringleb, & Edwards 2015: 90-91). It is also important to consider the likely trajectory of future regulation. The legalities pertaining to the economic environment is always changing, especially in the volatile world of healthcare and technology. In the case of many business deals, clauses are specifically inserted to ensure that one party does not bear the brunt of excessive unexpected damages. "Within a contract, risk transfer is primarily accomplished through a combination of indemnification/hold harmless, limitation of liability, and waiver of subrogation clauses" ("Basic guidelines" 2015). Indemnity shifts the risk or responsibility to the other party "for losses or damages (physical injury or monetary) caused by that other party," liability limitation limits amounts of damages one or both parties can recover and in a waiver of subrogation one party prevents one party's insurer attempting to recover the damages from the other party ("Basic guidelines" 2015). WorldWide, Inc., as it is a biotechnology company, must be particularly cognizant of the need to ensure that the responsibility of both parties are specifically delineated in a contract: if, for example, there is a problem with a drug that is not our organization's fault but is due to the actions of a third-party vendor or a subcontractor, WorldWide must protect itself against any negative financial fallout this might cause.

The world is also more interconnected ever before in terms of the global nature of modern commerce. Although it may behoove our organization to engage in international agreements to save costs and foster positive relationships abroad, there is also a greater risk (and expense) involved because of the necessary precautions to take when dealing with the legal questions which may arise between entities in different countries. Entering into joint ventures with local enterprises can be an effective risk mitigation effort, as the locally-based entity will have greater familiarity with the surrounding environment (Meiners, Ringleb, & Edwards 2015: 671). But joint ventures and franchising may mitigate the risk of falling afoul of cultural misunderstandings. It is important to remember that regardless of what is accepted business practice abroad, a U.S. company cannot flagrantly disobey the law. The Foreign Corrupt Practices Act expressly forbids U.S. companies from engaging bribery and corruption, even when this is the norm on a national basis (Meiners, Ringleb, & Edwards 2015: 672-673). "The FCPA requires companies to "make and keep books, records, and accounts which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of [their] assets" (Meiners, Ringleb, & Edwards 2015: 673). WorldWide has operations in a number of regions of the world (China, Mexico, Russia, and India) where corruption is a significant problem and is tacitly tolerated by government officials. As well as the absence of wrongdoing in formal contracts, personnel must be carefully briefed about appropriate procedures to avoid pressure to engage in illegal activities outside of such formal agreements. Even in countries with low levels of corruption, different ways of financing medical treatment can impact pricing which must be taken into consideration when targeting specific market areas.