In The News

China, Brazil and Russia Named by Healthcare Companies as Riskiest Markets for Compliance and Regulation

Practices: Health Care, Risk Management

Healthcare and life science companies have named China, Brazil and Russia as the three riskiest markets to do business in, according to new research from global law firm Ropes & Gray. 

The research - based on a global survey of 300 senior-level executives working for multi-national businesses in North America, EMEA, Asia Pacific and Latin America, in the healthcare, life sciences, asset management, banking, private equity and technology sectors – reveals that 22% of healthcare and life science companies cite China and a further 16% cite both Brazil and Russia as markets that pose the ‘most significant risk’ to their businesses.  The UK and US were identified (by 10% of companies in both cases) as the next most risky markets to operate in.

By way of comparison, just 4% of healthcare and life sciences companies named India and Mexico, 2% named Germany, Italy and Japan, and none named Canada, France or Indonesia.

Commenting on the survey findings, Mimi Yang, co-head of the Ropes & Gray Global Healthcare Compliance team, based in Hong Kong, said:

“It is no surprise that China, Brazil, and Russia are viewed by healthcare and life sciences companies as the riskiest markets.  These markets are often where economic growth is highest.  However, in order to achieve that growth, companies doing business in those markets must also compete for market share in an industry where compliance and transparency are less mature than their more developed counterparts, and where enforcement of domestic regulations can be somewhat arbitrary.”

Amanda Raad, international risk partner at Ropes & Gray and a co-head of the firm’s Global Healthcare Compliance team, based in London, added:

“The UK and US are prominent because of the extensive extra-territorial legislation and enforcement reaching other high risk markets.  China, Brazil and Russia are prime examples of countries targeted by corruption and sanctions laws in the US and UK.”

The report also reveals that the majority of multi-nationals (57%) do not feel their current risk management policies and practices meet present needs.  Even more (69%) worry their current practices will not be enough in the future.

These figures are even higher for the healthcare and life science companies, with 66% of firms admitting their current risk management policies and practices don’t meet present needs.  A further 64% worry their current practices will not be enough in the future.  

Most multi-national companies (57%) listed ‘regulation and compliance’ as the top type of risk they’re least prepared to address, with 78% saying they intend to devote the most risk management resources to deal with regulation and compliance risks in the future.

Again, these figures were even higher among healthcare and life science companies, with 62% admitting they were least prepared to address regulation and compliance risks, and 72% saying they planned to devote more resources in this area going forward.

Intellectual property issues were identified as the second biggest area of concern by companies in the pharma sector, with over a quarter (26%) - compared with just 11% of all multi-nationals - admitting they are unprepared to deal with threats in this area. Just under a quarter (24% in both cases) also felt unprepared to deal with anti-money laundering and sanctions risks.  In response 18% of life science companies indicated they would increase resources to deal with all these issues over the next 12 months.

Alison Fethke, co-head of the Ropes & Gray Global Healthcare Compliance team, based in Chicago, said:

“Historically, companies in the pharmaceutical and medical device sector have viewed their US regulatory and legal risks, including the FCPA, as far more substantial than those outside of the US However, over recent years, this framework has begun to change, and these companies are now contending with increasing enforcement and potential legal liability relating to corruption, money laundering, anti-trust, intellectual property, cybersecurity, data privacy and tax on a global scale.” 

Amanda Raad, international risk partner at Ropes & Gray and a co-head of the firm’s Global Healthcare Compliance team, based in London, added:

“At the same time, because the regulatory focus has slowly evolved over time, many companies have tried to address each risk on an individual basis, rather than taking a co-ordinated, centralised approach.  This is leaving many companies now struggling to effectively prioritise and efficiently tackle the breadth of risks they face.”

For a full copy of the report, please click here.  A copy the report, as well as an infographic summary is also attached. 

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