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69% Of Healthcare, Pharmaceuticals and Biotechnology Companies Affected by Fraud in the Past Year
[November 23, 2015]

69% Of Healthcare, Pharmaceuticals and Biotechnology Companies Affected by Fraud in the Past Year


More than two thirds (69%) of healthcare, pharmaceuticals and biotechnology companies experienced a fraud incident in the past year, according to the 2015 Kroll Global Fraud Report1.

The findings reveal the most common type of fraud experienced in the sector was due to management conflict of interest, experienced by 17% of healthcare companies, which is the second highest number of companies across all the sectors surveyed. This was followed by theft of physical assets or stock (14%) and regulatory or compliance breach (14%). More than one in 10 (13%) of companies across this sector suffered from intellectual property theft, which is the highest number across all industries.

Almost four out of five (78%) respondents in the healthcare, pharmaceuticals and biotechnology industry say their exposure to fraud has increased. The biggest drivers of this are high staff turnover (28%) and an increase in outsourcing and offshoring (19%) which is a common route for IP loss. Although 19% of respondents reported that the increased outsourcing and offshoring have driven greater risk exposure, only 18% will be enhancing IP protection in the coming year.

The report shows that healthcare companies are not taking active measures to address the industry's exposure to fraud risks, with only 36% of businesses reporting that their firm will be investing in management controls in the coming year.

Percentage of healthcare, pharmaceuticals and biotechnology companies affected by different types of fraud





     
Type of fraud      

Percentage of companies affected by this
in the past 12 months

Management conflict of interest       17%
Regulatory or compliance breach       14%
Theft of physical assets       14%
IP theft       13%
Vendor, supplier or procurement fraud       11%
Information theft       10%
Internal financial fraud       8%
Corruption and bribery       7%
Misappropriation of company funds       6%
Money laundering       1%
Market collusion (price fixing)       1%
 

Daniel Karson, Chairman, Kroll, observed: "One of the most telling results from this year's report is how vulnerable to fraud companies are feeling. In one form or another, the specter of fraud arises in virtually every business relationship. What our report drives home is that fraud is often an "inside job" and that companies must address both internal and external relationships if they are to most effectively protect their money, property and private data."

"While technology has enabled new ways to perpetrate fraud, our daily work with clients confirms what the report also reveals - that old fashioned theft, bribery and kickbacks are still amazingly effective and pervasive. Human nature being what it is, fraud will always be with us, whether it occurs in a company's corner office or a world away in its supply chain. However, there are numerous strategies, resources and best practices available to companies that can go a long way toward helping them protect themselves and their investments."

1The Kroll Global Fraud Report 2015 includes a full detailed industry analysis across a range of fraud categories and regions. To obtain a copy please visit http://www.kroll.com/global-fraud-report.

Notes to editors

Kroll commissioned the Economist Intelligence Unit to conduct a worldwide survey on fraud and its effects on business. Survey results were gathered between January and March 2015. A total of 768 senior executives took part in the survey from a wide range of industries, including Financial Services; Professional Services; Retail and Wholesale; Technology, Media and Telecommunications; Healthcare and Pharmaceuticals; Travel, Leisure and Transportation; Consumer Goods; Construction, Engineering and Infrastructure; Natural Resources; and Manufacturing.

Respondents were senior, with 50% at the C-suite level. Over half (51%) of participants represent companies with annual revenues of over $500 million.

Respondents this year included 29% from Europe, 25% from North America, 24% from the Asia-Pacific region, 10% from Latin America and 12% from the Middle East/Africa.

Please click visit http://www.kroll.com/global-fraud-report for key findings and graphics, including a detailed look at the industries, regions and types of fraud covered in the report.

About Kroll

Kroll is the leading global provider of risk solutions. For over 40 years, Kroll has helped clients make confident risk management decisions about people, assets, operations and security through a wide range of investigations, due diligence and compliance, cyber security, and data and information management services. Headquartered in New York with more than 53 offices across 28 countries, Kroll has a multidisciplinary team of over 2,000 employees and serves a global clientele of law firms, financial institutions, corporations, non-profit institutions, government agencies and individuals.


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