Hospitals and related organizations are well known for having stringent government regulations and strict enforcement.

It’s obvious why an industry that public health relies on is so heavily regulated, but the healthcare and medical industries need to stay on their toes when it comes to export compliance and due diligence.

Several high-profile cases of government action on medical institutions have occurred in recent years, which underline the need for exclusions screening to ensure business is not being conducted with a denied party, also known as restricted, debarred, and blocked entities, not just overseas but at home on American soil as well.

Examples include compliance rules as defined by the Office of the Inspector General (OIG), the General Services Administration (GSA), the Office Foreign Assets Control (OFAC), the Drug Enforcement Agency (DEA), and State Medicaid among others

How International Trade Regulations Impact Healthcare Institutions

Many hospitals and pharmaceutical research organizations are often large groups with networks that span national borders. One might do clinical trial testing in other countries, partner with foreign third-parties, import resources and supplies from overseas, or export goods and equipment to other regions.

Keeping track of all the export control compliance requirements is part of the job and helps to prevent all the penalties of non-compliance:

  • Monetary fines
  • Loss of export privileges
  • Mandates to set up compliance procedures
  • Criminal charges

And that’s not even including the unmeasurable penalties, such as a loss in trust amongst business partners and the community at large.

What Risks Should Be Considered?

Medical compliance starts with due diligence and an awareness of all the potential risks when working internationally. Almost all hospitals must face these challenges at some point in their growth. This article will focus on three main points of risk: acquisitions, clinical trials, and exports.


Whenever a medical corporation merges or acquires a target company, it legally assumes the liabilities of the latter. Preliminary due diligence, such as exclusions and denied party screening, is always helpful, but there are reasons why it must be supplemented with active investigations into potential ongoing risks:

  • Not all cases of trade non-compliance are clear, especially when the transaction involves a lot of indirect exports.
  • Trade regulations in foreign countries are often poorly understood.
  • The U.S. government has been known to give credit to businesses that address ongoing violations of their acquisitions proactively. These firms typically receive lighter penalties.

One example of an acquisition causing problems for its host company is the 2013 case involving a manufacturer of devices used in surgical procedures. The company had breached sanctions laws by doing business with the embargoed Mideast nation of Iran. Even after the acquiring company reported the problem to OFAC, a fine and other penalties were still handed down.

Clinical Trials

Clinical trials are a common source of non-compliance with trade regulations for several reasons:

  • They are typically around the time when companies are looking for ways to boost sales and cut costs, hence why export sanction violations can often occur at this stage.
  • Whenever materials and supplies are imported or exported to foreign facilities for testing, the potential for export regulations to be breached naturally goes up.
  • Many clinical trials are carried out at multiple locations around the world. Each region must be accommodated with regards to its trade compliance laws.

Pharmaceutical businesses working with foreign third-parties must check for compliance measures amongst their overseas partners first.


The government also has export sanctions that ban goods going to embargoed countries or to denied parties. These laws impact almost any industry, but medical firms are among the most common targets.

Keep in mind that even indirect sales can result in violations, such as this 2016 example. The company in this case was guilty of multiple offenses:

  • Unlicensed exports of surgical products to distributors in the sanctioned nations of Iran and Sudan.
  • Various violations of medical laws dating back to 2008.
  • A lack of any apparent compliance program internally.

Part of the reason why the fine was so significant was that the company not only committed a violation of trade compliance but also failed to implement any policies or procedures to detect and prevent such incidents from occurring.

This case is a testament to the importance of adopting due diligence monitoring procedures when doing business internationally.

For more comprehensive information about effective compliance in the healthcare industry, download our white paper or visit our Resource Center. 

Achieving Import and Export Compliance with Descartes’ Exclusions Screening

Whether you are a hospital administrator, chief ethics officer, or a risk executive, there’s plenty of research to be done on trade compliance in the medical industry. Pharmaceutical companies that take a holistic approach to GRC will ultimately reduce the risk of costly sanction penalties in the long-run.

Descartes offers its own solutions for exclusions screening, OFAC compliance auditing, export classification, and automation.

Are you looking to improve your company’s approach to compliance? Contact us today to set up your free demo.