Inevitably, the company will come to know of most problems long before the regulators...

They have more information reported to them, more staff capable of assessing that information, and more intimate knowledge of a product which they created. Externally imposed regulation is therefore not only a more clumsy tool than self-regulation to control the subtleties of scientific abuse, it is a tool which will normally only be applied after the damage is done. The fact that self-regulation offers more protection than external regulation is even more overwhelmingly the case in many countries, including the developed economies of Denmark, Finland, Norway, Spain, Switzerland and Germany,1" where government approval is not required before a company begins preliminary safety testing of a new drug on human beings. Where there is no external regulation, self-regulation provides the sole protection.
Making self-regulation work
Internal company inspectors are more likely to know where the bodies are buried than government inspectors. The medical director mentioned above who became suspicious that one of his scientists had conducted a 100-trial study by running 10 and fabri­cating 90 had available many ways of checking out his doubts. He could verify the number of animals taken from the animal store, the amount of drug substance which had been used, the number of samples which had been tested, and so on. His familiarity with the laboratory made this easy. As an insider he could do so quietly without raising the kind of alarm which might lead the criminal to pour an appropriate amount of drug substance down the sink. For a government inspector this would have been more difficult.
FDA Good Laboratory Practices regulations have recognised this fundamental reality and placed predominant reliance on self- regulatory mechanisms. Each drug-testing laboratory is required by the regulations to have a Quality Assurance Unit (QAU) which will act as an internal policeman of regulatory compliance. Such a self-regulatory requirement shifts the financial burden of regulation away from government and on to the corporation. It is reasonable that a company which makes a profit because of the benefits of a drug should also bear the cost of protecting the public from its potential dangers.17 Second, as we shall see later in the book, even the wealthiest governments in the world cannot afford effective inspection of corporate conduct as a matter of sheer budgetary practicality. The FDA was quick to learn from the Searle investi­gation that in-depth retrospective review of data was an option that the agency could only afford in extraordinary circumstances.
The decision to throw the major burden of regulation on to an internal QAU raised some thorny issues, however. Industry argued that if QAUs had to make their findings available to the FDA, then their effectiveness as a management tool to ensure the quality of research would be undermined. A QAU which knew that its comments would be read by FDA officials (and by consumer groups who could get the comments from the FDA under Freedom of Information laws) would be less than frank in its reports to management. QAU reports would become a public relations function of the company rather than a compliance function. The FDA was persuaded by this argument and decided that, as a matter of administrative policy, inspectors would not request reports of findings and problems uncovered by the QAU or records of cor­rective actions recommended and taken. FDA inspectors would still audit the QAU to ensure that it had effective compliance systems in place and to check certain objective compliance criteria. However, these records available for regular inspection would be separated from reports of findings and problems and corrective actions recommended. While the latter QAU reports would be treated as confidential company documents by the FDA, this does not prevent a court requiring the tabling of any QAU report, just as courts can demand other types of company documents which are confidential for routine inspectorial purposes. We will return to this issue in Chapter 9.
An exemplary requirement of the GLPs is that QAU status reports must routinely be placed before the study director and management of the company. Other regulatory schemes tend to ignore the importance of ensuring that people at the top of an organisation know about regulatory problems both so that they can be held legally accountable for thein and so that they might be forced to take rectifying action. The need for formal mechanisms to ensure that 'bad news' gets to the top was a central theme in Stone's seminal analysis of corporate crime: