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Wednesday 14 October 2015

Who's Up Next? More Pharma Companies Expected To Settle Foreign Bribery Cases

Now that Bristol-Myers Squibb has settled its foreign bribery case with the US government, speculation has turned to which pharma company will be next.

Take your pick: GlaxoSmithKline, Teva Pharmaceutical Industries Ltd., Sanofi, AstraZeneca, UCB, Novartis, Novo Nordisk, Eli Lilly?

All of those pharma companies, and probably others, reportedly are being investigated for violations of the US Foreign Corrupt Practices Act (FCPA) – some for the second time.

Meanwhile, the US Department of Justice will being putting a bigger squeeze on companies for foreign bribery practices. A DOJ official recently told the Wall Street Journal that the department is adding to the resources devoted to investigating foreign bribery cases and is focusing on large-value, high-impact matters. It has tripled the number of FBI agents working on foreign corruption investigations.

The Security and Exchange Commission’s $14 million settlement with Bristol-Myers concerns allegations that Bristol-Myers’ majority-owned joint venture in China, BMS China, gave healthcare providers in China cash, jewelry, meals, travel, entertainment and sponsorships for conferences and meetings between 2009 and 2014.

The SEC said that Bristol-Myers failed to respond to “red flags” indicating sales personnel were bribing healthcare providers in China. The drugmaker didn’t investigate claims from former BMS employees about improper payments and ignored similar concerns raised by internal audits, according to the SEC.

Over the years, pharma companies have had plenty of red flags about improper and illegal sales and marketing practices. The most prominent “red flags” are the whistleblower-initiated cases alleging improper marketing practices in the US – including allegations concerning inducements paid to doctors and other healthcare professionals – that pharma companies have paid billions to US enforcement authorities to resolve.

Instead of cleaning up their act, pharma companies appear to have simply exported improper practices they developed first in the US to international markets. Thus far, settlements to resolve FCPA allegations against two drugmakers – Eli Lilly ($29 million in 2012) and Pfizer ($60 million in 2012) – were both reached after those very companies paid hundreds of millions to the US to settle allegations of illegal kickbacks and other improper marketing practices.

Glaxo is a leading example. It paid the largest healthcare fraud settlement ever – $3 billion – to the US in 2012 to resolve criminal and civil allegations of improper marketing practices. Two years later, Glaxo’s Chinese subsidiary paid nearly $500 million to China after a court found the local subsidiary guilty of bribing healthcare officials. Glaxo is likely to pay millions more to settle bribery charges as both US and UK regulators are investigating the drugmaker’s practices in China, Poland, Jordan and Lebanon.

Similarly, Teva reported earlier this year that the SEC and DOJ have been investigating allegations that it violated the FCPA. Any settlement with federal regulators is unlikely until 2016 at the earliest. Last year, Teva paid the US $27.6 million to settle allegations that it had made payments to a doctor to induce the prescription of generic clozapine for Medicare and Medicaid patients despite potentially deadly side effects for elderly patients.

The Justice Department’s decision to increase the resources it devotes to FCPA cases is welcome news. That commitment combined with the SEC’s whistleblower enforcement efforts will attract well-placed company insiders who have detailed information about wrongdoing and will undoubtedly lead to many more foreign bribery cases.

As for Bristol-Myers, its post-settlement statement was filled with the platitudes we have become accustomed to hearing following similar Big Pharma missteps: “We have resolved this matter with the United States Securities and Exchange Commission, and are committed to the highest standards of business integrity, vigilance and ethics across our organization.”

I expect we will be hearing more of the same from other pharma companies very soon.


1 comment:

chris c said...

Tony Soprano went legit.