[1]thx to chris potter on flickr creative commons
Bristol Myers-Squibb has agreed to pay more than $14 million to resolve charges that it violated the Foreign Corrupt Practices Act by making illegal payments in China. In doing so, the company becomes the latest drug maker to get punished for paying bribes in order to boost sales in a foreign country.
In this instance, Bristol-Myers was charged with paying health care providers at state-run hospitals in China between 2009 and 2014 in hopes of increasing prescriptions of various medicines, according to an order [2] filed in federal court by the US Securities and Exchange Commission.
The SEC has been eyeing the pharmaceutical industry for the past several years amid concerns that drug makers are paying bribes to unduly influence medical practice overseas. A few drug makers, in fact, have voluntarily disclosed problems to the regulator, including Sanofi [3], the Alcon unit at Novartis, and Teva Pharmaceuticals [4].
The issue gained particular notice two years ago when Chinese authorities fined GlaxoSmithKline nearly $500 million for bribing doctors [5]. Since then, the drug maker began investigating similar claims that its employees bribed doctors in Iraq, Jordan, Lebanon, Syria, and Poland.
As for Bristol-Myers, the SEC charged the drug maker also lacked needed internal controls to monitor interactions between employees and health care providers, some of whom were given cash, jewelry, meals, travel, and entertainment.
The first hint of trouble came in 2009, when the drug maker reviewed problematic expense filings and found that funds received from false reimbursement claims were used to pay doctors and others. In 2010 and 2011, several employees who were fired for making payments wrote to the head of its China operations to complain that “there was no other way to meet their sales targets,” the SEC said.
In explaining their actions, the former employees wrote that it was an “open secret” that health care providers in China rely upon such income, according to the order. One sales rep characterized the expenses as a “departmental development fee.”
Despite such information, the drug maker failed to respond to the “red flags” and sufficiently investigate the “numerous irregularities,” according to the SEC. And, the agency said, the drug maker continued to record the payments as legitimate expenses.
Meanwhile, the SEC noted that internal company audits cited a lack of due diligence in assessing anti-bribery compliance, a failure to properly document and approve agreements with health care providers who served as speakers, and the lack of a mechanism to ensure that services were received in exchange for sponsorships.
The SEC also faulted Bristol-Myers for failing to address lackadaisical oversight. Internal company audits cited a lack of due diligence in assessing anti-bribery compliance. And when mandatory anti-bribery training began in 2009, 67 percent of company employees in China failed to complete the course on time.
As a result of the various shortcomings, the drug maker “enabled a widespread practice of providing corrupt inducements in exchange for prescription sales to continue for years,” said Kara Brockmeyer, chief of the FCPA unit in the SEC Enforcement Division, in a statement.
A Bristol-Myers spokesman sent us a statement to say the drug maker is “committed to the highest standards of business integrity, vigilance, and ethics across our organization.”
We should note that a separate SEC probe into potential FCPA violations committed by its subsidiary in Germany appear to be ongoing, according to a recent SEC filing [6] by the drug maker. That investigation was originally launched in 2006 by a German prosecutor, although the German inquiry has since been resolved. Bristol-Myers says it is cooperating with the SEC.