Sep 01, 2012

Big Pharma Placed in Malpractice Spotlight

In August, Pfizer resolved investigations by the US Department of Justice (DOJ) and the US Securities and Exchange Commission (SEC) regarding corrupt business practices. The SEC charged Pfizer with violating the US Foreign Corrupt Practices Act (FCPA) after an investigation alleged that certain Pfizer subsidiaries in Bulgaria, China, Croatia, Czech Republic, Italy, Kazakhstan, Russia and Serbia had been bribing foreign officials to obtain regulatory and formulary approvals, sales and increased prescriptions. The bribes were concealed in accounting records as legitimate expenses for activities such as promotion, marketing, training, travel and entertainment and clinical trials. Pfizer voluntarily reported the violations to US authorities in 2004 and has since implemented anticorruption compliance reviews and anticorruption training.

"Pfizer subsidiaries in several countries had bribery so entwined in their sales culture that they offered points and bonus programs to improperly reward foreign officials who proved to be their best customers," Kara Brockmeyer, chief of the SEC Enforcement Division's Foreign Corrupt Practices Act Unit, said in a statement.

In addition, the SEC separately charged Wyeth, which Pfizer acquired in 2009, for its own FCPA violations. The violations are alleged to have taken place primarily before, but also after Wyeth was acquired. Pfizer discovered the violations shortly after the acquisition and reported them to the authorities.

Combined, Pfizer and Wyeth will pay more than $45 million to settle the SEC charges, as well as a $15-million penalty from the DOJ. However, Pfizer has been praised by both the DOJ and the SEC for its cooperation with the investigations, and the DOJ has chosen not to push for any criminal action against the company.

Further corruption

Pfizer is not the only big-name company to have been in the spotlight recently for business malpractice. In mid-August, Teva revealed that it was being investigated for potential FCPA violations. In July, the company received a subpoena from the SEC asking for documents concerning business practices in Latin America. Teva also added that it is conducting a voluntary investigation of its own into business activities that may have further FCPA implications.

Meanwhile in July, GlaxoSmithKline was in the spotlight for marketing malpractice. The company paid $3 billion to resolve criminal and civil liability relating to several malpractices, including unlawful promotion of certain prescription-only drugs, failure to report certain safety data and false price reporting practices. GSK says it has taken action at all levels of the company to change its procedures for compliance, marketing and selling, as well as removing employees who engaged in misconduct.

Drug settlements

Do you think large drug settlements to settle criminal and civil liabilities are an appropriate deterrent to corporate malpractices?
A recent poll on asked whether drug settlements were enough to deter pharmaceutical companies from using corrupt business practices (see below).

The majority of respondents (63%) believe that drug settlements are not enough an appropriate deterrent. However, large fines no doubt highlight to a business that it must do more to monitor activities across its global subsidiaries. In a statement, the SEC explained that Pfizer's recent charges "illustrate the pitfalls that exist for companies that fail to appropriately monitor potential risks in their global operations."

Discuss the results of this poll and your thoughts on the recent FCPA violations on LinkedIn:

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