On Tuesday, September 4, 2018, Sanofi agreed to pay more than $25 million to resolve charges that its Middle Eastern and Kazakhstan subsidiaries made corrupt payments in order to win business. The agreement, as announced the by the Securities and Exchange Commission (SEC), covers schemes that spanned multiple countries from at least 2011 to 2015 and involved bribe payments to government officials and healthcare providers in order to receive tenders and to increase prescribing practices of its products.
In Kazakhstan, distributors were used as part of a kickback scheme to generate funds from which bribes were paid to officials to ensure that Sanofi was awarded tenders at public institutions. The kickbacks were then tracked in internal spreadsheets where they were coded as “marzipans.”
In the Middle East, various pay-to-prescribe schemes were used to induce healthcare providers to increase their prescriptions of Sanofi products in countries such as Jordan, Lebanon, Syria, Bahrain, Kuwait, Qatar, Yemen, Oman, and the United Arab Emirates. According to the SEC, Sanofi’s salespeople generated money for the bribes by submitting false travel and entertainment reimbursement claims. They pooled the money and distributed it as bribes “to increase prescriptions of Sanofi products.”
The SEC took issue with the fact from at least 2011 through 2015, Sanofi failed to devise and maintain a sufficient system of internal accounting controls and lacked an effective anti-corruption compliance program with regard to Kazakhstan, Levant, and the Gulf and that deficiencies in the internal accounting controls and compliance program of Sanofi also led to similar improper conduct in connection with sales in other countries in which Sanofi operates.
Sanofi initially disclosed the investigation in 2014, based on tips from an anonymous whistleblower. In March of 2018, Sanofi announced that the Department of Justice (DOJ) declined to take any actions on these allegations. As such, we expect that the SEC settlement will be the resolution of this issue.
“Bribery in connection with pharmaceutical sales remains as a significant problem despite numerous prior enforcement actions involving the industry and life sciences more generally,” said Charles Cain, FCPA Unit Chief, SEC Enforcement Division. “While bribery risk can impact any industry, this matter illustrates that more work needs to be done to address the particular risks posed in the pharmaceutical industry.”
The SEC’s order finds that Sanofi violated the books and records and internal accounting controls provisions of the federal securities laws. Without admitting or denying the findings, Sanofi agreed to a cease-and-desist order and to pay $17.5 million in disgorgement, $2.7 million in prejudgment interest, and a civil penalty of $5 million.