We previously covered allegations in China that GlaxoSmithKline (GSK) used a network of more than 700 travel agencies and other firms to channel bribes to health officials since 2007. According to two recent stories in FiercePharma, the Department of Justice is “on its tail.”
They report: “Prosecutors have been eyeing pharma (and other industries) for
violations of the Foreign Corrupt Practices Act (FCPA), and several drugmakers
have paid millions of dollars to settle corruption probes. Though Glaxo is based in Britain, its shares are listed in the U.S., making it vulnerable to FCPA prosecution.
And now, Glaxo is a natural target. According to Chinese authorities, Glaxo’s employees funneled almost $490 million in bribes to scores of doctors, all in an effort to meet aggressive sales-growth targets. Because doctors are civil servants in
China–technically, ‘government officials’–kickbacks to physicians could
easily run afoul of the FCPA.
The company anticipated the latest U.S. probe. Spokesman David Mawdsley told Reuters that Glaxo started working with the Justice Department as the bribery allegations surfaced. ‘Since the investigation in China began, we have proactively reached out to relevant regulators,’ Mawdsley told the news service. ‘This includes the DoJ, and we have been in an ongoing dialogue with them.’ “
This comes on the heels of the company’s recent settlement with the DOJ: “The company last year paid $3 billion to settle a portfolio of marketing allegations, including off-label promotions and physician kickbacks. And before that, it paid $750 million in civil and criminal penalties to wrap up allegations that it produced and sold adulterated drugs.”
However, GlaxoSmithKline is not alone: “Pfizer agreed to pay $60 million to wrap up FCPA allegations, while J&J paid $70 million to settle a probe involving suspect payments in Iraq, Greece, Poland and Romania. Bristol-Myers Squibb, Merck, Baxter, Eli Lilly and AstraZeneca have all disclosed FCPA probes.”
A second FiercePharma story describes the company’s compliance efforts and more of the bribery allegations:
“Contrary to Glaxo’s official explanations, police say rogue executives didn’t engineer $489 million in alleged bribes. The company itself organized the scheme, they say, and made sure internal auditors didn’t uncover it.”
As a result, “Companies are stepping up compliance efforts, Reuters reports,
and executives are jetting in to dig into potential “grey zone” business. Meanwhile, drugmakers’ sales are suffering as worried doctors bar sales reps.”
According to Xinhua, the state news service: “individuals involved in the GSK case have divulged more information about the suspected bribes. ‘As the investigation is moving on, it is becoming clear that [the alleged bribery was] organized by GSK China rather than drug salespeople’s individual behavior,’ Xinhua said.”
“The company not only facilitated the alleged bribes but also made sure they wouldn’t be uncovered during routine compliance checks, officials claim. Police investigators found that GSK China merely ‘went through the motions’ with their internal audits ‘so as not to discover these violations,’ Xinhua said. If so, that could explain why GSK officials didn’t find evidence to back up a whistleblower’s allegations that cropped up early this summer–but Chinese authorities apparently did.”
GSK CEO Andrew Witty blamed “certain senior executives” at GSK China acting “outside our processes and controls.” He has also said that London headquarters knew nothing of the alleged fraud. After the latest report, a company spokesman told the Telegraph that the new issues “would be a clear breach of our corporate values and we have zero tolerance for any behavior of this nature.”
As a result, other companies are checking up on their practices in China. “Citing executives who didn’t want to be identified, Reuters reported that companies are bringing in lawyers to check for antitrust violations. One medical devices executive visited all his company’s offices to make sure staffers and third-party sales agents weren’t overstepping the lines.”