Bristol-Myers Squibb has ended certain business practices in China that reportedly involve making payments to physicians, among other things. The move comes five months after the drug maker agreed to pay more than $14 million to resolve charges that it violated the Foreign Corrupt Practices Act by making illegal payments to health care providers in the country.
Chinese social media reported the drug maker announced a clampdown on using expenses and speaker fees to reward physicians, according to Reuters. By email, a Bristol-Myers spokesman would only tell us that the company “voluntarily stopped certain initiatives in China as the company continues to review its activities and build upon its business model in China.” He did not respond when asked to be specific.
As we noted previously, Bristol-Myers was charged with paying health care providers at state-run hospitals in China between 2009 and 2014 in hopes of increasing prescriptions for various medicines, according to this order filed by the US Securities and Exchange Commission. The SEC charged the drug maker also lacked internal controls to monitor interactions between employees and health care providers, some of whom were given cash, jewelry, meals, travel, and entertainment.
Former employees explained it was an “open secret” that health care providers in China rely upon such income, and one sales rep characterized the expenses as a “departmental development fee,” according to the SEC. Despite having such information, the drug maker failed to sufficiently investigate “numerous irregularities,” according to the agency, and continued to record the payments as legitimate expenses.
The internal crackdown comes amid ongoing scrutiny of the pharmaceutical industry and its efforts to build market share in numerous countries. Bribery concerns gained prominence three years ago after an episode in China, where GlaxoSmithKline (GSK) was eventually found guilty by a Chinese court of bribing doctors, hospitals, and other nongovernment personnel, and was fined more than $490 million.
As we noted previously, some Glaxo employees in China were accused of using travel agencies to issue bogus receipts and to channel bribes to government officials, hospitals, and doctors in order to sell more of its drugs at higher prices. Ultimately, five of the company’s managers, including its former top China executive, received suspended jail sentences, and about 110 employees were fired.
The scandal in China, however, was watched particularly closely for signs of how the country — which is an increasingly important market for global drug makers — may have tried to boost its own domestic drug makers while simultaneously trying to crack down on corruption.
The pharmaceutical industry, meanwhile, has run into difficulties elsewhere. Just last month, South Korean authorities raided Novartis’s (NVS) offices in search of evidence the company provided bribes to local doctors. A Novartis spokesman acknowledged an investigation was under way. And Glaxo has opened internal investigations in various countries, including in Jordan and Lebanon.
In the United States, concerns about the extent to which drug companies seek to influence medical practice and research spurred the Obama administration to create the Open Payments database, which is publicly accessible and lists payments made by drug companies to doctors.