AstraZeneca agreed to pay $5.5 million to settle charges of violating the Foreign Corrupt Practices Act, making it the latest global drug maker to face such accusations as part of a long-running probe by US authorities into companies that paid bribes in order to boost sales of their medicines.
In this instance, the company had been accused of making improper payments to health care providers in Russia and China, according to a cease-and-desist order released Tuesday by the US Securities and Exchange Commission.
From 2005 through at least 2010, AstraZeneca (AZN) failed to maintain sufficient internal accounting controls to track interactions between its China and Russia subsidiaries, and government officials in those countries. Most of those officials were health care providers at state-owned and state-controlled entities, according to the SEC.
The feds charged that AstraZeneca sales and marketing staff, along with “multiple levels” of company managers at the subsidiaries, “designed and authorized several schemes” to convey gifts, conference expenses, travel, and cash, among other things, in order to influence purchases of AstraZeneca drugs.
At various times, AstraZeneca sales staff in China sales submitted — and managers approved — fake tax receipts for fraudulent reimbursements to generate cash that was used to bribe health care providers. The employees also established bank accounts in the names of some doctors names as part of their scheme, the SEC alleged.
And employees in the Chinese subsidiary made cash payments to local officials to reduce or avoid fines that were levied against the subsidiary. Finally, the company falsely recorded all of the improper payments by its subsidiaries as legitimate business expenses in its consolidated financial statements, according to the SEC.
An AstraZeneca spokeswoman wrote us that the company is “pleased to have resolution of these matters. The SEC has acknowledged our cooperation during the entire course of the inquiry, and the US Department of Justice has closed its investigation. … We began enhancing our compliance program prior to the start of the investigation. Strong ethics and acting with integrity are central to AstraZeneca’s code of conduct, which is reinforced through ongoing training and monitoring.”
As we have noted previously, 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. The issue gained particular notice two years ago when Chinese authorities fined GlaxoSmithKline (GSK) nearly $500 million as the result of a bribery scandal.
Since then, several drugs makers have reached settlements for allegedly violating the Foreign Corrupt Practices Act. Last March, Novartis (NVS) agreed to pay $25 million to settle charges of making illegal payments to health care providers in China.
SciClone Pharmaceuticals agreed to pay $12.8 million to settle an SEC investigation into potential violations. Last year, Bristol-Myers Squibb paid $14 million for paying bribes in China. In 2012, Eli Lilly agreed to pay more than $29 million to settle charges of bribing foreign government officials to win business in several countries. And in 2011, Johnson & Johnson paid $70 million to resolve FCPA violations.
Meanwhile, Glaxo has opened internal investigations in various countries, including in Jordan, Lebanon and Yemen. And Novartis is facing a probe by authorities in Turkey, and some of its executives were recently indicted in South Korea.
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 OpenPayments database, which is publicly accessible and lists payments made by drug companies to doctors.