Pfizer Agrees to Settle Foreign Bribery Case With U.S.
Pfizer Inc., the world’s biggest drugmaker, agreed to pay $60.2 million to settle foreign bribery cases it brought to U.S. authorities involving alleged payments paid by employees and agents of subsidiaries.
Pfizer entered into two agreements with the Securities and Exchange Commission and the New York-based drugmaker reached a deferred prosecution accord with the Department of Justice, according to filings today in federal court in Washington.
U.S. law enforcement authorities have been probing drugmakers including Teva Pharmaceutical Industries Ltd, AstraZeneca Plc (AZN), Bristol-Myers Squibb Co. (BMY) and GlaxoSmithKline Plc (GSK) for possibly breaking an overseas anti-bribery law that bars employees or their agents from paying bribes to foreign government officials to obtain or retain business. Today’s settlements stem from payments and gifts Pfizer said its foreign units made to government-employed doctors and workers in eastern Europe, China and the Middle East, according to the filings.
“These improper payments were variously made to influence regulatory and formulary approvals, purchase decisions, prescription decisions, and to clear customs,” according to a complaint filed by the SEC.
The SEC said the payoffs were made “without the knowledge or approval of officers or employees of Pfizer, but the inaccurate books and records of Pfizer subsidiaries were consolidated in the financial reports of Pfizer.”
Pfizer alerted U.S. authorities in 2004 after probing the claims. More payments were found when the drugmaker bought its Wyeth unit in 2009.
“The actions which led to this resolution were disappointing, but the openness and speed with which Pfizer voluntarily disclosed and addressed them reflects our true culture and the real value we place on integrity and meeting commitments,” Amy Schulman, Pfizer’s general counsel, said in an e-mailed statement. “We expect every colleague across Pfizer to adhere to the highest standards of conduct.”
The Justice Department charged the Pfizer HCP Corp. unit with two criminal counts, conspiracy to violate the Foreign Corrupt Practices Act and a violation of the FCPA’s anti-bribery provisions. Prosecutors agreed to defer prosecution and drop the charges after two years if Pfizer continues to cooperate and take remedial steps. The settlements must be approved by a federal judge.
Prosecutors agreed to a criminal fine of $15 million, a 34 percent reduction, because of the company’s “extraordinary cooperation” after voluntarily disclosing the payments, and its “extraordinary and ongoing remediation.”
Pfizer disclosed in regulatory filings last year that it had reached agreements in principle with the Justice Department and the SEC “to resolve matters concerning potentially improper payments” made by the company outside the U.S., without specifically citing the Foreign Corrupt Practices Act.
Pfizer has been voluntarily cooperating with government investigators since 2004, the company said. Governments in other countries also are investigating potentially improper payments, Pfizer said in the filings.
The settlements announced today include Pfizer operations in eight countries: Bulgaria, Croatia, Kazakhstan, Russia, Italy, China, the Czech Republic and Serbia. The Wyeth settlement, over its nutrition business, was for China, Indonesia, Saudi Arabia and Pakistan.
Pfizer agreed for two years to submit reports to the SEC on the company’s anticorruption efforts and the status of implementing compliance measures, according to court filings. The company won’t be subject to direct monitoring by the Justice Department of the SEC, though.
Wyeth agreed to settle without admitting or denying the bribery allegations, according to a court filing by Wyeth vice president, Bradley Lerman.
In Bulgaria, local representatives spent $28,000 to invite government doctors on “incentive trips” to Greece, as a reward for the physicians who were the biggest prescribers of Pfizer’s products, Pfizer admitted according to the Justice Department filing. They also paid $17,000 to send doctors to medical conferences, again in exchange for commitments to prescribe Pfizer drugs.
In Croatia, the unit there had used a consulting agreement with a government doctor to help influence which drugs were allowed to be sold in the country, paying the physician in cash and travel expenses, Pfizer admitted.
Pfizer also admitted to what was called the “hospital program,” in Russia, where doctors were given a 5 percent kick- back on certain drugs prescribed.
“Pfizer Russia used the Hospital Program to make cash payments to individual government healthcare professionals to corruptly reward past purchases and prescriptions of Pfizer products, and to corruptly induce future purchases and prescriptions,” the Justice Department said in the filing. Pfizer’s Russian unit also used intermediary companies to pay off doctors and government officials, the company admitted.
The 1977 Foreign Corrupt Practices Act makes payments to foreign officials to win business illegal. It was created after a SEC investigation in the 1970s found that 400 U.S. companies had paid $300 million in bribes abroad, according to the Justice Department.
Bristol-Myers, based in New York, said April 26 it received a subpoena in March from the SEC and the company is cooperating.
Glaxo said in its 2010 and 2011 annual reports that the SEC and the Justice Department were conducting an industry-wide investigation into whether drug companies bribed officials in Argentina, Brazil, Canada, China, Germany, Italy, Poland, Russia and Saudi Arabia.
Glaxo is among the companies that received inquiries, and it is cooperating, the London-based company said. Stephen Rea, a spokesman, said Aug. 6 the company had nothing to add. “We continue to cooperate with the ongoing investigation,” he said by e-mail.
AstraZeneca received inquiries from the SEC and the Justice Department, according to the London-based company in its 2010 and 2011 annual reports. The company also “is investigating indications of inappropriate conduct in certain countries, including China,” according to the 2011 report. The investigations are continuing and the company is cooperating, Sarah Lindgreen, an AstraZeneca spokeswoman, said by e-mail on Aug. 6.
Manufacturers of medical devices also have reported getting requests in the past year for information from U.S. prosecutors and regulators on compliance with the act in Europe and South America. The law bars corporate employees or their agents from paying bribes to government officials to obtain or retain business.
Olympus Corp., the world’s largest maker of endoscopes, said Aug. 1 it had uncovered “irregularities” at a doctor- training program in Brazil that may have violated the U.S. law. Smith & Nephew Plc (SN/), Europe’s biggest maker of artificial hips and knees, agreed in February to pay $22.2 million to settle U.S. allegations that it paid bribes to doctors employed by government hospitals or agencies in Greece.
In April 2011, Johnson & Johnson (JNJ), the world’s biggest health-products maker, agreed to pay $70 million after admitting that the company bribed doctors in Europe and paid kickbacks in Iraq to win contracts and sell drugs and artificial joints.
In March, Biomet Inc., a closely held maker of medical devices, agreed to pay $22.9 million to settle U.S. accusations it bribed foreign doctors to win business.
The Justice Department and SEC are investigating allegations that Wal-Mart Stores Inc. approved as much as $24 million in bribes in Mexico. Wal-Mart disclosed the payments to the Justice Department and the SEC, according to a December 2011 regulatory filing.
The Pfizer cases are U.S. Securities of Exchange Commission v. Pfizer Inc. (PFE), 12-cv-01303; U.S. Securities of Exchange Commission v. Wyeth LLC, 12-cv-1304; and U.S. v. Pfizer HCP Corp., 12-cr-00169, U.S. District Court, District of Columbia (Washington).