What The Pharmas Are Reading

The latest issue of the Rx Compliance Report included  summaries of our posts, a flock of pharmas and why benchmarking matters.

We're happy to be included. Most of the forty drug companies subscribe to the newsletter, as do the law firms that help them. For ten years, Rx Compliance has been chronicling the 'government's crackdown on pharmaceutical sales and marketing practices.' That crackdown is gaining speed.

The Wall Street Journal reported this week that Pfizer will pay about $60 million to settle alleged FCPA violations. In April, Johnson & Johnson resolved FCPA offenses by paying $70 million.

Our 2011 corporate investigations list included Pfizer, as well as AstraZeneca, Biomet, Bio-Rad Laboratories, Bristol-Meyers Squibb, Covidien, Eli Lilly, GlaxoSmithKline, Medtronic, Merck, Orthofix International, Sciclone Pharmaceuticals, Smith & Nephew, Stryker Corporation, Talecris Biotherapeutics, and Zimmer.

The same issue of Rx Compliance ran a front-page story about Jeff Kaplan's view of global enforcement trends. Kaplan, co-author of the anti-corruption compliance program benchmarking survey, also described 'five practical benchmarks in anti-corruption efforts.'

Take Your Meds

In its quarterly report filed with the SEC last week, pharma giant Pfizer Inc said it has reached agreement in principle with the SEC and DOJ to resolve 'improper payment' matters outside the United States.

It expects final settlements by year end.

In 2009, New York-based Pfizer paid a $2.3 billion civil and criminal penalty for unlawful prescription drug promotions in the U.S. As we said then, using similar sales techniques with doctors at government-owned hospitals overseas could violate the FCPA.

That same year, a senator in the Philippines accused Pfizer of using illegal tactics to block legislation aimed at lowering drug costs. Senator Mar Roxas wrote a letter to the U.S. Justice Department requesting an FCPA investigation. He alleged that Pfizer offered the Philippines' health secretary 'discount cards' in exchange for not implementing the retail drug-price law.

Pfizer then bought full-page ads in Philippines newspapers saying, 'We categorically deny this allegation and consider this a grave affront to our reputation … We have always sought to provide wider access to our high quality medicines.'

In a post last month, a flock of pharmas, a reader asked why our 2011 corporate investigations list is full of pharmaceutical and medical-device companies. Those on the list were AstraZeneca, Biomet, Bio-Rad Laboratories, Bristol-Meyers Squibb, Covidien, Eli Lilly, GlaxoSmithKline, Medtronic, Merck, Orthofix International, Pfizer, Sciclone Pharmaceuticals, Smith & Nephew, Stryker Corporation, Talecris Biotherapeutics, and Zimmer.

We said,

Their sales practices for a long time involved (and may still involve) payments of some sort to doctors, in exchange for recommendations for their products or actual sales. Because doctors overseas who work in government owned or managed hospitals are considered to be 'foreign officials' under the Foreign Corrupt Practices Act, those payments may create offenses under the U.S. law.

Will Pfizer's settlement with the DOJ and SEC open the industry floodgates? It could. As we've said, when the feds can bring in for questioning multiple companies from a single industry, usually at least one is willing to squeal on the others in exchange for leniency. 

Pfizer Inc is the world's biggest research-based drug company. It has about 110,000 employees and  revenue last year was $69 billion. It acquired Wyeth in 2009.

It trades on the NYSE under the symbol PFE.

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Pfizer Inc's complete disclosure regarding the potential SEC and DOJ settlements from its Form 10-Q filed on November 10, 2011 (pdf) said,

The Company has voluntarily provided the DOJ and the U.S. Securities and Exchange Commission (SEC) with information concerning potentially improper payments made by certain Pfizer and Wyeth subsidiaries in connection with certain sales activities outside the U.S. In recent discussions, we have reached agreements-in-principle with the SEC staff and with the DOJ for the resolution of these matters. We anticipate entering into and announcing final agreements in the fourth quarter. In addition, certain potentially improper payments and other matters are the subject of investigations by government authorities in certain foreign countries, including a civil and criminal investigation in Germany with respect to certain tax matters relating to a wholly owned subsidiary of Pfizer.

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Our thanks to Josh, who asked for some coverage of Pfizer and last week's disclosure.

Is Pharma Under Fire In Indonesia?

As we said, two FBI agents at an international law enforcement conference last week said several U.S. public companies are being investigated for bribery in Indonesia.

The agents wouldn't name names.

But signs point to pharma.

In 2009, assistant AG Lanny Breuer of the DOJ's criminal division warned that industry about overseas bribery. At a November conference that year of pharma lawyers, he said:

In the pharmaceutical context, we have additional expertise that significantly enhances our ability to proactively investigate and prosecute these often complex cases. . . . And we are seeing increasing international cooperation, coordination and information sharing. . . . . Our focus and resolve in the FCPA area will not abate, and we will be intensely focused on rooting out foreign bribery in your industry. That will mean investigation and, if warranted, prosecution of corporations to be sure, but also investigation and prosecution of senior executives.

Since then, GlaxoSmithKline, Merck, AstraZeneca, Eli Lilly, Baxter, SciClone, and Bristol-Myers Squibb have said they received questions from the DOJ and SEC about foreign sales practices. Pfizer is also reported to have disclosed to U.S. authorities some payments outside the U.S. that may violate the FCPA. 

After the DOJ's Breuer spoke directly to the pharma lawyers, he repeated his warning to an FCPA confab in Washington:

As I mentioned in a speech last week to the Pharmaceutical Regulatory and Compliance Congress, one area of focus will be overseas sales in the pharmaceutical industry. In some foreign countries and under certain circumstances, nearly every aspect of the approval, manufacture, import, export, pricing, sale and marketing of a drug product may involve a "foreign official" within the meaning of the FCPA. The depth of government involvement in foreign health systems, combined with fierce industry competition and the closed nature of many public formularies, creates, in our view, a significant risk that corrupt payments will infect the process. Our remarkable FCPA unit and our terrific health care fraud unit will be working together to investigate FCPA violations in the pharmaceutical industry in an effort to maximize our ability to effectively enforce the law in this high-risk area.

Indonesia's healthcare system fits Breuer's description. It has heavy government involvement, and contact with "foreign officials" by drug makers and marketers is frequent.

WikiLeaks: Drug Company Hijinks

A U.S. diplomatic cable says Pfizer hired investigators to dig up damaging evidence against Nigeria's former attorney general to pressure him into dropping a lawsuit against the pharmaceutical company.

The document published by the Guardian today quotes a Pfizer official in 2009 as saying the company was seeking to uncover corruption links to Attorney General Michael Aondoakaa and was passing the information to local media.

Pfizer was facing a lawsuit over the company's trial of the antibiotic Trovan during a meningitic epidemic in the Nigerian state of Kano in 1996. Nigerian officials said 11 children died during the trial while others were left with deformities. Pfizer reached a $75 million settlement with Kano last year.

Enrico Liggeri, Pfizer's country manager in Nigeria, was named in the leaked cable. It said: "According to Liggeri, Pfizer had hired investigators to uncover corruption links to Federal Attorney General Michael Aondoakaa to expose him and put pressure on him to drop the federal cases. He said Pfizer's investigators were passing this information to local media."

The Nigerian press published stories detailing the alleged corruption. The cable said Pfizer "had much more damaging information on Aondoakaa and that Aondoakaa's cronies were pressuring him to drop the suit for fear of further negative articles."

In a statement to the Guardian, Pfizer said: "The Trovan cases brought by both the federal government of Nigeria and Kano state were resolved in 2009 by mutual agreement. Pfizer negotiated the settlement with the federal government of Nigeria in good faith and its conduct in reaching that agreement was proper. Although Pfizer has not seen any documents from the US embassy in Nigeria regarding the federal government cases, the statements purportedly contained in such documents are completely false.

"As previously disclosed in Pfizer's 10-Q filing in November 2009, per the agreement with the federal government, Nigeria dismissed its civil and criminal actions against the company. Pfizer denied any wrongdoing or liability in connection with the 1996 study. The company agreed to pay the legal fees and expenses incurred by the federal government associated with the Trovan litigation. Pursuant to the settlement, payment was made to the federal government's counsel of record in the case, and there was no payment made to the federal government of Nigeria itself. As is common practice, the agreement was covered by a standard confidentiality clause agreed to by both parties."

-- Compiled from reports from the Guardian, VOA, and others

He Said, We Said

On November 12, 2009, there was a lot of tough talk from the DOJ's Lanny Breuer (left). The new chief of the criminal division warned pharmaceutical companies and executives about their exposure under the Foreign Corrupt Practices Act. He said, "Our focus and resolve in the FCPA area will not abate, and we will be intensely focused on rooting out foreign bribery in your industry. That will mean investigation and, if warranted, prosecution of corporations to be sure, but also investigation and prosecution of senior executives."

He was speaking at an annual pharma compliance confab in Washington. A copy of his remarks can be downloaded here.

On September 3, 2009, the FCPA Blog said:

Will drug makers be the target of the next industry-wide Foreign Corrupt Practices Act investigation, following in the footsteps of the oil and gas services companies and orthopedic device makers? It's possible. Their sales practices are in the news a lot these days. And amid the healthcare debate, drug-company behavior anywhere invites attention in Washington and beyond.

Remember the orthopedic device makers? Like Pfizer this week and Eli Lilly earlier this year, they resolved enforcement actions based on illegal domestic sales practices. Soon after, most of them disclosed that the DOJ and SEC were looking into their overseas marketing methods for any FCPA offenses. Those investigations are ongoing. . . .

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