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The SEC announced on March 23, 2016 that it settled FCPA allegations with Switzerland-based pharmaceutical company Novartis AG, via a cease and desist order finding that Novartis violated the FCPAs book and records and internal controls provisions related to activities in China. The SEC found that employees of two Novartis Chinese subsidiaries gave money and gifts to Chinese health care providers at state-owned hospitals in order to boost sales. In some cases, the order found, Novartis employees created spreadsheets that linked payments to individual Chinese health care providers to increased sales of certain drugs and created a ranking system for the health care providers. SECs order found that Novartis recorded the payments as lecture fees, conferences, seminars, medical studies, and travel and entertainment. The SEC further found that Novartis failed to devise and implement a sufficient system of internal accounting controls to detect the improper payments, and lacked an effective anti-corruption compliance program. The order did not say whether Novartis self-disclosed the involved conduct, but the order notes the company's cooperation and states that the company began an internal investigation after news reports surfaced that a competitor was investigating similar FCPA concerns in its Chinese subsidiaries. Novartis consented to the SECs order without admitting or denying the charges and agreed to pay $25 million to resolve the case, including a $2 million penalty, disgorgement of $21.5 million in profits, and $1.5 million in prejudgment interest. Novartis will also provide status reports to the SEC for the next two years regarding remediation efforts and new anti-corruption compliance measures.
On February 4, 2016, the SEC settled FCPA allegations with California-based SciClone Pharmaceuticals with a cease and desist order finding that SciClone violated the FCPAs anti-bribery, books and records, and internal controls provisions related to activities in China. The SEC found that from at least 2007 to 2012, employees of SciClone subsidiaries gave money and gifts to Chinese officials (including employees of state-owned hospitals) in order to boost sales. The SEC further found that SciClone failed to devise and implement a sufficient system of internal accounting controls and lacked an effective anti-corruption compliance program. SciClone consented to the SECs order without admitting or denying the charges and agreed to pay $12.8 million to resolve the charges, including a $2.5 million penalty, the disgorgement of $9.426 million in profits, and $900,000 in prejudgment interest. SciClone will also provide status reports to the SEC for the next three years regarding remediation efforts and new anti-corruption compliance measures. SciClone simultaneously announced that the DOJ had declined to pursue any additional action.
On October 5, the SEC announced a settlement with Bristol-Myers Squibb to resolve allegations that the pharmaceutical companys Chinese joint venture, BMS China, gave cash, jewelry, and other benefits to health care providers in order to boost prescription sales at state-owned or controlled hospitals. The SEC proceeded via an administrative cease and desist order. The SECs order found that the company violated the internal controls and books and records provisions of the FCPA. Bristol-Myers consented to the SECs order without admitting or denying the findings, and agreed to disgorge profits of $11.4 million plus $500,000 in pre-judgment interest and pay a civil penalty of $2.75 million. Bristol-Myers also agreed to report to the SEC for two years regarding the status of its efforts to implement anti-corruption compliance controls. The SECs order states that Bristol-Myers failed to investigate red flags and claims by terminated BMS China employees that raised the possibility that sales personnel were making improper payments. The order also states that Bristol-Myers was too slow to fill gaps in its internal controls regarding interactions with health care providers.
French pharmaceutical company Sanofi S.A. has disclosed that it is investigating whether certain payments made by company employees from 2007 to 2012 in the Middle East and Africa to healthcare professionals violated the FCPA. Sanofi reportedly launched the investigation after receiving anonymous whistleblower allegations, including allegations that company employees made payments to doctors for prescribing Sanofi-manufactured pharmaceuticals. According to news reports, Sanofi has self-reported the allegations to the U.S. Department of Justice and the Securities and Exchange Commission. Sanofis disclosure appears to continue the trend of investigations and potential enforcement actions in the pharmaceutical industry concerning payments related to prescriptions, as well as the trend of companies self-disclosing whistleblower allegations.
On September 19, according to media reports, a Chinese court ordered the Chinese subsidiary of GlaxoSmithKline, the UK-based pharmaceutical company, to pay approximately $487 million related to alleged bribery of hospitals and doctors. Five of Glaxo's managers were also convicted after entering guilty pleas, and Glaxo's former country manager was ordered to be deported. Glaxo apologized for the conduct in a statement. Glaxo's Chinese subsidiary was alleged to have bribed hospitals and their doctors to boost prescriptions of Glaxo products, including through payment of large travel and entertainment expenses and other fees, leading to over $150 million in additional revenue. The Glaxo case involves many of the key areas currently affecting anti-corruption practitioners and compliance personnel. For example, allegations were first raised by a whistleblower in 2013, and investigations regarding bribery of foreign state-owned hospitals or their doctors have been rising in the past few years. Here, while the full facts are not yet clear, Glaxo has stated that only commercial (business to business) bribery was at issue, characterizing the conduct at issue as "offer[ing] money or property to non-government personnel in order to obtain improper commercial gains, and . . . bribing non-government personnel."