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Teva Pharmaceutical Industries Ltd. (Teva), an Israeli company, stated in its Form 6-K filed with the SEC on November 15, 2016, that it has set aside approximately $520 million for a potential settlement of FCPA matters being investigated by the SEC and DOJ. Teva explained that the reserve relates to conduct that occurred between 2007 and 2013 in Russia, Mexico, and the Ukraine, and that it was discovered in the course of the investigation that began in early 2012 with the issuance of an SEC subpoena to Teva, as well as a concurrent internal investigation of its worldwide business practices.
Should Teva enter into a settlement, it will top the growing list of pharmaceutical companies that have been subject to multimillion dollar penalties for conduct in violation of the FCPA, including the following:
- AstraZeneca ($5.5 million settlement in 2016 of allegations relating to bribery of Chinese and Russian doctors)
- GlaxoSmithKline ($20 million settlement in 2016 of allegations relating to bribery of Chinese health care professionals)
- Novartis ($25 million settlement in 2016 of allegations relating to bribery of Chinese doctors
- Bristol-Myers Squibb & Co. ($14 million settlement in 2015 of allegations relating to bribery of healthcare professionals at state-owned hospitals in China)
- Eli Lily & Co. ($29 million settlement in 2012 of allegations relating to bribery of government employed physicians in Russia, Brazil, China and Poland)
- Johnson & Johnson ($70 million settlement in 2011 of allegations relating to conspiracy and bribery of doctors employed by state-controlled health care systems in Greece)
According to an August 9, 2016 news report, six former and current executives of Novartis Korea have been indicted by prosecutors in Seoul for alleged corruption involving payments to physicians intended to boost sales. The news report stated that the officials are alleged to have made payments to the physicians totaling $2.3 million from 2011 to present. Several doctors and publishers of medical journals involved in the payments were also indicted according to the news report.
In March 2016, a different division of the Switzerland-based pharmaceutical company entered into a settlement with the SEC to resolve alleged violations of the FCPA’s book and records and internal controls provisions related to activities in China. Prior FCPA Scorecard coverage of the Novartis AG settlement can be found here. In the past few years, several other pharmaceutical companies have also faced corruption allegations regarding allegedly corrupt payments to employees of Chinese state-owned hospitals. Prior FCPA Scorecard coverage of those investigations can be found here.
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.
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