Abbott accused of bribing doctors to promote drugs


Abbott Laboratories is the latest foreign pharmaceutical company facing bribery allegations in China. According to 21st Century Business Herald (21CBH), sales staff at Abbott Nutrition offered doctors kickbacks of 8 – 10% of sales revenue as an inducement to buy Abbott products.

The alleged kickbacks resulted in significantly inflated drug prices, the report said.

According to the company website, Abbott Nutrition develops and sells nutritional and related health care products.

One source, going by the pseudonym Liu Yue, said kickbacks of 8 – 10% of sales revenue was common practice and endorsed by the company.

“It is impossible for staff to reach sales quotas if they abide by the company’s compliance regulations” and “in top cities, the kickback for Abbott’s Glucerna SR product can reach over 300,000 yuan ($49,564) in a month,” Liu Yue said.

According to emails provided by anonymous sources, Abbott’s sales division required staff to visit doctors 12 times a day, and failing to do resulted in disciplinary warnings. In addition, staff were required to organize at least nine medical conferences per quarter.

Liu also alleged that all kickbacks were paid in cash to avoid leaving evidence. The expense reimbursements for the alleged cash bribes were disguised as expenses for banquets, meetings or fake conferences organized by partner travel agencies.

Abbott executives monitored reimbursements closely but didn’t question their staff about methods used to make sales, according to the report.

In a statement, the company said it “demanded its staff strictly abide by the laws and regulations of the country, as well as company policies.” Abbott told Southern Metropolis Daily that it would investigate the bribery allegations and release the findings in a timely manner.

The allegations against Abbott come after British drugmaker GlaxoSmithKline, was accused of funneling more than $600 million in bribes to doctors and hospitals through travel agencies to promote sales in China.
Sources: 21st Century Business Herald (21世纪经济报道), Southern Metropolis Daily (南方都市报)

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Investigation on foreign Bribery in Drug Industry would be one the priority (US)


 

Seal of the United States Department of Justice

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Accordig to Lanny Breuer, the head of the (US) Justice Department‘s Criminal Division, investigating foreign bribery in the Drug industry would be one of his priorities over the next several years.

On Tuesday, the WSJ’s (Wall Street Journal) Michael Rothfeld reports that federal investigators are looking at ways that drug makers could be paying bribes overseas to boost sales and speed approvals.

Big companies-including Merck, AstraZeneca, Bristol-Myers Squibb and GlaxoSmithKline -in recent months have disclosed they are being investigated for possible violations of the Foreign Corrupt Practices Act, the now ubiquitous 1977 law that makes it illegal for companies whose stock is traded in the U.S. to bribe government officials in other countries to get business.

In fact, since 1977 to nowadays, the SEC and department of justice did not have the means to check the implementation of this Act.

The first well known cases were Siemens, and some others in Poland. I am not here to give companies names that be found in the SEC’s website.(Beside link on this blog)

The companies said they are cooperating with the government, with several adding that the investigation is industry-wide and broader than their companies specifically.

So far, none of the companies has been accused of wrongdoing, and the investigation ultimately may not result in charges.

The investigation is targeting transactions in Brazil, China, Germany, Italy, Poland, Russia and Saudi Arabia, people familiar with the matter said.

Note that FCPA procedures have been settled since 2 or 3 years in the foreign subsidiaries of majors companies. I worked on that for France, Belgium and Switzerland

Kind of briberies

Letters from the government to one of the companies, which were reviewed by The Wall Street Journal, identified four types of possible violations:

  1. Bribing government-employed doctors to purchase drugs; (understand in France, doctors who prescribe reimbursement drugs – see Charter on sales representatives (signed between Leem and CEPS)
  2. paying company sales agents commissions that are passed along to government doctors;
  3. paying hospital committees to approve drug purchases
  4. paying regulators to win drug approvals (this have been seen in former cases, which is, to my opinion, the worst behavior).

It is true that the pharmaceutical industry is particularly vulnerable because government plays a bigger role in administering medicine in many foreign countries than it does in the U.S. and drugs are highly regulated, which creates contact with public officials..the approach is different abroad  – Nevertheless the Obama “reform” might make grown up relationship between Pharmaceutical industry and insurances, hospitals…to be followed.

Link for more:http://blogs.wsj.com/law/2010/10/05/feds-introducing-bigpharma-to-fcpa/

Source: Chief Compliance Ethics Officer Network and FCPA: Foreign Corrupt Practices Act Forum

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