Between 1991 and mid-2012, U.S. drug companies paid a total of more than $30 billion for domestic criminal or civil violations, including withholding safety information from the Food and Drug Administration (FDA), illegal promotion of drugs for unapproved uses, and fraud by overcharging Medicare and Medicaid. A staggering sum, this figure represents a little more than two-thirds of the profits made by the 10 largest drug companies in 2010 alone.
But criminal and civil violations are not limited to the domestic sphere. Consider the Foreign Corrupt Practices Act (FCPA). Enacted in 1977, the law is enforced by the Securities and Exchange Commission (SEC) and “generally prohibits the payment of bribes to foreign officials to assist in obtaining or retaining business.” It is applicable to prohibited conduct worldwide on the part of “publicly traded companies and their officers, directors, employees, stockholders and agents.”
In July, senior officials at Glaxo-SmithKline (GSK) were implicated in what the website Pharmalot referred to as a “coordinated … bribery scheme” in China, which is rapidly becoming the world’s largest pharmaceutical market, totaling “more than $400 million in bribes.” The website FDA News reported that “the alleged kickbacks — described by the Ministry of Public Security as ‘serious economic crimes’ — were given to government officials, medical associations, hospitals and doctors … and were aimed at increasing sales and prices of GSK drugs.”
Several weeks ago, GSK CEO Andrew Witty issued a statement calling the situation “shameful” and blaming “individuals” who operated outside “controls and processes.”
Other actions for FCPA violations include:
Eli Lilly and Company, 12/2012: The company was charged with “improper payments its subsidiaries made to foreign government officials to win business in Russia, Brazil, China and Poland.” It paid more than $29 million in settlements.
Pfizer, 8/2012: The SEC charged the company for “illegal payments made by … subsidiaries to foreign officials … to obtain regulatory approvals, sales and increased prescriptions for its products.” The company, with its recently acquired Wyeth LLC — charged with its own FCPA violations — agreed to pay a combined $45 million.
Johnson & Johnson, 4/2011: The company was accused of “bribing public doctors in several European countries to win contracts for their products and paying kickbacks to Iraq to illegally obtain business.” Total settlement: $70 million.
Given the small fraction of total profits these settlements represent, there is much room for the penalties to grow. It is time to add jail sentences for the responsible officials and to greatly expand the size of penalties for violations taking place both at home and abroad.by