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FCPA Third-Party Risk and Compliance for Pharmaceutical Companies

May 19th, 2016
posted by Aravo

Recent FCPA Penalties against Pharmaceutical Companies

Around the world, governments are getting stricter about enforcing anti-bribery and anti-corruption regulations such as the U.S. Foreign Corrupt Practices Act (FCPA), the U.K. Anti-Bribery Act, and other national laws modelled on the OECD Anti-Bribery Convention. These regulations forbid bribery and corruption by companies and their third-party partners, including resellers, distributors, and marketing agencies.

Penalties for violating anti-bribery and anti-corruption regulations can be steep. When technology giant Siemens AG was charged with bribery and corruption in 2008, the company ended up paying over $1.5 billion to settle the charges.

Recent FCPA Penalties against Pharmaceutical Companies
More recently several leading pharmaceutical companies have paid tens of millions of dollars in fines to settle charges of FCPA violations brought by the Securities and Exchange Commission (SEC). As the SEC reports:

  • Novartis SG – The Swiss-based pharmaceutical company agreed to pay $25 million to settle charges that it violated the FCPA when its China-based subsidiaries engaged in pay-to-prescribe schemes to increase sales. (3/23/16)
  • SciClone Pharmaceuticals – The California-based pharmaceutical firm agreed to pay $12 million to settle SEC charges that it violated the FCPA when international subsidiaries increased sales by making improper payments to health care professionals employed at state health institutions in China. (2/4/16)
  • Bristol-Myers Squibb – The SEC charged the New York-based pharmaceutical company with violating the FCPA when employees of its China-based joint venture made improper payments to obtain sales. Bristol-Myers Squibb agreed to pay more than $14 million to settle charges. (10/5/15

Increased Scrutiny by the Department of Justice

At the same time the SEC is pursuing civil charges for violators, the U.S. Department of Justice (DOJ) is increasing its staffing and broadening its tactics to investigate potential FCPA violations.

In recent years, the DOJ has:

  • Announced that it will quicken the pace of its FCPA investigations.
  • Announced that the penalties for violations will not be going down.
  • Announced it is targeting individual wrong-doers, not just companies.
  • Increased its staff of FCPA prosecutors by 50%.
  • Added three new fully operational squads to the FBI’s International Corruption Unit.
  • Launched a new Kleptocracy Asset Recovery Initiative
  • Introduced tactics such as wiretaps and stings more commonly associated with crime such as drug dealing.

How Pharmaceutical Companies Can Ensure Compliance with Anti-Bribery and Anti-Corruption Regulations

To avoid penalties for violating the FCPA and similar regulations, pharmaceutical companies need to:

  • Document and distribute code of conduct guidelines for employees and third parties.
  • Implement clear accounting and financial control processes so that income and expenses can be monitored and tracked in sufficient detail for uncovering unlawful actions such as bribes.
  • Establish clear criteria for vetting and onboarding third parties.
  • Centralize information about third parties so monitoring can be comprehensive and timely.
  • Implement processes for re-assessing third parties when regulations change and when news of third party infractions appears.

Why a Third-Party Compliance Solution Is Critical

Pharmaceutical companies typically employ thousands or even tens of thousands of third parties to help with researching, developing, marketing, and distributing their products. Tracking all those third parties and ensuring they have not committed regulatory violations is an almost impossible job if data collection depends on Excel spreadsheets, email, or—worse—paper-based forms.

To stay on top of third parties and ever-changing anti-bribery and anti-corruption regulations, pharmaceutical companies need a highly scalable and configurable software-based platform that streamlines data collection, centralizes data analysis, and automatically alerts business managers and compliance teams when laws change, a third party is due for an annual review, or a third party has been found to engage in behavior that merits investigation.

To learn more about recent DOJ and SEC actions and the importance of a third-party compliance solution for pharmaceutical companies, read our new white paper, “Reducing FCPA Risks and Achieving Third-Party Compliance in the Pharmaceutical & Medical Devices Industries“:

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