A Flock Of Pharmas

A friend sent this great comment:

I read in the Corporate investigations list (a few days ago) that just about every single pharmaceutical company I could name was on the list. Are there different/conflicting laws in different places that put these companies in “the shadow of doubt?” No long explanation needed but I was just struck by the saturation level of pharmaceuticals on such a list.

Here’s our reply:

Great to hear from you and thanks for reading the blog. You’re very observant about the pharmas — they’re all there.

Their sales practices for a long time involved (and may still involve) payments of some sort to doctors, in exchange for recommendations for their products or actual sales. Because doctors overseas who work in government owned or managed hospitals are considered to be ‘foreign officials’ under the Foreign Corrupt Practices Act, those payments may create offenses under the U.S. law.

The elements of an FCPA offense are (1) giving or promising to give (2) anything of value (3) to a foreign official (4) with a corrupt intent (5) to obtain or retain business.

Unfortunately for the pharmas, their overseas sales practices seem to satisfy every element of an FCPA offense. So the DOJ and SEC are taking a close look and will likely bring some enforcement actions at some point.

Also, when the DOJ, because of circumstances, can bring in for questioning multiple companies from a single industry, usually at least one is willing to squeal on everyone else in exchange for leniency. Johnson & Johnson did that among the orthopedic device makers, for example. So it’s possible one or more of the pharmas have already turned state’s evidence.