WASHINGTON, D.C.—An ongoing federal probe involving numerous drug companies and the way they do business overseas is keeping investigators and internal auditors at numerous drug companies busy as 2010 draws to a close.
Drug companies and federal agencies at the heart of the investigation, however, are keeping mum on not only the specifics, but also the generalities of the probes.
According to published reports, drug companies such as Baxter,SciClone and others have received letters from federal investigators asking for more information about the companies' overseas businesses.
It is believed that the investigation is reviewing the pharmaceutical industries in Brazil, China, Germany, Italy, Poland, Russia and Saudi Arabia.
While drug company relationships are highly regulated in the United States, other countries are not necessarily as stringent in maintaining above-the-board business practices as are some companies in other countries, where bribery is the norm in many industries.
Companies who have their stock traded in U.S. markets are regulated under a 1977 law, the Foreign Corrupt Practices Act (FCPA) of 1977, which makes them subject to scrutiny from both the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC).
According to the DOJ, the anti-bribery provisions of the FCPA make it unlawful for a U.S. person, and certain foreign issuers of securities, to make a corrupt payment to a foreign official for the purpose of obtaining or retaining business for or with, or directing business to, any person.
Since 1998, these provisions also apply to foreign firms and persons who take any act in furtherance of such a corrupt payment while in the United States.
The FCPA was intended to have and has had an enormous impact on the way American firms do business. Several firms that paid bribes to foreign officials have been the subject of criminal and civil enforcement actions, resulting in large fines and suspension and debarment from federal procurement contracting, and their employees and officers have gone to jail.
To avoid such consequences, many firms have implemented detailed compliance programs intended to prevent and to detect any improper payments by employees and agents.
The government expects that companies voluntarily report violations of the FCPA to the appropriate authorities.
While the FCPA was not vigorously enforced in the recent past, it is estimated that more than $1 billion in fines have been levied in thus far in 2010 alone. Federal agencies are staffing up to support this influx of enforcement activity—according to recent reports, the FBI is doubling the number of agents who investigate FCPA violations.
Representatives of the SEC would not comment for this story, except to refer ddn to the SEC's website to await pending actions. Several calls placed to the DOJ also yielded no comments.
According to published reports, large drug companies have admitted that investigations are underway due to alleged violations of the FDCA. Those companies include including AstraZeneca PLC, Bristol-Myers Squibb Co. and GlaxoSmithKline PLC and Merck.
The companies said they are cooperating with the government, with several adding that the investigation is industry-wide and broader than their companies specifically. Officially, none of the companies have been accused of wrongdoing.
According to an investigation by The Wall Street Journal, letters to the companies under scrutiny identified four types of possible violations: bribing government-employed doctors to purchase drugs; paying company sales agents commissions that are passed along to government doctors; paying hospital committees to approve drug purchases; and paying regulators to win drug approvals.
Representatives for Eli Lilly & Co. and Baxter did not respond to requests for comment for this story. A SciClone spokeswoman would not comment on the probe.
