August 9, 2012

Pfizer Inc. (“Pfizer”) is the world’s largest pharmaceutical manufacturer and is based in New York. The U.S. has been investigating Pfizer and other drug manufacturers for possible violations of the U.S. Foreign Corrupt Practices Act, which prohibits employees and agents from paying bribes to foreign government officials in order to obtain or retain business. Many doctors in foreign countries are employed by their governments.

The investigation with regard to Pfizer involved alleged payments and gifts made by Pfizer’s foreign subsidiaries to doctors and other workers who were employed by foreign governments in eight countries (Bulgaria, Croatia, Kazakhstan, Russia, Italy, China, the Czech Republic, and Serbia). As an example, Pfizer created a points program in China whereby physicians were awarded points based on how many prescriptions they wrote which they could then redeem for gifts such as cellphones and tea sets.

Wyeth, a subsidiary of Pfizer that Pfizer acquired in 2009, allegedly paid cash and gave gifts to government doctors in China, Indonesia, and Pakistan when they recommended Wyeth’s nutritional products. Wyeth allegedly hid the improper payments by issuing false invoices.

The alleged illegal payments were made to influence regulatory and formulary approvals, to influence prescription and purchase decisions, and to clear customs in foreign countries, according to the U.S. Securities and Exchange Commission (“SEC”). The alleged payments were made without the actual knowledge of Pfizer’s officers or its employees, but the inaccurate financial records of Pfizer’s subsidiaries were consolidated in Pfizer’s financial reports.

Pfizer began investigating the alleged illegal payments and self-reported the matter to appropriate authorities in the United States in 2004. In 2009, Pfizer became aware of the additional improper payments by Wyeth when it acquired Wyeth.

The U.S. government had charged Pfizer H.C.P. Corporation (a subsidiary of Pfizer) with one criminal count of conspiracy to violate the Foreign Corrupt Practices Act and a second criminal count of a violation of the Foreign Corrupt Practices Act’s anti-bribery provisions. Pfizer H.C.P. Corporation admitted that between 1997 and 2006, it paid more than $2 million of bribes to government officials in Bulgaria, Croatia, Kazakhstan and Russia.  Pfizer H.C.P. Corporation also admitted that it made more than $7 million in profits as a result of the bribes. Source

Pfizer has entered into two agreements with the SEC in which it has agreed to pay $45.1 million ($26.3 million by Pfizer and an additional $18.8 million by Wyeth) to settle claims involving Pfizer subsidiaries and Wyeth, and Pfizer H.C.P. Corporation has entered into a deferred prosecution agreement with the U.S. Department of Justice (“DOJ”) that defers criminal prosecution for two years after which charges will be dropped if Pfizer continues to cooperate with the investigation and takes necessary remedial steps including submitting reports to the SEC regarding Pfizer’s anti-corruption efforts and the status of enhanced compliance measures. Pfizer H.C.P. Corporation also agreed to pay a $15 million penalty to settle claims against it. The agreements were filed in federal court in Washington, D.C. on August 7, 2012, and must be approved by a federal judge.

Other drug companies that have been investigated by the U.S. for possible violations of the U.S. Foreign Corrupt Practices Act include Teva Pharmaceutical Industries Ltd., AstraZeneca Plc, Bristol-Myers Squibb Co., and GlaxoSmithKline Plc.

Source: The Daily Record, August 8, 2012.

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