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Exclusive: FCPA Pharma Probe Spans 3 Continents

By Christopher M. Matthews, Joe Palazzolo and Aruna Viswanatha | July 19, 2022 6:03 pm

The Justice Department is focusing on the practices of several pharmaceutical companies in at least eight countries (highlighted): Brazil, China, Germany, Greece, Italy, Poland, Russia and Saudi Arabia. (Main Justice)

A U.S. probe of pharmaceutical companies suspected of foreign bribery is targeting operations in at least eight countries sprawled across three continents, according to several people with knowledge of the investigation.

In late April, the U.S. Justice Department and the Securities and Exchange Commission each sent letters to four major pharmaceutical companies: AstraZeneca PLC; Baxter International Inc.; Eli Lilly & Co.; and Bristol-Myers Squibb Co.

The letters, which were described to Main Justice, said the agencies were focusing on the companies’ business in several countries, which varied by firm but included Brazil, China, Germany, Greece, Italy, Poland, Russia and Saudi Arabia.

The names of the target countries and all but one of the companies have not been previously reported. At least two companies, and possibly more countries, could not be identified.

Spokespersons for Baxter, Eli Lilly, and Bristol-Myers did not respond to requests for comment. Tony Jewell, an AstraZeneca spokesman, said in a statement that the company is cooperating with the agencies but declined to comment further.

The letters are the first indication of the global sweep of the probe and the department’s willingness to engage the upper crust of the pharmaceutical industry using the Foreign Corrupt Practices Act, which makes it illegal to pay foreign officials to obtain or keep business. The companies implicated in the investigation are all Fortune 500 companies and considered titans in the pharmaceutical world.

The Justice Department letter stated that the agency had information pointing to violations of the FCPA, while the SEC’s letter said investigators were still trying to determine whether the companies had broken the law. The difference suggests the department has information that it may not be able to share with the SEC, such as grand jury material.

To a large extent, health care in the countries of interest is state-run, and the Justice Department counts employees in such systems as foreign officials under the FCPA. Moreover, doctors’ salaries are typically lower in national programs, creating more demand for sweeteners and kickbacks.

“When you have millions and billions [of dollars in play], someone is getting some kickbacks somewhere. It’s low-hanging fruit, and that’s all there is to it,” said a defense lawyer who is representing one of the companies.

Several of the companies have revealed ongoing FCPA probes in SEC filings, but the disclosures are vague about the nature of the allegations. A recent client advisory by Arnold & Porter LLP said the Justice Department was investigating whether drug companies conducting foreign clinical trials are paying off third-party investigators to finesse research data.

Laura Sweeney, a spokeswoman for the Justice Department, and SEC spokesman John Heine both declined to comment.

The letters have created work for a familiar group of law firms, the people said.

Baxter, whose headquarters is located in a suburb of Chicago, has long drawn on the services of Chicago-based Kirkland & Ellis LLP, which has represented the company in patent and product liability litigation. Arnold & Porter LLP has represented Bristol-Myers Squibb in regulatory issues and on trademark disputes. The firms are also assisting the companies in the FCPA probe.

AstraZeneca has enlisted the help of Davis Polk & Wardwell LLP, which represented the company in major antitrust litigation. And Eli Lilly has hired Sidley Austin LLP, which has represented the company in major Justice Department investigations, including one that led to a $1.4 billion settlement over the marketing of its anti-psychotic drug Zyprexa.

Lawyers at the firms declined to comment.

In a November speech, Lanny Breuer, head of the Justice Department’s Criminal Division, put the pharmaceutical industry on notice that it would be subject to increased FCPA enforcement. The wide-ranging probe builds on efforts dating back at least seven years to curtail illicit payments by pharmaceutical and medical device companies operating oversees.

Several companies — including Bristol-Myers Squibb, Eli Lilly, AstraZeneca, Johnson & Johnson and Pfizer — had been under investigation before the April letters were sent, according to SEC filings. In some cases, the Justice Department and the SEC piggybacked on the work of foreign investigators.

The SEC began investigating subsidiaries of Bristol-Myers Squibb in Germany in 2004. The company said in an April 2010 SEC filing that the FCPA investigation encompasses matters previously investigated by the German prosecutors in Munich.

The SEC also has been investigating Eli Lilly’s compliance with the FCPA since 2003. The company disclosed in an SEC filing that staff from the Justice Department and the SEC have expanded their investigation. The company has received several subpoenas and has been asked to voluntarily provide information about its activities in several countries. (The company did not name the countries in its SEC filings.)

AstraZeneca has been under investigation by the SEC since 2006. The company disclosed that it had received a letter from the agency requesting documents related to its business activities in Croatia, Russia and Slovakia. In a May SEC filing, the company said it had received “an inquiry” from the Justice Department “in connection with an investigation into Foreign Corrupt Practices Act issues in the pharmaceutical industry.”

Johnson & Johnson received a subpoena in 2006 from the SEC for documents related to the company’s participation in the United Nations Iraq Oil for Food Program. The following year, the company voluntarily disclosed its belief that foreign subsidiaries made illegal payments to officials in at least two small-market countries in connection with the sale of medical devices.

Pfizer has voluntarily provided U.S. agencies with information about potential bribes in connection with sales abroad. The company is also under investigation by authorities in Italy and Germany. The Italians are investigating payments made by Pfizer subsidiaries to doctors in the country’s national health care system, according to SEC filings. The Germans are investigating possible tax violations, the filings said.

Main Justice reported in May that Pfizer and Johnson & Johnson are close to reaching an agreement with the Justice Department.

One Comment

  1. DannyHaszard says:

    Greedy Eli Lilly made $40 billion (and counting) on wicked Zyprexa drug that helped only 20% of the patients actually indicated for it.
    Put it this way: Zyprexa is like giving toxic cancer chemotherapy drugs to patients who don’t have cancer!

    Zyprexa has generated a lot of bad press for Eli Lilly and they still have unresolved Zyprexa settlement claims.
    Eli Lilly is reaping the whirlwind for unethical marketing of Zyprexa that has caused suffering and deaths.DON’T EVER FORGET THIS:Zyprexa up to $14 per pill charged to insurance plans of the mentally challenged less able to advocate for themselves.
    Daniel Haszard Zyprexa whistle-blower and patient who got diabetes from it.

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