bonus programs, Bribery, bribery of foreign officials, Bulgaria, China, corruption, Croatia, Czech Republic, FCPA, Foreign Corrupt Practices Act, foreign corrupt practics, fraud, Italy, Kazakhstan, Pfizer, pharmaceutical sales, point programs, prescriptions, Russia, Serbia, travel incentives
From the charges: “For example, in March 2006, a Pfizer China marketing manager explained to his regional sales manager that Pfizer China would only offer to support travel to a conference in Australia for two doctors if they promised to “use no less than 4,200 injections a year” and to prescribe a Pfizer product to “more than 80%” of their patients.. Pfizer China employees also offered and provided small cash payments in order to influence doctors to prescribe Pfizer products. These payments were directly linked to the volume of Pfizer products prescribed by those doctors.“ (Excerpt from the charges.)
“SEC Charges Pfizer with FCPA Violations
FOR IMMEDIATE RELEASE
Washington, D.C., Aug. 7, 2012 —
The Securities and Exchange Commission today charged Pfizer Inc. with violating the Foreign Corrupt Practices Act (FCPA) when its subsidiaries bribed doctors and other health care professionals employed by foreign governments in order to win business.
The SEC alleges that employees and agents of Pfizer’s subsidiaries in Bulgaria, China, Croatia, Czech Republic, Italy, Kazakhstan, Russia, and Serbia made improper payments to foreign officials to obtain regulatory and formulary approvals, sales, and increased prescriptions for the company’s pharmaceutical products.
They tried to conceal the bribery by improperly recording the transactions in accounting records as legitimate expenses for promotional activities, marketing, training, travel and entertainment, clinical trials, freight, conferences, and advertising.
The SEC separately charged another pharmaceutical company that Pfizer acquired a few years ago – Wyeth LLC – with its own FCPA violations. Pfizer and Wyeth agreed to separate settlements in which they will pay more than $45 million combined to settle their respective charges. In a parallel action, the Department of Justice announced that Pfizer H.C.P. Corporation agreed to pay a $15 million penalty to resolve its investigation of FCPA violations.
“Pfizer subsidiaries in several countries had bribery so entwined in their sales culture that they offered points and bonus programs to improperly reward foreign officials who proved to be their best customers,” said Kara Brockmeyer, Chief of the SEC Enforcement Division’s Foreign Corrupt Practices Act Unit.
“These charges illustrate the pitfalls that exist for companies that fail to appropriately monitor potential risks in their global operations.”
According to the SEC’s complaint against Pfizer filed in U.S. District Court for the District of Columbia, the misconduct dates back as far as 2001. Employees of Pfizer’s subsidiaries authorized and made cash payments and provided other incentives to bribe government doctors to utilize Pfizer products.
In China, for example, Pfizer employees invited “high-prescribing doctors” in the Chinese government to club-like meetings that included extensive recreational and entertainment activities to reward doctors’ past product sales or prescriptions.
Pfizer China also created various “point programs” under which government doctors could accumulate points based on the number of Pfizer prescriptions they wrote. The points were redeemed for various gifts ranging from medical books to cell phones, tea sets, and reading glasses.
In Croatia, Pfizer employees created a “bonus program” for Croatian doctors who were employed in senior positions in Croatian government health care institutions. Once a doctor agreed to use Pfizer products, a percentage of the value purchased by a doctor’s institution would be funneled back to the doctor in the form of cash, international travel, or free products.
According to the SEC’s complaint, Pfizer made an initial voluntary disclosure of misconduct by its subsidiaries to the SEC and Department of Justice in October 2004, and fully cooperated with SEC investigators. Pfizer took such extensive remedial actions as undertaking a comprehensive worldwide review of its compliance program.
The SEC further alleges that Wyeth subsidiaries engaged in FCPA violations primarily before but also after the company’s acquisition by Pfizer in late 2009.
Starting at least in 2005, subsidiaries marketing Wyeth nutritional products in China, Indonesia, and Pakistan bribed government doctors to recommend their products to patients by making cash payments or in some cases providing BlackBerrys and cell phones or travel incentives. They often used fictitious invoices to conceal the true nature of the payments. In Saudi Arabia, Wyeth’s subsidiary made an improper cash payment to a customs official to secure the release of a shipment of promotional items used for marketing purposes. The promotional items were held in port because Wyeth Saudi Arabia had failed to secure a required Saudi Arabian Standards Organization Certificate of Conformity.
Following Pfizer’s acquisition of Wyeth, Pfizer undertook a risk-based FCPA due diligence review of Wyeth’s global operations and voluntarily reported the findings to the SEC staff. Pfizer diligently and promptly integrated Wyeth’s legacy operations into its compliance program and cooperated fully with SEC investigators.
In settling the SEC’s charges, Wyeth neither admitted nor denied the allegations. Pfizer consented to the entry of a final judgment ordering it to pay disgorgement of $16,032,676 in net profits and prejudgment interest of $10,307,268 for a total of $26,339,944. Wyeth also is required to report to the SEC on the status of its remediation and implementation of compliance measures over a two-year period, and is permanently enjoined from further violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934. Wyeth consented to the entry of a final judgment ordering it to pay disgorgement of $17,217,831 in net profits and prejudgment interest of $1,658,793, for a total of $18,876,624. As a Pfizer subsidiary, the status of Wyeth’s remediation and implementation of compliance measures will be subsumed in Pfizer’s two-year self-reporting period. Wyeth also is permanently enjoined from further violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act. The settlements are subject to court approval.
The SEC’s investigation was conducted by Michael Catoe and Charles Cain of the Enforcement Division’s FCPA Unit. The SEC acknowledges the assistance of the U.S. Department of Justice’s Criminal Division’s Fraud Section and the Federal Bureau of Investigation in this matter.” https://www.sec.gov/news/press-release/2012-2012-152htm
21. During the relevant period, Pfizer’s pharmaceutical products were promoted in the People’s Republic of China by Pfizer’s subsidiary based in Beijing, Pfizer Investment Co. LTD (“Pfizer China”).
22. From at least 2003 through 2007, Pfizer China, through its employees and agents, provided cash payments, hospitality, gifts, and support for international travel to doctors employed by Chinese government healthcare institutions. The payments of cash and other things of value were intended to influence these government officials to prescribe Pfizer products, provide hospital formulary listing, and otherwise use their influence to grant Pfizer China an unfair advantage.
23. Pfizer China employees provided these improper payments in recognition of past product sales or prescriptions, as incentives to prescribe or purchase Pfizer products in the future, or upon the basis of Pfizer China employees’ assessments of the doctors’ potential prescribing levels.
24. To facilitate the payment of rewards and incentives, Pfizer China employees organized meetings with Chinese government doctors that were marketed as “clubs” or “high-prescribing doctors” programs. Invitations to such events were provided to doctors in recognition of past product sales or prescriptions, or as incentives to prescribe or purchase Pfizer products in the future. In some cases, meeting agendas included only minimal professional content and extensive recreational and entertainment activities.
25. Pfizer China also created various “point programs,” under which government doctors could accumulate points based upon the number of Pfizer prescriptions they had written.
The points could be redeemed for various gifts, some of which were related to the practice of medicine (e.g., medical books), but others that were gifts of a personal nature (e.g., cell phones, tea sets, and reading glasses).
26. Pfizer China employees offered and provided financial and other support for Chinese doctors to attend domestic and international conferences in return for explicit agreements to prescribe, purchase, or recommend Pfizer products.
For example, in March 2006, a Pfizer China marketing manager explained to his regional sales manager that Pfizer China would only offer to support travel to a conference in Australia for two doctors if they promised to “use no less than 4,200 injections a year” and to prescribe a Pfizer product to “more than 80%” of their patients.
27. Pfizer China employees also offered and provided small cash payments in order to influence doctors to prescribe Pfizer products. These payments were directly linked to the volume of Pfizer products prescribed by those doctors.
28. Pfizer China employees took steps to conceal the true nature of the cash payments, gifts, and travel support made to Chinese government doctors by failing to accurately record the transactions”. https://www.sec.gov/litigation/complaints/2012/comp-pr2012-152-pfizer.pdf