Pfizer accused of FCPA violations

Michael P. Tremoglie Aug. 14, 2012, 2:37pm

WASHINGTON (Legal Newsline) -- The Securities and Exchange Commission has charged Pfizer Inc. with violating the Foreign Corrupt Practices Act.

It is alleged that the company's subsidiaries bribed foreign government doctors and other health care professionals to gain business.

Pfizer's subsidiaries in Bulgaria, China, Croatia, Czech Republic, Italy, Kazakhstan, Russia and Serbia allegedly made improper payments to foreign officials for regulatory and formulary approvals, sales, and increased prescriptions for the company's pharmaceutical products. The bribery was concealed 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.

"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."

The complaint - filed in U.S. District Court for the District of Columbia -said the misconduct dates back as far as 2001. Subsidiaries authorized and made cash payments and provided other incentives to bribe government doctors to utilize Pfizer products. Pfizer's Chinese subsidiary rewarded "high-prescribing doctors" in the Chinese government by inviting them to meetings that included recreational and entertainment activities.

Pfizer China also created various "point programs" so government doctors could accumulate points based on Pfizer prescriptions written. The points were redeemed for various gifts. Pfizer Croatia employees created a "bonus program" for Croatian government doctors employed in senior positions.

This bonus program took the form of kickback to doctors who prescribed Pfizer products.

The SEC said Pfizer voluntarily disclosed the misconduct by its foreign subsidiaries in October 2004. It has fully cooperated with SEC investigators. The company is reviewing its compliance policies and taking remedial corrective action.

The SEC also announced that another pharmaceutical company that Pfizer acquired a few years ago - Wyeth LLC has been separately charged 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, according to the SEC. 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.

The SEC communique stated 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."

Wyeth neither admitted nor denied the allegations, nonetheless, 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 will also be 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 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.

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