U.S. Increases Bribery of Drug Manufacturers and Investigation of Medical Institutions

The business agency reported on September 6th that the Deputy Attorney General of the United States, Lenny Breuer, stated that there is a risk that the overseas pharmaceutical business process will be affected by corruption payments.

At least a dozen pharmaceutical and medical device manufacturers are being investigated by U.S. federal prosecutors and securities regulators on whether these companies have illegally paid doctors and health officials outside the United States.

Overseas clinical trial pays attention to cost

In previous investigations, federal officials accused some companies of being suspected of bribing doctors overseas to order and prescribe their products. In the United States, companies often hire doctors as consultants to promote medicines and devices to their colleagues and other healthcare professionals at medical conferences and small gatherings. As long as doctors do not receive compensation for directly prescribing products to patients, such consulting activities are legal in the United States.

But in many parts of the world outside the United States, doctors are government employees. Even some consulting activities that are considered normal in the United States may violate the United States' Overseas Anti-Corruption Laws, especially those that have paid too much or have not been disclosed to the local government.

According to Kirk Ogroski, a federal prosecutor who was responsible for nationwide medical fraud counterattacks and now a Washington law firm representing drug makers and medical instrument manufacturers, U.S. prosecutors are more worried about paying to the United States. There is a large amount of fees for medical doctors and clinical test doctors overseas. In recent years, clinical trials conducted overseas by the United States have been growing.

According to a recent survey conducted by Daniel R. Levinson, chief inspector of the US Department of Health and Human Services, more than 80% of drugs approved for listing in the United States in 2008 involved clinical trials outside the United States and participation in clinical trials. Of the population, 78% are recruited in overseas research institutions. Medical ethicists have long been concerned that many of these clinical trials are conducted in countries where federal inspectors have rarely visited and in these countries control of these studies may be minimal.

Now, the prosecutors are investigating whether these payments to doctors conducting research overseas are appropriate. If there is evidence that these payments have affected the results of some clinical trials, federal prosecutors will scrutinize these clinical trials, Mr. Ogroski pointed out.

Last month, a federal drug regulator reported that he found duplicate evidence in a controversial landmark anti-diabetic drug Avandia. In these lines of evidence, patients who developed severe cardiac problems after taking Avandia were not included in this study's key adverse event statistics. Many of the clinical trial sites in this study were outside the United States, and the main reason why Avandia continued to sell in the US market was due to this clinical study. U.S. government officials have not accused GlaxoSmithKline, the originator of the clinical trial, of being suspected of fraud.

There is a risk in investigating overseas medical institutions

"In the U.S. Department of Justice, allegations of drug-related damage caused by drugs have skyrocketed, causing the FBI to pay attention," Ogroski pointed out.

U.S. pharmaceutical companies are more likely to encounter such investigations because the overseas representatives of the U.S. pharmaceutical industry work with government officials or doctors employed by the government's healthcare system on a daily basis.

Because pharmaceutical companies “belong to the health care sector, in many countries outside the United States, employees in the medical department are regarded as foreign government officials and investigations have higher risks”, federal prosecutors who have been responsible for health care and foreign corruption cases are now serving in Washington. The lawyer's Jay Dayton pointed out. However, he said that the announcement by some companies that they are under investigation does not mean that these companies automatically violate foreign bribery laws.

Indeed, some recent regulatory filings have reported that some drug makers and medical instrument companies are being investigated for possible violations of the US "Overseas Anti-Corruption Law."

For example, in a regulatory filing earlier this month, Merck said it was working with a federal investigation to find information about the company’s activities in a number of countries.

In a regulatory filing, Johnson & Johnson said that the company is obliged to disclose to federal agencies that the company’s overseas subsidiaries may have inappropriate payments in two countries related to the sale of medical devices.

Eli Lilly stated that it is cooperating with a survey on the activities of its subsidiaries in Poland and other countries.

At the same time, medical device maker Medtronic said that the company is accepting federal investigations into the company’s activities in a number of countries including Greece, Poland, Germany, Turkey, Italy, and Malaysia. Medical device manufacturer Jimma also said that the company has become a federal investigation target for a range of countries selling the company’s products.

In a speech last November, an official from the US Justice Department warned drug makers that the US Department of Justice is paying close attention to the pharmaceutical industry.

Ask for public consultation as soon as possible

“In some countries outside the United States, in some cases, the approval, manufacturing, import, export, pricing, sales, and marketing of drugs may involve almost every aspect of the foreign officials defined in the U.S. Foreign Corrupt Practices Act. The Deputy Attorney General of the Ministry of Justice’s Criminal Department, Lenny Breuer, said in a speech. "The depth of government intervention in health care systems outside the United States, coupled with fierce industry competition and undisclosed public prescription sets, has created an important risk of corrupt remuneration affecting the entire process."

This federal investigation is a broader assessment of the financial relationship between medical product manufacturing companies and physicians. Even in the United States, when doctors use medical insurance, Medicaid, or another health care plan to order drugs or medical instruments for patients. Is also considered part of government procurement.

Federal law will require these companies to publicly pay doctors for counseling as soon as possible; some companies have begun to make public payments of such payments. Some medical schools and professional medical associations recently issued guidelines prohibiting or limiting such financial activities.

Since the settlement of the bribery case by Syncor in 2002, almost a dozen companies have reached a settlement on the series of prosecutors charged with bribery cases in foreign countries. The company paid a relatively modest $2.5 million fine to settle criminal and securities allegations. The company uses gifts, exaggerated invoices, and inappropriate referral fees to encourage doctors outside the United States of America to order the company’s products from the state hospital or to have the patient go to the image center they own.

Last year, Novo Nordisk from Denmark agreed to pay a fine of US$9 million to settle allegations paid to former Iraqi officials for payment of insulin and other drugs for payment contracts. According to a press release issued by the U.S. Department of Justice, Novo Nordisk paid US$1.4 million to the former Iraqi government and raised the contract price by 10% before submitting the contract to the UN for approval.

Since the amount of fines paid so far has been relatively modest, the current federal investigation of possible bribery will lead to a greater impact on the marketing strategies of these pharmaceutical product manufacturers, rather than just scratching their heads as before.

Even so, Mr. Dalton, a former Justice Department official, pointed out that executives of pharmaceutical companies should do their best to remind their subsidiaries outside the United States not to bribe local officials and doctors.

"They should set the tone at the highest level and make it clear to the company's international marketing team that this type of compensation is unacceptable," Dalton said.