The New York Times (8/7/12) reported yesterday that Pfizer would pay a $45 million penalty. Further, the Justice Department also announced that Pfizer HCP Corporation would have to shell out $15 million to settle similar charges, according to the report.
"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 unit of the SEC enforcement division, in a statement. "These charges illustrate the pitfalls that exist for companies that fail to appropriately monitor potential risks in their global operations."
The charges were bought under the Foreign Corrupt Practices Act and relate to activities that appear to have widespread support on foreign shores by indigenous cultures, regardless of the legality. Specifically, according to the report, the activities are alleged to have occurred as far back as 2001, and involved the aforementioned bribes and payments to doctors.
In various countries, doctors are employees of the government. Thus, such payments are considered illegal under the Foreign Corrupt Practices Act, which forbids such payments to government officials.
The activities under scrutiny include a point program created by Pfizer China and extended to physicians and health care workers that could be redeemed for cell phones and tea sets based upon the number of prescriptions written for the sponsoring pharmaceutical's product.
Wyeth subsidiaries in China, Pakistan and Indonesia extended such gifts in kind as well as cash payments to government physicians who recommended Wyeth nutritional products. It is alleged that fake invoices were procured in order to hide the illegal payments.
Pfizer, which acquired Wyeth in 2009, noted the activity was duly reported to federal authorities after Pfizer discovered improper payments made by employees of a Croatia-based affiliate Pfizer had recently acquired. Results of an ongoing investigation by Pfizer, once the improprieties were discovered, kept regulators apprised on an ongoing basis, according to Pfizer.
The company noted a similar response once discovering improper activities amongst some international subsidiaries of Wyeth after acquiring the firm.
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Pharmaceutical companies continue to be increasingly active in international markets—through the manufacture of drugs at less cost than similar production in the US, and the sale and marketing of pharmaceuticals into emerging global markets where citizens have a newfound capacity to afford such products. The capacity to resist an entrenched culture of corruption in several countries has been seen to elude pharmaceutical officials on the ground. The Times reports that federal prosecutors together with securities regulators are continuing to crack down on the illicit and improper marketing and sale of drugs and medical devices in foreign countries.
The combined penalty will cost Pfizer $60 million.