Regulatory Focus™ > News Articles > Pfizer Settles With SEC Over Charges it Bribed Foreign Regulatory Officials

Pfizer Settles With SEC Over Charges it Bribed Foreign Regulatory Officials

Posted 08 August 2012 | By Alexander Gaffney, RAC 

Pharmaceutical manufacturing giant Pfizer has settled corruption charges leveled against it by the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ), both of which said the company had violated the Foreign Corrupt Practices Act (FCPA) by bribing foreign officials to win business and allow its products to access markets.

SEC said in a statement the company and its agents had bribed officials in Bulgaria, China, Croatia, the Czech Republic, Italy, Kazakhstan, Pakistan, Saudi Arabia, Indonesia, Russia and Serbia, "To obtain regulatory and formulary approvals, sales, and increased prescriptions for the company's pharmaceutical products."

Regulated activities accounted for a number of the ways Pfizer employees tried to hide the funds used to bribe officials, including clinical trials, advertising, promotional activities, marketing and training.

In a statement released 7 August, Pfizer said it would pay more than $60 million to settle the charges, which it noted had been disclosed to SEC and DOJ investigators willingly.

Despite Pfizer's "extraordinary cooperation," an SEC official said the culture of bribery and corruption was, "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."

"These charges illustrate the pitfalls that exist for companies that fail to appropriately monitor potential risks in their global operations," wrote Kara Brockmeyer, chief of SEC's Enforcement Division's FCPA Unit.

Regulators Bribed

"In Croatia, Pfizer employees created a "bonus program" for Croatian doctors who were employed in senior positions in Croatian government health care institutions," wrote SEC in a statement.

"The payments of cash and other things of value were intended to influence these government officials to prescribe Pharmacia and Pfizer products and to provide regulatory approvals for Pharmacia and Pfizer products," wrote SEC in its court filing against Pfizer. In addition to cash payments, government officials also received free products and international travel, said investigators.

The extent of the company's hold on Croatian regulators was expansive, SEC wrote. A memo obtained by the agency has one Pharmacia employee claiming to expect "all products which are to be registered [[through a Croatian government official bribed by the company]] will pass the regular procedure by his assistance." Pharmacia was purchased by Pfizer in 2003, after which time several payments continued to reach the Croatian official.

The European Medicines Agency (EMA) may ultimately find matters of the case to be concerning. Croatia is set to join the EU on 1 July 2013, and EMA officials have already started translating documents into the country's language.

Settlement Reached

Under the terms of the agreement between Pfizer, SEC and DOJ, the company will pay $16 million related to net profits obtained and $10.3 million in interest earned on those profits. Wyeth, now owned by Pfizer, will pay $17.2 million and interest of $1.6 million and be subject to, "Remediation and implementation of compliance measures over a two-year period."

In a statement, Pfizer acknowledged the settlement and said the issues were "historical." No criminal action would be brought against Pfizer or Wyeth employees-an option under the FCPA.

"We have worked diligently to strengthen our corporate compliance program worldwide," said Douglas Lankler, executive vice president and chief compliance and risk officer for Pfizer. "We are pleased that the DOJ and SEC today recognized these efforts and our close cooperation. We have instituted rigorous oversight and accounting mechanisms and pioneered a host of new tools designed to maintain compliance and detect problems before they spread."

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