B-MS Pays $14M to Settle SEC Charges over Bribing Health Providers in China

Regulatory NewsRegulatory News | 05 October 2015 |  By 

Bristol-Myers Squibb (B-MS) on Monday agreed to pay more than $14 million to the Securities and Exchange Commission (SEC) to settle charges that its joint venture in China made cash payments and provided other benefits to health care providers (HCPs) at state-owned and state-controlled hospitals in exchange for prescription sales.

The payment comes as SEC found B-MS violated the Foreign Corrupt Practices Act (FCPA) and reaped more than $11 million in profits from its misconduct. 

SEC Findings

B-MS, operating through its joint venture known as Sino-American Shanghai Squibb Pharmaceuticals, allegedly failed to respond to red flags indicating that sales personnel provided bribes and other benefits to generate sales from HCPs in China, according to the SEC.

SEC found that sales representatives provided a variety of benefits to HCPs -- from small food and personal care items to shopping cards, jewelry, sightseeing and cash payments, in exchange for prescription sales.

Between mid-2009 and late 2013, B-MS China found "numerous irregularities in travel and entertainment and event documentation, including fake and altered purchase orders, invoices, agendas, and attendance sheets for meetings with HCPs that likely had not occurred," the SEC says. B-MS China also inaccurately recorded the reimbursement of these false claims as legitimate business expenses.

One sales representative, according to SEC, even went so far as to explain that a former sales representative had offered cash for sales to HCPs at a local hospital and “the attitude of the director of the infectious diseases department was extremely clear when I took over: ‘No money, no prescription.’”

"Citing the 'open secret' that HCPs in China rely upon the 'gray income' to maintain their livelihood, they said that they tried to meet the demands of the HCPs for the benefit of BMS China. Despite the widespread exceptions and serious allegations of potentially widespread bribery practices, BMS China did not investigate these claims," SEC notes.

SEC’s order finds that B-MS violated FCPA’s internal controls and recordkeeping provisions.  Without admitting or denying the findings, B-MS consented to the order and to return $11.4 million of profits plus prejudgment interest of $500,000, as well as a civil penalty of $2.75 million. The company also agreed to report to SEC for two years on the status of its remediation and implementation of FCPA and anti-corruption compliance measures.

“Bristol-Myers Squibb’s failure to institute an effective internal controls system and to respond promptly to indications of significant compliance gaps at its Chinese joint venture enabled a widespread practice of providing corrupt inducements in exchange for prescription sales to continue for years,” said Kara Brockmeyer, chief of the Enforcement Division’s FCPA Unit.   

The alleged violations of B-MS are similar those leveled against Pfizer back in 2012, when the SEC said the company 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."

SEC Order



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