Novartis today agreed to pay $25 million to settle charges
Novartis today agreed to pay $25 million to settle charges that it violated the Foreign Corrupt Practices Act by making illegal payments to health care providers in China. In doing so, the company becomes the latest drug maker to get punished for paying bribes in order to boost sales in a foreign country.
The settlement also comes just one month after South Korean authorities raided Novartis offices in search of evidence the company bribed local doctors.
In China, Novartis employees at two different Chinese subsidiaries gave money, gifts, vacations, and entertainment, among other things, to health care professionals between 2009 and 2011, according to an administrative order filed by the US Securities and Exchange Commission.
The SEC has been eyeing the pharmaceutical industry for the past several years amid concerns that drug makers are paying bribes to unduly influence medical practice overseas. The issue gained particular notice two years ago when Chinese authorities fined GlaxoSmithKline nearly $500 million as the result of a bribery scandal.
As for Novartis, its Sandoz unit — which makes and sells generics drugs — arranged for 20 Chinese health care professionals to attend a medical conference in Chicago in 2009. But while in the United States, the company took them on a sightseeing trip to Niagara Falls, paid for their spouses to travel to the United States, provided $150 in “walking around” money, and covered charges at strip clubs.
The same unit also paid health care professionals to analyze patient study data to better understand the use of a particular Novartis drug. However, senior sales and marketing managers were involved in the design and execution of the studies, according to the SEC. And the agency said the effort was a ruse — the studies were used to reward providers who prescribed the drug, but did not yield any medical data.
The agency also noted that the drug maker improperly recorded numerous payments as legitimate expenses for travel and entertainment, conferences, lecture fees, marketing events, educational seminars, and medical studies.
At the same time, the SEC said that Novartis failed to “devise and maintain a sufficient system of internal accounting controls and lacked an effective anticorruption compliance program to detect and prevent these schemes. As a result, the improper payments were not accurately reflected in Novartis’s books and records.”
A Novartis spokesman sent us a note to say the issues raised by the SEC “largely pre-date many of the compliance-related measures introduced by Novartis across its global organization in recent years. We believe these measures, which we review and update on an ongoing basis, address the issues raised by the SEC and reflect a broader initiative by Novartis to align and enhance our compliance standards globally.”
Recently, SciClone Pharmaceuticals agreed to pay $12.8 million to settle an SEC investigation into potential violations. Last year, Bristol-Myers Squibbpaid $14 million for paying bribes in China. In 2012, Eli Lilly agreed paid more than $29 million to settle charges of bribing foreign government officials to win business in several countries. And in 2011, Johnson & Johnsonpaid $70 million to resolve FCPA violations.
And several drug makers — including GlaxoSmithKline, Sanofi, and the Alcon eye unit at Novartis — have been running internal investigations into potential problems in various countries.
Source : Pharmalot (April 2016)
Chinese police pick up AstraZeneca sales rep for questioning
Now, China is putting the heat on AstraZeneca. Police visited the company's operations in Huangpu Friday and took a sales rep away for questioning, Reuters reports.
Whether the move against AstraZeneca ($AZN) is part of China's new crackdown on corruption in the pharma industry isn't clear. In a statement, the company said the visit was part of a "local police matter" and tried to distance itself from the fast-moving GlaxoSmithKline ($GSK) bribery scandal. But as The New York Times reports, Big Pharma should expect Chinese police to come knocking in the near future. The newspaper obtained documents showing that the Shanghai Linjiang International Travel Agency, which allegedly helped Glaxo funnel kickbacks to doctors, worked with at least a half-dozen other multinational drugmakers, including Merck ($MRK), Novartis ($NVS) and Sanofi ($SNY). The agency arranged events and conferences for the pharma companies, just as it did for Glaxo, the NYT said. The documents "contain no indication of wrongdoing," the newspaper said, but indicate that Chinese officials could be interested in probing these companies further.
AstraZeneca wasn't among the companies named in the NYT article. "We believe that this investigation relates to an individual case and while we have not yet received an update from the PSB [Public Security Bureau], we have no reason to believe it's related to any other investigations," AZ said in a statement.
AstraZeneca went on to emphasize its intolerance for "any illegal or unethical conduct in our business activities" and said its Chinese employees and contractors "are required to strictly comply with these guidelines in the conduct of business."
Glaxo thought the same thing; its emerging markets chief Abbas Hussain said as much in a statement over the weekend: "Certain senior executives of GSK China, who know our systems well, appear to have acted outside of our processes and controls, which breaches Chinese law."
That's not to say that AstraZeneca's people disregarded their own rules. But the existence of rules doesn't mean they can't be broken.
Source : Fierce Pharma
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GlaxoSmithKline executive in China TV 'confession'
One of four senior GlaxoSmithKline executives detained in China over allegations of corruption has made a confession on state television.
The executive, a Chinese national, confessed to paying bribes and said his actions had pushed up drug prices.
It comes a day after Chinese officials accused the British pharmaceutical giant of paying 3bn yuan ($489m; £323m) in bribes since 2007.
GSK has called the allegations shameful and promised full cooperation.
It said in a statement last week that its own internal inquiries had found no evidence of bribery or corruption in China, but it took the allegations seriously and was willing to co-operate with the authorities.
Closely watched The senior executive appeared dishevelled during his appearance on the main evening bulletin, the BBC's Martin Patience reports from Beijing.
He was one of four Chinese executives from GSK arrested over the allegations. The firm's British general manager in China, Mark Reilly, is reported to have left for London last month and has not returned.
Chinese police on Monday said GSK had used more than 700 travel agencies and consultancies in which to transfer hundreds of millions in bribes in the last six years.
Chinese newspapers alleged that the travel agencies would invent fictitious conferences that required staff travel, and the budget would then be used to bribe doctors to prescribe GSK drugs.
"We have sufficient reason to suspect that these transfers were conducted illegally," said Gao Feng, head of the economic crimes investigation unit. "You could say the travel agencies and GSK were criminal partners."
Mr Gao said investigators had so far not received any information from GSK's British headquarters.
GSK said in a statement that it "shares the desire of the Chinese authorities to root out corruption".
The firm said it was "taking a number of immediate actions", including severing links with the travel agencies identified in the investigation and "conducting a thorough review of all historic transactions related to travel agency use".
Our correspondent says GSK's reputation has already taken a huge hit and it is still not clear what fines or punishments it may face.
But how this case is handled will be very carefully watched by other multinationals operating here, he adds
Source : BBC News
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Medicines: corruption and pharmaceuticals
- US$ 4.1 trillion is spent globally on health services every year, with US$ 750 billion spent in the pharmaceutical market.
- 10 to 25% of public procurement spending (including on pharmaceuticals) is lost to corrupt practices.
- In developed countries, fraud and abuse in health care has been estimated to cost individual governments as much as US$ 23 billion per year.
- Countries with a higher incidence of corruption have higher child mortality rates.
- Lack of medicines and counterfeit and substandard medicines lead to patient suffering and have direct life or death consequences.
- To reduce corruption, thorough checks and balances are required at each step in the medicine chain. Good governance includes transparency, accountability, promoting institutional integrity and moral leadership.
Unethical practices in the medicines chain The medicines chain refers to the steps required for the creation, regulation, management and consumption of pharmaceuticals. Corruption in the pharmaceutical sector occurs throughout all stages of the medicines chain, from research and development to dispensing and promotion1.
To see diagram go to source (bottom page)
Figure: Key steps of the medicine supply chain and unethical practices in the pharmaceutical sector [gif 86kb]
Good Governance for Medicines programme (GGM)
GGM's three-step process
Unethical practices along the chain can take many forms such as falsification of evidence, mismanagement of conflict of interest, or bribery. The Figure illustrates key steps of the medicines chain and some examples of unethical practices.
Good governance within the medicines chain is one essential means for optimizing public health outcomes. For example, countries with higher incidence of corruption have higher child mortality rates, even after statistically controlling for quality of health-care provision2.
What factors contribute to pharmaceutical corruption? US$ 4.1 trillion is spent globally on health services each year3 with US$ 750 billion spent in the global pharmaceuticals market4. However, 10 to 25% of public procurement spending (including on pharmaceuticals) is lost to corrupt practices5. Medicines change hands several times before reaching patients. The large number of steps in the medicines chain allows numerous opportunities for unethical practices to take place.
While there are reported cases of corruption in the medicines chain, much unethical practice goes unreported. This is due to fear of victimization and retaliation towards whistle-blowers, and a lack of incentives to come forward. Some forms of corruption have become institutionalized to the point where people feel powerless to influence change in their countries.
Countries with weak governance within the medicines chain are more susceptible to being exploited by corruption. These countries lack:
- appropriate legislation or regulation of medicines;
- enforcement mechanisms for laws, regulations and administrative procedures;
- conflict of interest management.
Impact of corruption There are at least three main areas of negative impact from corruption in the medicines chain.
- Negative patient impact. Unethical practices lead to reduced availability of medicines in health facilities due to diversion of medicines, as well as the presence of unsafe or ineffective products on the market. Diverted, counterfeit and substandard medicines have been identified in markets of both rich and poor countries, as well as medicines that are granted unwarranted registration. Such practices lead to patient suffering and have direct life or death consequences.
- Lost resources. Corruption results in enormous amounts of limited public health resources being lost. For example, in developed countries, fraud and abuse in health care has been estimated to cost individual governments as much as US$ 12–23 billion per year6. In developing countries, up to 89% leakage of procurement and operational costs has been observed7. Such losses cripple the ability of health-care institutions to provide adequate care.
- Eroding confidence. Corruption also takes a more subtle toll by eroding public and donor confidence in public institutions. In some countries, the public health system is perceived as the most corrupt public service institution8. Pharmaceutical corruption within ministries of health has also threatened the withdrawal of donor contributions in some low-income countries9,10,11.
WHO is committed to reducing corruption in the medicines chain through its Good Governance for Medicines (GGM) programme, launched in 2004. By applying transparent, accountable administrative procedures and by promoting ethical practices, GGM provides support for countries to curb corruption. The programme assists countries through a three-step process of assessing their vulnerabilities to corruption, and developing and implementing specific programmes to maintain efficient health-care systems that are not undermined by the abuse of corruption.
1. Measuring transparency in the public pharmaceutical sector: assessment instrument, WHO/EMP/MAR/2009.4.
2. Gupta S, Davoodi H, et al., (2000). Corruption and the provision of healthcare and education services, International Monetary Fund:11.
3. WHO Fact Sheet: spending on health: a global overview, 2007.
4. IMS Health lowers 2009 global pharmaceutical market forecast to 2.5–3.5 percent growth, IMS New Releases.
5. Transparency International (2006). Handbook for curbing corruption in public procurement.
6. Becker D, Kessler D, McClellan M. Detecting medicare abuse. Journal of Health Economics, 2005, 24:189–210.
7. Ye, X, Canagarajah, S. (2002). Efficiency of public expenditure distribution and beyond: a report on Ghana's 2000 public expenditure tracking survey in the sectors of primary health and education. Africa Region Working Paper, No. 31.
8. Fidler A, Msisha W, Governance in the pharmaceutical sector, Eurohealth 14, 2008, No. 1:25–29.
9. The Global Fund welcomes Ugandan corruption inquiry report, Global Fund Press Release, June 2006.
10. The K27 billions scandal at the ministry of health, The Lusaka Paper, June 2009.
11. Dutch Government stops aid to Zambia, Africa News, May 2009.
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