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Bribery And Corruption In The Pharmaceutical Sector « Back
Richard Summerfield, September 2013
Page 2 of 2

Crucially, the authorities must ask themselves: At what point does the promotion of products and general hospitality cross over into inappropriate conduct? This is at the heart of the matter, according to Mr Debenham. “Is there a bright yellow line differentiating legal and illegal behaviour,” he asks, “or is it simply a matter of the discretion of the enforcement officials? Let’s take another example to make the point – gambling casinos and hotels are a growth industry. They want to come to country X to build a new hotel and casino. Meanwhile, country X’s public officials have been going to Las Vegas for years, where they are ‘comped’ free private jets to and from the hotel casino, a 3000 square foot suite, food, drinks and the like. When that Las Vegas hotel and casino applies for a licence to build in country X, do the ‘comps’ suddenly become bribes?” 

In this context the relationship between pharmaceutical companies and potential customers is indeed a grey area. Although the practice of offering incentives and hospitality is well established within the sector, the European Federation of Pharmaceutical Industries and Associations (EFPIA) is pushing all of its members to do away with promotional products within the framework of the transparent codex it has drafted. The proposal is under discussion at various levels of both the pharmaceutical industry and the European promotional products industry. 

Nationally, approaches to hospitality payments can vary. Mr Rehder notes that Germany’s Supreme Court has ruled that self employed doctors are neither public officials in the context of Germany’s Penal Code, nor are they employees of the national health care system – they are independent professionals. “This means that these doctors can essentially accept payments from drug companies and not be charged with accepting a bribe,” he says. “Yes, there is a code of conduct that physicians in Germany must observe, but to not have a law on the books prohibiting such payments is different than from most other industrialised countries.” Similarly, in China doctors are considered to be ‘foreign officials’ and as they earn minimal salaries, are permitted to supplement their incomes by collecting payments from both patients seeking better treatment and pharmaceutical companies looking to market their products. 

With systems in place that allow doctors to supplement their income in this manner, it is easy to see how more unscrupulous characters can abuse the system. So is enough being done to counter corruption at a governmental level? “People in the anti-corruption sector often say more has to be done,” says Mr Debenham. “This is a self-serving answer. The fact is that this is simply a judgment call. What can fairly be said is that in Canada, enforcement by the Royal Canadian Mounted Police has grown exponentially, our anti-corruption legislation has eliminated facilitation payments and adopted the FCPA books and records provisions, and our pharmaceutical companies have hired the best and the brightest to design, implement and monitor some of the most sophisticated anti-corruption regimes for corporations that exist in Canada.” 


Over the last decade or so we have seen a dramatic rise in the number of whistleblowers in the pharmaceutical sector. Whistleblowers and government investigations in the US have exposed a number of issues relating to pharmaceutical companies in all facets of the industry. On 31 July, Pfizer Inc agreed to pay a fine of $490.9m in relation to allegations of improper marketing of kidney transplant drug Rapamune. The allegations stem from a former sales representative turned whistleblower. 

But whistleblowers cannot always be trusted. According to Mr Debenham, the key is to understand that ‘whistleblowing’ is the start of a confidential investigation, not the catalyst for an anti-corporate campaign in the press. In the United States the process is becoming ‘professionalised’ by consultants to ensure that the whistleblower focuses on the proper purpose of whistleblowing, so that generous compensation packages incentivise people to make proper claims against their own company without defaming anyone. “Though whistleblowing gets a lot of attention in the world – in particular in the United States – that is not the case in Germany,” says Mr Rehder. “Largely for historical reasons, Germans are wary of ‘informants’. That is why there is no statutory provision in Germany that expressly protects whistleblowers. In Germany, all employees owe a duty of loyalty to their employers. As a result, employees in Germany must generally lodge their concerns with their employer before going public or to the authorities. Failure to do so may lead to termination of their employment.” 


The pharmaceutical sector has been dogged by allegations of bribery and corruption for some time, and GSK and AstraZeneca’s recent troubles in China serve to highlight wider issues that could threaten to undermine the industry if left unchecked. While there are arguably enough preventative measures in place to help curtail the impact of rogue individuals without the need for additional regulation, firms must ensure that they maintain compliance. As big pharma pushes into the emerging markets, this is even more important. The effects of being tarnished with allegations of corruption often extend beyond criminal penalties.

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