Pharma's Unique ExposureOn Nov. 12, 2009, Lanny A. Breuer, Assistant Attorney General (AAG) for DoJ's Criminal Division, delivered the keynote address at the 10th Annual Pharmaceutical Regulatory and Compliance Congress and Best Practices Forum and warned those in attendance that the government would be "intensely focused on rooting out foreign bribery" in the pharmaceutical industry in the months and years ahead. Within just a few months of AAG Breuer's remarks, a number of drug companies announced that they had received subpoenas and letter requests from the DoJ and Securities and Exchange Commission (SEC) regarding possible FCPA violations.
Pharmaceutical companies are particularly vulnerable to FCPA liability, in large part because of their extensive contacts with individuals who may be deemed "foreign officials." The FCPA prohibits US companies and citizens from paying or giving gifts of any value to a "foreign official" in order to obtain or retain business or to secure an improper business advantage. DoJ has broadly interpreted the phrase "foreign official" to include not only health ministers, customs officers, and other obvious government actors, but also physicians, pharmacists, and researchers employed by state-owned or state-controlled hospitals or other enterprises. This expansive interpretation has significant implications for drug companies, especially those operating in emerging markets where government is often heavily involved in the delivery of healthcare. As AAG Breuer observed in his November 2009 address, "It is entirely possible, under certain circumstances and in certain countries, that nearly every aspect of the approval, manufacture, import, export, pricing, sale, and marketing of a drug product in a foreign country will involve a 'foreign official' within the meaning of the FCPA."
For all the benefits that may flow to drug manufacturers through deeper engagement in emerging markets, these investments are not without risks. Each new deal that a drug company makes in an emerging market brings the organization into contact with a variety of government agencies and officials, increasing the company's exposure to FCPA liability. To compound these risks, many of the pharmerging markets that IMS identified have poor track records when it comes to bribery and corruption.
For example, Transparency International (TI) compiles an annual report ranking countries based on their perceived levels of public sector corruption. A number of the pharmerging markets fared poorly in TI's 2010 Corruption Perceptions Index (CPI). Of the 178 countries included in this year's CPI, the pharmerging market countries receiving the poorest scores included Venezuela (164), Russia (154), Pakistan (143), Ukraine (134), and Vietnam (116). Poland received the most favorable rating (41), while India, China, and Brazil received scores of 87, 78, and 69, respectively. Although a number of these countries have made genuine efforts to crack down on bribery and corruption within their borders, real risks remain.