The United States Securities and Exchange Commission (SEC) has charged AstraZeneca PLC with violating the books and records and internal controls provisions of the Foreign Corrupt Practices Act. The charges stem from wholly-owned subsidiaries in China and Russia that made illegal payments to boost drug sales.
According to the SEC, AstraZeneca sales staff in China “made numerous improper payments in cash, gifts and other items” to doctors at state-owned healthcare providers “as incentives to purchase or prescribe AstraZeneca pharmaceuticals” from 2007 until 2010. According to the SEC, “Sales and marketing team members, including managers within various business units at AZ China, designed and implemented the improper payment schemes.”
The gifts and payments were allegedly spread out, with some going to individual doctors and others going to hospitals or medical departments. AZ China sales staff and managers are suggested to have funded the illegal payments using fake fa piao (tax receipts). It didn’t stop there, however, AstraZeneca China purportedly worked with a “collusive travel vendor who submitted fake or inflated invoices to generate cash that could be used to funnel money” to the doctors and healthcare providers; the China staff set up bank accounts in doctors’ names.
They also paid speaker fees to doctors for events which documentation contained “no meeting date, venue, subject or fees associated with the particular speaking event. … In some instances, the related speaker engagement was totally fabricated and never occurred.”
AstraZeneca China was not the only subsidiary to face allegations from the SEC. In Russia, from 2005 until 2010, AstraZeneca employees used similar tactics to make and hide illegal payments to government-employed physicians. Russian employees of AstraZeneca kept charts that recorded doctors’ names, where they practiced, and how much influence they had over purchasing decisions.
The charts used by AstraZeneca Russia employees showed “the manner in which they could be motivated to purchase AstraZeneca products through gifts, conference support, and other means.” According to the SEC, several levels of AstraZeneca Russia management either directed or approved the illegal gifts and payments.
While AstraZeneca did not self-report the Foreign Corrupt Practices Act violations, the company did provide “significant cooperation” to the SEC during the agency’s investigation. According to the SEC, AstraZeneca “immediately took a cooperative posture and ensured that it consistently provided complete information in a timely manner” and “voluntarily and timely disclosed information obtained during its own internal investigation.”
While the investigation was open and ongoing, AstraZeneca worked to enhance its internal controls and compliance programs, in part by adding compliance budgets and staff at the corporate level and in the local markets. AstraZeneca also fired some employees that were involved in the FCPA offenses and reassigned others to lower-risk positions and gave them targeted training.
AstraZeneca also has since enhanced its anti-corruption training and audits, improved its policies governing interactions with healthcare providers and government officials regarding gifts, travel and entertainment, third-party engagements, meetings, congresses, and contributions.
In the settlement, AstraZeneca has agreed to pay $4.325 million in disgorgement, $822,000 in prejudgment interest, and a $375,000 civil penalty. As is typical, AstraZeneca settled the enforcement action without admitting or denying any wrongdoing or any of the SEC’s findings.