Life Science Compliance Update

September 01, 2016

AstraZeneca Pays $5.5 Million to Resolve FCPA Offenses


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.

AztraZeneca’s Cooperation

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.

June 23, 2016

Is the Carrot Bigger Than the Stick? - The DOJ’s FCPA “Pilot Program”

Kurt Stitcher, Senior Compliance Consultant

The U.S. Department of Justice's FCPA Pilot Program is nominally designed to encourage voluntary self-disclosure of FCPA violations by providing more certainty around the outcome of such disclosure. The price of this "certainty" is fairly onerous, however, and the program suffers from many ambiguities and flaws that make it only marginally useful to Life Sciences companies when structuring compliance programs and determining the benefits of voluntary self-reporting.

On April 5, 2016, U.S. Assistant Attorney General Leslie Caldwell announced the roll-out of a Foreign Corrupt Practices ("FCPA") Pilot Program designed to encourage companies to self-report potential FCPA violations. Accompanying her announcement was an "Enforcement Plan and Guidance" from Andrew Weissman, the Chief of the DOJ's Fraud Section. The FCPA Guidance enumerates several benefits offered to companies that voluntarily disclose such violations, including reduced fines (beyond those offered under the United States Sentencing Guidelines) and the removal of any corporate monitor requirement. In the DOJ's opinion, specifying the benefits of voluntary self-disclosure provides transparency in the process and, thus, more certainty for companies when they are deciding whether to self-report.

In exchange for these potential benefits, however, the DOJ requires (1) truly voluntary self-disclosure; (2) full cooperation with federal authorities in the ensuing investigation; and (3) rapid remediation of any flaws in the company's compliance program.70 Moreover, these Pilot Program requirements are in addition to those imposed under the Principles of Federal Prosecution of Business Organizations set forth in the U.S. Attorneys' Manual71 and under the U.S. Sentencing Guidelines, both of which speak to the steps that companies must….

Read Full Article in the June 2016 Issue of Life Science Compliance Update

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May 16, 2016

Aegerion Pharmaceuticals Reaches Settlement Agreements in Principle with the Department of Justice

Aegerion Pharmaceuticals has reached agreements in principle with the Department of Justice ("DOJ") and the Securities and Exchange Commission ("SEC"), relating to the ongoing investigations by both agencies into the Company's sales activities and disclosures related to JUXTAPID® capsules.

The inquiries into the company started last year, following an investigation done by Brazilian authorities to determine whether or not Aegerion's commercial activities violated local anti-corruption laws.

The agreement in principal comes after former Aegerion Chief Executive Marc Beer resigned after saying on CNBC's Fast Money that "patients are going to die of a cardiac event, either a stroke or a heart attack, if we don't have them on therapy." Those remarks set off the U.S. Food and Drug Administration ("FDA"), who claimed that those comments "misleadingly" suggested that the drug could reduce cardiovascular events and prolong life, when the FDA approval was based on data that showed that the pill lowered cholesterol in people with homozygous familial hypercholesterolemia.

The agreement in principle has Aegerion paying a fine of $40 million, payable over five years with outstanding amounts accruing interest at 1.75% per annum. The breakdown of payment will likely proceed as follows: approximately $3 million upon the finalization of the settlement with the DOJ and the SEC, approximately $3.7 million per year (payable quarterly) during the first three years of the five-year payout, and approximately $13 million per year (also payable quarterly) in years four and five.

The settlement payments are subject to acceleration in the event of certain change of control transactions or the sale of JUZTAPID or MYALEPT® assets.

The company will also plead guilty to two misdemeanor misbranding violations of the Food, Drug and Cosmetic Act ("FDCA"): one count pertaining to the marketing of JUXTAPID with inadequate directions for use and the other for the failure to comply with the Risk Evaluation and Mitigation Strategies ("REMS") for the drug.

Aegerion will also enter into a five-year deferred prosecution agreement in connection to charges that it violated the Health Insurance Portability and Accountability Act ("HIPAA") and engaged in obstruction of justice relating to the REMS program. The deal with the DOJ requires Aegerion to enter into a civil settlement agreement to resolve alleged violations of the False Claims Act. The specific nature of the violations was not disclosed.

Lastly, Aegerion will enter into a non-monetary consent decree with the FDA prohibiting future violations of the law. It remains uncertain whether or not Aegerion will be subject to a corporate integrity agreement with the Department of Health and Human Services.

The SEC's Division of Enforcement will recommend that the SEC accept a settlement offer from Aegeroin on a neither-admit-nor-deny basis that contains alleged negligent violations of the Securities Act of 1933, related to certain statements made by the Company in 2013 regarding the conversion rate of patients receiving JUXTAPID prescriptions, with remedies that include censure.

Aegerion Chief Executive Officer Mary Szela is hopeful about the company moving forward following these agreements in principle, stating:

These preliminary agreements in principle with the DOJ and the SEC represent an important step forward towards addressing the immediate issues facing Aegerion and positioning the Company for near-term value creation and growth. As a company, we are deeply committed to legal and regulatory compliance, and we have made significant investments to ensure that these values resonate throughout our organization. We look forward to putting these matters behind us and to continuing our focused efforts on developing and commercializing innovative therapies for patients with debilitating rare diseases.

The terms as outline above are subject to change following further negotiations, and other terms of the final settlement remain subject to further negotiation. This preliminary agreement is also subject to approval of supervisory personnel within both the DOJ and the SEC. The agreements in principle do not cover the DOJ or SEC's inquiries into Aegerion's Brazilian operations.


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