Life Science Compliance Update

February 02, 2017

Zimmer Biomet Pays $30 Million to Resolve New FCPA Charges


Medical device maker Zimmer Biomet Holdings, Inc., agreed to pay $30.5 million to resolve Department of Justice (DOJ) and Securities and Exchange Commission (SEC) investigations into the company’s “repeat” violations of the Foreign Corrupt Practices Act (FCPA). The $30.5 million is split between a criminal fine of $17.46 million and an SEC penalty of $13 million (consisting of $6.5 million in disgorgement and interest and a $6.5 million penalty).

Biomet entered into a deferred prosecution agreement (DPA) with the DOJ, requiring them to retain an independent compliance monitor for three years, and settled the claims with the SEC through an internal administrative order, halting the need to go to court.

Previous Charges

Biomet first faced FCPA charges from both the DOJ and SEC in March 2012, paying nearly $23 million to settle that enforcement action. At that time, Biomet entered into a DPA with the DOJ and also retained an independent compliance monitor for three years. In 2013, Biomet learned about more potential anti-bribery violations in Brazil and Mexico and notified the monitor.

Even after the 2012 DPA, according to the DOJ, Biomet “knowingly and willfully continued to use a third party distributor in Brazil known to have paid bribes to government officials on Biomet’s behalf.” In Mexico, Biomet failed to implement an adequate system of internal accounting controls at a subsidiary, “despite employees and executives having been made aware of red flags suggesting that bribes were being paid.”

The 2012 enforcement action involved Biomet’s bribery of government officials in Argentina, Brazil, and China. The three-year DPA from 2012 was extended by the DOJ for another year after Biomet reported to the monitor the suspected bribery in Brazil and Mexico. At the end of that year, according to the DOJ, “the independent monitor was unable to certify that the company’s compliance program satisfied the requirements of the 2012 DPA.” In 2015, Zimmer bought Biomet in 2015 for about $14 billion, and the combined company trades on the Stock Exchange under ZBH.

Repeat Violations

In June 2016, the DOJ said that Biomet had breached the 2012 DPA “based on conduct in Brazil and Mexico.” Once the DOJ told Zimmer Biomet it was in breach of the 2012 DPA, the company “fully cooperated” and provided information about individuals involved in the misconduct. This agreement imposes another three-year DPA on Zimmer Biomet with an independent compliance monitor.

Assistant Attorney General Leslie R. Caldwell said, “In appropriate circumstances the department will resolve serious criminal conduct through alternative means, but there will be consequences for those companies that refuse to take these agreements seriously.”

A statement from the company said the money to be paid was previously recorded in financial statements. Chad Phipps, senior vice president, general counsel, and secretary at Zimmer Biomet, said that the company is pleased to have resolved “legacy Biomet FCPA compliance matters.” Phipps also said, “Zimmer Biomet is committed to upholding the highest ethical and legal standards in our business practices across the globe, and we look forward to continuing to integrate the legacy Biomet business operations into our robust corporate compliance program.”

January 20, 2017

The Trump Administration: One Predictive Perspective


We recently had the pleasure of speaking with Michaeline Daboul, President and CEO of MediSpend, about the upcoming administration and what she portends for the future of compliance and enforcement. Ms. Daboul introduced the first open source SaaS compliance solution to the life sciences industry and has been introducing disruptive technologies in the pharmaceutical industry for drug development, genomics research, and compliance since 1985.

With so many compliance regulations in different parts of the world, global business leaders need to understand the different laws and industry codes of conduct that they encounter on a regular basis. Compliance solutions that aggregate business data daily allow companies to manage the constant changes in laws, currency and data differences, and multiple language cross-border interactions.

For life science companies, relevant and timely compliance management and monitoring is extremely important. The impending Trump administration will likely influence how seriously companies continue to comply with US laws like the Foreign Corrupt Practices Act (FCPA), Anti-kickback and Securities and Exchange Commission (SEC) laws, not to mention the complications Brexit and changes in Italy add to the mix.

We have seen an era of vigorous FCPA enforcement from roughly 2000 up to the present, with Attorneys General making prosecuting foreign bribery a significant priority and/or devoting substantial resources to the area.

As someone who has been entrenched in the life sciences industry for over thirty years, she has seen her fair share of changes, and the ebbs and flows with each presidential administration and corresponding Congresses. With respect to the upcoming Trump Administration and Republican-led Congress, Ms. Daboul says, “We don’t know what is going to happen, but all signs lead to a more relaxed interpretation of the law. These laws were enacted to control and prevent corruption. Companies need to operate in an ethical manner – and organizing and aggregating the data needed to be in compliance with the many existing laws will go a long way towards preventing non-compliance and corruption.”

While there is no current movement in Congress to change the FCPA, Ms. Daboul believes that President-Elect Trump may try to dismantle the law. She refers back to a 2012 episode of CNBC’s Squawk Box when Mr. Trump referenced the FCPA saying, “It’s a horrible law, and it should be changed.” He believes the FCPA inhibits US businesses from conducting business abroad in places like China, Colombia, and Brazil.

Ms. Daboul is not alone in thinking that Mr. Trump will attempt to dismantle the law. Matthew Stephenson, a professor at Harvard Law School, wrote about his belief that the “era of vigorous FCPA enforcement…is over.” He believes that the FCPA “is likely to be substantially weakened,” though entire repeal is relatively unlikely.

Those who are suspicious of Mr. Trump and his business dealings, believe that enforcement may become more politicized than it has been in the past, with more deliberate targeting of foreign companies and perceived political enemies (especially those that compete with firms close to Mr. Trump and his businesses).

Alexandra Wrage, president and founder of TRACE International, also believes that enforcement will slow during the Trump Administration, noting that “[Mr.] Trump has championed reduced regulation and has derided the FCPA, so it seems likely that fighting corruption will be a considerably lower priority.”

If Mr. Trump indeed ushers in a period of deregulation, Ms. Daboul recommends that companies around the world continue to focus on improving business process workflows, transparency between organizational stakeholders, and doing the right thing by managing end-to-end business activities with proper controls.

Ms. Daboul also made sure to note that in order to do business all over the world, it is imperative to understand how to interact and operate globally – the FCPA is only one law and there are other new and forthcoming laws by which global companies need to abide.

Mr. Trump Nominates Jay Clayton

In early January 2017, Donald Trump nominated Jay Clayton (currently in private practice as a partner at Sullivan & Cromwell) to lead the SEC during his administration. Mr. Clayton presently represents companies in FCPA investigations.

In 2011, prior to the wave of global anti-bribery cooperation, Mr. Clayton authored a 2011 New York City Bar Association paper about the FCPA, addressing the “lasting harm to the competitiveness of U.S. regulated companies” due to the current “anti-bribery regime.” 

Richard Bistrong at the FCPA Blog seems to think that Mr. Clayton may be another Andrew Weissman, who was appointed as Chief of the DOJ Fraud section a year ago. Prior to being appointed to that position, Weissman aggressively advocated limiting the FCPA, which led many to believe that his appointment would result in less FCPA enforcement. However, that did not happen, and instead, led the biggest 365 days in FCPA enforcement history.

December 27, 2016

Teva Pharmaceutical to Pay $519 Million to Settle FCPA Charges


Right before the holiday weekend, news broke that Teva Pharmaceutical Industries had come to an agreement to pay $519 million in a deferred prosecution agreement (DPA) and civil settlement, and a subsidiary will plead guilty after the pharma giant admitted it paid bribes to government officials in Russia, Ukraine, and Mexico.

The settlement money is split between a criminal penalty of $283 million and an additional $236 million to settle civil charges. According to Assistant Attorney General Leslie R. Caldwell, “Teva and its subsidiaries paid millions of dollars in bribes to government officials in various countries, and intentionally failed to implement a system of internal controls that would prevent bribery. Companies that compete fairly, ethically and honestly deserve a level playing field, and we will continue to prosecute those who undermine that goal.”

According to the companies’ admissions, Teva executives and Teva Russia employees paid bribes to a high-ranking Russian government official intending to influence the official to use his authority to increase sales of Teva’s multiple sclerosis drug, Copaxone, in annual drug purchase auctions held by the Russian Ministry of Health. The arrangement took place at the same time the Russian government was seeking to reduce the amount spent on costly foreign pharmaceutical products, such as Copaxone. Between 2010 and 2012 (possibly even later), pursuant to an agreement with a repackaging and distribution company owned by the Russian government official, Teva earned more than $200 million in profits on Copaxone sales to the Russian government. Additionally, the Russian official earned roughly $65 million in corrupt profits through inflated profit margins granted to the official’s company.

Teva also admitted to paying bribes to a senior government official within the Ukrainian Ministry of Health to influence the Ukrainian government’s approval of Teva drug registrations, which were necessary for the company to market and sell its products in the country. From 2001 to 2011, Teva paid the official a monthly fee as a “registration consultant,” also paying for travel and other things of value totaling approximately $200,000.00. In exchange for the benefits received from Teva, the official used his position and influence within the Ukrainian government to influence the registration in Ukraine of Teva products, including Copaxone.

In Mexico, Teva admitted that it failed to implement an adequate system of internal accounting controls and failed to enforce the controls it had in place at its Mexican subsidiary, which allowed bribes to be paid by the subsidiary to doctors employed by the Mexican government. Teva’s Mexican subsidiary had been bribing these doctors to prescribe Copaxone since at least 2005. While Teva executives in Israel were responsible for the development of the company’s anti-corruption compliance program, they were also aware of the bribes paid to government doctors in Mexico. Nevertheless, Teva executives approved policies and procedures that they knew were not sufficient to meet the risks posed by Teva’s business and were not adequate to prevent or detect payments to foreign officials. Teva also admitted that its executives put in place managers to oversee the compliance function, but those executives were unable or unwilling to enforce the anti-corruption policies that had been put in place.

Criminal Information and Charges

Teva entered into a DPA in connection with a criminal information filed in the Southern District of Florida on December 22, 2016. The information charged the company with one count of conspiracy to violate the anti-bribery provisions of the FCPA and one count of failing to implement adequate internal controls. The DPA also included a provision requiring Teva to pay a criminal penalty in the amount of $283,177,348. Teva also agreed to continue to cooperate with any ongoing DOJ investigations, enhance its compliance program, implement rigorous controls and retain an independent corporate compliance monitor for three years. 

Teva Russia signed a plea agreement (subject to court approval), agreeing to plead guilty to a one-count criminal information, charging the company with conspiring to violate the anti-bribery provisions of the FCPA. The case has been assigned U.S. District Judge Kathleen M. Williams and Teva Russia’s initial court appearance is scheduled for January 12, 2017.

Securities and Exchange Commission

The United States Securities and Exchange Commission (SEC) filed a cease and desist order against Teva, whereby the company agreed by pay roughly $236 million in disgorgement of profits to the SEC, including prejudgment interest. The SEC’s complaint alleges that the company made more than $214 million in illicit profits by making the influential payments to increase its market share and obtain regulatory and formulary approvals as well as favorable drug purchase and prescription decisions.


The Criminal Division’s Fraud Section reached the resolution based on a variety of factors, including that Teva did not timely voluntarily self-disclose the conduct, but did cooperate with the department’s investigation after the SEC served it with a subpoena. Teva received a twenty percent discount off the low end of the United States Sentencing Guidelines fine range because of substantial cooperation and remediation. The company did not receive full cooperation credit, because, according to the DOJ, there were several issues that resulted in delays in the early stages of the investigation, including vastly overbroad attorney-client privilege assertions and failure to timely produce relevant documents.

However, the announcement by the DOJ made no mention of any resolution of bribery probes that Teva had previously acknowledged in Argentina and Romania. According to Teva, the Argentina internal review has been closed, but still no mention of a resolution involving Romania.

The Teva settlement at $519 million joins the ranks of Seimens ($800 million), Alstrom ($772 million), and KBR/Halliburton ($579 Million) as number five in the largest FCPA settlements in history.


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