Life Science Compliance Update

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.

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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