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Home » Food & Drug Regulation: Library » Newsbriefs

Pfizer, Wyeth To Pay More Than $60 Million To Resolve FCPA Allegations

Date Posted: August 7, 2012

The Department of Justice (DOJ) announced Aug. 7 that Pfizer H.C.P. Corp., a subsidiary of Pfizer Inc., agreed to pay a $15 million penalty to resolve an investigation into alleged violations of the Foreign Corrupt Practices Act (FCPA). In addition, the Securities and Exchange Commission (SEC) announced that Pfizer Inc. agreed to pay more than $26.3 million and that Wyeth L.L.C., acquired by Pfizer in 2009, agreed to pay more than $18.8 million in disgorgement of profits, including prejudgment interest, to resolve alleged FCPA violations involving the conduct of their subsidiaries.

The DOJ filed a two-count criminal information in the U.S. District Court for the District of Columbia charging Pfizer H.C.P. with conspiracy and FCPA violations in connection with alleged improper payments made to government officials, including regulators and health care professionals, in Bulgaria, Croatia, Kazakhstan and Russia. According to the department, the “broad range” of payments “sought to improperly influence government decisions … regarding the approval and registration of Pfizer Inc. products, the award of pharmaceutical tenders and the level of sales of Pfizer Inc. products.” The payments allegedly were made in the form of “sham” consulting contracts, an exclusive distributorship, and improper travel and cash payments. The DOJ said that Pfizer H.C.P. admitted to paying more than $2 million in bribes between 1997 and 2006 and to making more than $7 million in profits as a result.

The company agreed to enter into a deferred prosecution agreement to resolve the investigation. Principal Deputy Assistant Attorney General Mythili Raman said that the DOJ recognized the “significant efforts” that Pfizer made to eliminate improper practices, both by implementing compliance reforms and “by assisting U.S. authorities in our ongoing FCPA investigations of other companies and individuals.”

The SEC charged that employees and agents of Pfizer subsidiaries in Bulgaria, China, Croatia, the Czech Republic, Italy, Kazakhstan, Russia and Serbia made improper payments beginning in 2001 to foreign officials to obtain regulatory and formulary approvals, sales, and increased prescriptions for Pfizer pharmaceutical products. The payments allegedly were concealed in accounting records as legitimate expenses for promotional activities, marketing, training, travel and entertainment, clinical trials, freight, conferences and advertising. The SEC acknowledged Pfizer’s voluntary disclosure of the alleged misconduct, its cooperation with agency investigators and its “extensive remedial actions.”

In addition, the SEC charged that FCPA violations were committed by subsidiaries marketing Wyeth nutritional products in China, Indonesia and Pakistan beginning “at least in 2005,” with the subsidiaries allegedly bribing government doctors to recommend the products to patients. The bribes took the forms of cash payments, gifts of cell phones, and travel incentives, often concealed through fictitious invoices, the agency alleged. In addition, a Wyeth subsidiary allegedly made an improper cash payment to a customs official in Saudi Arabia to secure the release of a shipment of promotional items.

The SEC acknowledged that, after Pfizer acquired Wyeth, Pfizer “undertook a risk-based FCPA due diligence review” of Wyeth operations and voluntarily reported the findings to commission staff. “Pfizer diligently and promptly integrated Wyeth’s legacy operations into its compliance program and cooperated fully with SEC investigators,” the commission said.

Pfizer and Wyeth neither admitted nor denied the SEC allegations. Wyeth agreed to report to the SEC on compliance measures for a period of two years. The settlements are subject to court approval, the commission said.

Pfizer noted that “there is no allegation by either DOJ or SEC that anyone at Pfizer’s or Wyeth’s corporate headquarters knew of or approved the conduct at issue before Pfizer took appropriate action to investigate and report it. As soon as these local activities came to the attention of Pfizer’s corporate headquarters, they were voluntarily brought to the attention of the DOJ and SEC.”

Pfizer Executive Vice President and General Counsel Any Schulman said, “The actions which led to this resolution were disappointing, but the openness and speed with which Pfizer voluntarily disclosed and addressed them reflects our true culture and the real value we place on integrity and meeting commitments.” Pfizer said that its self-reporting and compliance efforts led the DOJ and SEC to agree that appointment of an independent compliance monitor for the company was not necessary.

Full coverage of the agreements will appear in the September issue of Thompson Publishing Group’s FDA Enforcement Manual newsletter.

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