Over the last year, reports have emerged implicating pharmaceutical giant Glaxo Smith Kline (GSK) for paying bribes and falsifying records in connection with its Chinese operations. Anonymous emails were sent to Chinese authorities by a whistleblower alleging that doctors were being bribed with the knowledge of GSK management. The whistleblower also alleged that GSK falsified its books and records to conceal its illegal marketing practices. This report comes on the heels of other regulatory troubles for GSK, including settling a Department of Justice (DOJ) investigation in 2012 for $3 billion, as well as notice this year that the Serious Fraud Office in the UK is investigating them. In addition, GSK is apparently investigating itself for bribery allegations in Poland, Iraq, Jordan and Lebanon.
It appears that the FCPA is fertile ground for greater whistleblower participation in the pharmaceutical and medical device industries, specifically in emerging markets like China.
The Foreign Corrupt Practices Act of 1977, as amended, 15 U.S.C. §§ 78dd-1, et seq. ("FCPA"), was enacted for the purpose of making it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business. It prohibits the payment of bribes to foreign officials, which includes publicly traded companies who are attempting to obtain or retain business. This includes, but is not limited to, employees, directors, officers, stockholders and agents who are subject to significant sanctions when they have violated the anti-bribery or accounting provisions of the FCPA. The SEC and the Department of Justice are responsible for enforcing the FCPA.
Section 922 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) provides financial rewards to individuals who assist the Securities and Exchange Commission (SEC) in uncovering securities violations, including Foreign Corrupt Practices Act (FCPA) violations. Since the Dodd-Frank Act permits individual whistleblowers to earn significant benefits by reporting offenders, global companies and their employees, especially those in the pharmaceutical and medical device industry, should beware. But will they?
Looking ahead, it appears that the FCPA is fertile ground for greater whistleblower participation in the pharmaceutical and medical device industries, specifically in emerging markets like China. For the corporations, it may be nothing more than the cost of doing business in foreign countries. This unprincipled behavior, however, could have an impact on the quality of care provided to patients receiving these medications or medical devices. I can hear the whistle loud and clear, but will it be enough to end these practices? Is this just another example of a cost of doing business? Or will the risk of enforcement by China, the UK and others finally stop these practices?
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