BMS fined $14 million for bribery in China


Bristol-Myers Squibb (BMS) has been caught giving bribes and inducements to health care providers (HCP) in China, and must pay $14 million to US authorities.

The charges have been brought against the US firm by the Securities and Exchange Commission (SEC), which says the firm violated the Foreign Corrupt Practices Act (FCPA) and reaped more than $11 million in profits from the misconduct of its joint venture, BMS China.

The company is permitted to settle the charges without admitting or denying the findings, but must return $11.4 million of profits plus prejudgment interest of $500,000 and a civil penalty of $2.75 million.

The charges make BMS the latest in a string of firms found guilty of bribery in the world's biggest developing market, with Pfizer and Lilly also found to have used payments and gifts to win the favour of Chinese doctors in recent years.

Most notably, GlaxoSmithKline was fined a record 3 billion yuan ($488 million) by Chinese authorities last year for paying kickbacks in the country, with its head of China operations Mark Reilly deported after pleading guilty to bribery-related charges.

BMS has agreed to settle charges that its joint venture in China made cash payments and provided other benefits to HCPs at state-owned and state-controlled hospitals in exchange for prescription sales.

The SEC's investigators say that, between 2009 and 2014, BMS China sales representatives sought to secure and increase business by providing HCPs in China with cash, jewellery and other gifts, meals, travel, entertainment, and sponsorships for conferences and meetings.

Company employees then inaccurately recorded the spending as legitimate business expenses in its books and records, which were then consolidated into the books and records of BMS.

The SEC says BMS failed to respond to 'red flags' indicating that sales personnel were offering bribes and other benefits, and did not investigate claims by former employees that faked invoices, receipts and purchase orders were widely used to fund improper payments.

It added that the firm was slow to respond to warnings about a lack of internal controls over its interactions with HCPs and inappropriate payments, despite these being identified repeatedly in annual internal audits of BMS China between 2009 and 2013.

"Bristol-Myers Squibb's failure to institute an effective internal controls system and to respond promptly to indications of significant compliance gaps at its Chinese joint venture enabled a widespread practice of providing corrupt inducements in exchange for prescription sales to continue for years," said Kara Brockmeyer, chief of the Enforcement Division's FCPA Unit.

The pharma company has now agreed to report to the SEC for a two-year period on the status of its remediation and implementation of FCPA and anti-corruption compliance measures.

The problem of corruption in business and public life in China is well known, with foreign company insiders complaining that business cannot be done without backhanders being paid.

China's government launched a major anti-bribery drive in 2012, targeting corruption across local government and state-controlled sectors. Despite these efforts, the country saw its ranking slip further down Transparency International's global corruption perceptions index in December last year, falling from 80th least corrupt nation to number 100.

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Linda Banks

6 October, 2015