US fines Teva $519m over foreign bribery charges

Teva has agreed to pay US authorities a fine of almost $520 million for corrupt practices involving bribes to government officials in Russia, Ukraine and Mexico.

The US Department of Justice said this was the largest criminal fine imposed against a pharma company for violating the Foreign Corrupt Practices Act (FCPA).

Israel-based Teva has agreed to pay a criminal penalty of more than $283 million, and forfeit profits of $236 million to the Securities and Exchange Commission financial regulator.

The US government has also appointed a temporary independent monitor to ensure Teva continues to comply with US anti-corruption laws.

Although it is the world’s largest generics company, Teva has a range of branded drugs, including the blockbuster multiple sclerosis drug, Copaxone – which faces competition from cut-price copies across the world and was at the centre of the bribery scandal.

According to the DoJ, Teva executives and Teva Russia employees paid bribes to a high-ranking Russian government official, to influence him to increase sales of Copaxone, in yearly auctions by the Russian Ministry of Health.

At the time, the Russian government was trying to cut spending on costly foreign branded drugs, such as Copaxone.

Over a period of more than two years from 2010 onwards, thanks to an agreement with a repackaging and distribution company owned by the official, Teva earned $200 million in profits.

The official earned around $65 million through inflated profit margins from the company.

In Ukraine, Teva admitted to bribing an official within the country’s Ministry of Health to influence its approval of Copaxone and insulins, to allow Teva to market and sell them in the country.

Between 2001 and 2011, the official was Teva’s “registration consultant”, receiving a monthly fee, travel and gifts totalling around $200,000.

Meanwhile in Mexico, Teva admitted it had failed to implement internal controls, which had allowed its subsidiary there to bribe government-employed doctors to prescribe Copaxone since at least 2005.

In a statement Teva said that none of the employees involved are still employed by the company, adding that it replaced its entire Russian management team in 2013.

Teva said that since learning about the bribery concerns from its own employees and the US government in early 2012, it had begun an investigation led by an independent counsel, named a global head of compliance, and put in place tougher governance arrangements.

It has also trained tens of thousands of employees on compliance and anti-corruption measures.

Teva’s chief executive Erez Vigodman, who was appointed in 2014 to replace Jeremy Levin, described the company’s actions as “regrettable and unacceptable”.

He added: “Since becoming CEO, I have worked diligently to make our culture of compliance central to everything Teva does. The compliance programme that Teva has in place is serious, rigorous, and comprehensive and is designed to protect the company and its subsidiaries against future violations.”