Corrupted Contracts by Pharmaceutical Company Busted After 12 Years

Jack Humphrey, Regulatory journalist
April 08, 2011 /

Medical device and pharmaceutical company Johnson and Johnson (J&J) has agreed to pay the settlements in the lawsuit filed by the Securities and Exchange Commission charging the firm of bribing public doctors in European countries and paying kickbacks to Iraq to illegally obtain contracts.

“Bribes to public doctors can have a detrimental effect on the public health care systems that potentially pay more for products procured through greed and corruption,” said Cheryl Scarboro, Chief of the SEC Enforcement Division’s Foreign Corrupt Practices Act Unit.

The charges came amid the issue faced by its Tylenol product, a medication for attention deficit/hyperactivity disorder. The pharmaceutical company‘s McNeil Consumer Healthcare unit has recalled the product in late 2009 following detection of manufacturing problems that resulted in the formation of metal shavings found in the children’s medicine bottles.

One year later, the pharmaceutical company was sued by the United States Department of Justice for allegations of illegal marketing of its antipsychotics to Omnicare, a case disproved by J&J, saying the payments conformed with the law.

According to court papers, the pharmaceutical company’s subsidiaries paid several bribes to public doctors in Greece, Poland, and Romania to have their products unfairly prescribed over the others and to obtain contracts illegally. The bribes included cash and inappropriate travel made possible through the use of slush funds, sham civil contracts with doctors, and off-shore companies in the Isle of Man.

The suit added that J&J subsidiaries paid kickbacks to Iraq for 19 contracts obtained under the United Nations Oil for Food Program.

SEC’s enforcement head Robert Khuzami said, “J&J chose profit margins over compliance with the law by acquiring a private company for the purpose of paying bribes, and using sham contracts, off-shore companies, and slush funds to cover its tracks.”

The pharmaceutical company has agreed to pay more than $48.6 million in disgorgement and prejudgment interest, in addition to the $21.4 million fine imposed by the U.S. Department of Justice.

The SEC further orders J&J to comply with certain undertakings to comply with the Foreign Corrupt Practices Act program. The pharmaceutical company has also revealed some violations committed by its employees and said it has started investigating internally the bribery.

The internal investigation is carried out by its internal auditors and outside counsel.
The United Kingdom Serious Fraud Office is also expected to file a related suit against the pharmaceutical company.


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