Healthcare companies claim second place on the current FCPA investigation list

Eighty-four companies are listed on the most recent FCPA blog corporate investigations list. These companies are part of an ongoing and unresolved investigation related to the U.S. Foreign Corrupt Practices Act (FCPA) and have disclosed it in their financial statements to the U.S. authorities. As I work in Transparency International’s (TI) Pharmaceuticals & Healthcare Programme I wanted to examine any healthcare companies in the list. I compiled information on the sector, industry and HQ location of all 84 companies in the list and from the analysis there are four key findings.

Excluding SciClone Pharmaceuticals, which recently agreed to pay $12.8 million to settle SEC charges regarding improper payments in China, of the 83 companies remaining on the list, 14 companies are in the healthcare sector. This means just under 17% of companies that are part of an ongoing and unresolved FCPA-related investigation are in the healthcare sector. Healthcare has the second highest number of companies currently under investigation, following the industrials, a very broad sector including companies all the way from aerospace & defence to construction & engineering. Evidently corrupt practices are widespread in the healthcare sector and not confined to just one or two companies, which suggests that anti-corruption policies must address the systemic issues.

Of the 14 healthcare companies in the list just over half are biotechs and pharmaceuticals. This shouldn’t be too surprising considering some of the recent high profile settlements made by pharmaceutical companies. Of the remaining six healthcare companies, four are medical equipment and device companies, and two are healthcare facilities and services companies. More work needs to be done to examine the policies and practices of these other industries, as they receive less media scrutiny than the biotechs and pharmaceuticals.

Healthcare companies in the FCPA blog’s Corporate Investigations List (January 2016)

Healthcare company Industry HQ
Alexion Pharmaceuticals Inc Biotech & Pharma USA
Analogic Corporation Medical Equipment & Devices USA
AstraZeneca PLC Biotech & Pharma UK
Fresenius Medical Care AG & Co KGaA Healthcare Facilities & Svcs Germany
GlaxoSmithKline PLC Biotech & Pharma UK
Grifols SA Biotech & Pharma Spain
Merck & Co Inc Biotech & Pharma USA
Nordion Inc Healthcare Facilities & Svcs Canada
Novartis AG Biotech & Pharma Switzerland
Olympus Corp Medical Equipment & Devices Japan
Orthofix International NV Medical Equipment & Devices USA
Sanofi SA Biotech & Pharma France
Teva Pharmaceutical Industries Limited Biotech & Pharma Israel
Zimmer Biomet Holdings Inc Medical Equipment & Devices USA

Five of the ten largest pharmaceutical companies as ranked by pharmaceutical sales are currently being investigated: GlaxoSmithKline, Merck & Co., Novartis, Sanofi and AstraZeneca. As market leaders the largest pharmaceutical companies should be setting high standards for the rest of the sector, so it is disappointing that so many are currently under investigation.

At least seven of the fourteen cases in the healthcare sector relate in some way to sales and marketing. Despite some investigations having begun several years ago it still shows that the sector must do more to prevent corrupt marketing practices, such as paying incentives for healthcare professionals to use their products, and likewise healthcare professionals and related officials must be regulated by clear, strong standards. Interestingly, of those seven cases, six relate to biotech and pharmaceutical companies, suggesting that this is a high risk for that industry.

To reduce corruption in the healthcare sector and achieve better health outcomes for patients, mitigating corruption risks in the private sector is crucial. The TI Pharmaceuticals & Healthcare Programme isconducting research to better understand these risks and to develop effective policies and tools. Only through engaging with all actors, including the private sector, can real change be achieved.

Author – Michael Petkov, Programme Officer, Transparency International’s Pharmaceuticals & Healthcare Programme

Photo: Flickr/Creative Commons – Chesapeake Bay Program; Edited by TI-UK