Serbian bribery probe highlights emerging-markets danger

Tools

A Serbian bribery probe serves up a cautionary tale for drugmakers relying on emerging markets for growth. Reuters digs into the years-long corruption investigation, relating a plot that could have come out of a suspense novel, complete with wild parties, a mistress-turned-informant, and a suicide note posted to an estranged wife.

But the corruption allegations are all too real, and they involve several Big Pharma companies. AstraZeneca ($AZN), Sanofi ($SNY) and Actavis confirmed they've been served with indictments relating to the Serbian bribery investigation, while Roche ($RHHBY), Merck KGaA, and a unit of Valeant Pharmaceuticals ($VRX) have also been charged, Reuters reports. The only company to comment in detail--Actavis--told Reuters the allegations "include bribery of state officials in order to obtain preferential status when it comes to the sale of oncology products in Serbia."

What's more, this one investigation illustrates the dangers of expansion into emerging markets. These countries are less regulated--and often more free-wheeling--than markets in which Big Pharma previously focused its energies. But with established markets stagnating, drugmakers have been flocking into developing countries, in a sort of pharma gold rush. Companies are tussling for market share like prospectors staking claims.

At the same time, U.S. and U.K. prosecutors have stepped up their investigations into drugmakers' activities overseas, looking for violations of the Foreign Corrupt Practices Act and Britain's new Bribery Act, Reuters points out. Johnson & Johnson ($JNJ) has already settled with the U.S. government, and Pfizer ($PFE) is expected to announce a deal soon, the news service says. In all, 8 of the biggest drugmakers have disclosed that they're under investigation.

"It is almost guaranteed that every multinational pharmaceutical company is going to end up with these issues and is going to have to go through a painful experience," one in-house lawyer at a major U.S. drugmaker told the news service. "Frankly, the odds are stacked against companies."

- read the Reuters investigation

Related Articles:
Gov't probes laundry list of drugmakers
Pfizer near agreement to resolve bribery probe
Amid FCPA probe, AZ indicted in Serbia for bribery