Bristol-Myers scraps doc payments in China after last fall's FCPA settlement

Bristol-Myers Squibb ($BMY) is cracking down on its promotions in China. According to multiple reports on news sites and social media, the company will stop paying speaker fees to doctors, curtail spending on entertainment, and stop sponsoring medical associations because of red flags in its operations there.

In a statement, Bristol-Myers said it had stopped "certain initiatives" in China, but declined to specify the changes.

Bristol-Myers agreed last October to pay $14.7 million to settle a Securities and Exchange Commission probe into violations of the Foreign Corrupt Practices Act in China. The SEC said the U.S.-based drugmaker's Chinese joint venture had boosted profits by $11 million by "providing healthcare providers in China with cash, jewelry and other gifts, meals, travel, entertainment, and sponsorships for conferences and meetings."

The SEC settlement said Bristol-Myers had "failed to respond effectively" to evidence that its salespeople offered "bribes and other benefits" to boost sales to healthcare providers. Nor did the company investigate former employees' claims that its Chinese business was faking invoices, receipts and purchase orders to fund "improper payments" to providers, the SEC said.

At the time, Bristol-Myers said it had rolled out a series of reforms. It fired more than 90 of its staffers and disciplined 90 others, including sales reps and managers.

The company also changed its accounting and compliance systems, adding new checks on all employee expense claims, better tracking of expense reports, and adding a third-party audit system that includes surprise visits at marketing-sponsored events.

Now, there's a second wave of changes after possible violations of company policy, Bloomberg says. "The promotional activities will be stopped effective immediately as a precaution," Karl Lintel, BMS' president in China said in a memo sent to employees and seen by Bloomberg. Lintel didn't specify the possible violations.

The latest moves in a way mimic GlaxoSmithKline's ($GSK) sales reforms. The U.K. drug giant paid nearly $500 million to settle a bribery investigation in China--on top of $3 billion in a broad marketing settlement with the U.S. government--and has ratcheted back doctor payments and entertainment in a bid to rehabilitate its reputation.

After the China bribery settlement, GSK faced follow-up bribery probes by U.S. and U.K. officials. Meanwhile, a range of drugmakers have settled claims--or are under investigation for--FCPA violations, including Pfizer ($PFE), Johnson & Johnson ($JNJ), Teva Pharmaceutical Industries ($TEVA) and AstraZeneca ($AZN).

- check out the Financial Times coverage
- get more from Bloomberg
- read FiercePharma's story about the SEC settlement