Are FCPA penalties a cost of doing emerging-markets business?

Drugmakers know firsthand that the U.S. government has stepped up its anti-bribery enforcement. Over the past couple of years, one Big Pharma after another has disclosed federal probes related to the Foreign Corrupt Practices Act, as investigators sifted allegations of kickbacks and other improper payments.

As Reuters reports, the FCPA push coincides with the industry's even bigger push into fast-growing emerging markets. With doctors often on government payrolls in these countries--and gift-giving a common practice--the pitfalls for drugmakers are many. Indeed, Pfizer ($PFE) and Johnson & Johnson ($JNJ) have actually settled their probes, for $60 million and $70 million, respectively. A few years ago, Novo Nordisk ($NVO) paid $9 million to wrap up its FCPA allegations.

But can that size settlement really deter the sort of back-scratching that's endemic in countries all over the world? From Russia to India to Latin America, personal gifts--and cash--are part of the business landscape. With so much at stake in emerging markets, experts say, these settlements are like flea bites on an elephant.

"The $60 million fine for Pfizer to a lay person sounds like quite a bit of money, but in perspective it took less than two days of Lipitor sales during its peak," GlobalData analyst Michael Leibfried told Reuters. "It's really just chump change for them."

Pfizer and J&J, though, say that they've put anti-corruption policies in place. They're also monitoring relationships with foreign providers and government officials, they say.

What might work as well, actually, is publicity. After Reuters published a lengthy take-out about pharma gifts to doctors in India--including household items like blenders and vacuum cleaners, given in return for scripts--at least one company, Abbott Laboratories ($ABT), told its Indian reps to cease and desist.

- read the Reuters piece

 

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