Bristol-Myers shells out $14.7M in China bribery settlement

Bristol-Myers Squibb ($BMY) is the latest Big Pharma to pay up for bribery in China. The U.S.-based drugmaker agreed to a $14.7 million settlement with the Securities and Exchange Commission to wrap up charges that its Chinese joint venture shelled out cash and other incentives to boost scripts for its drugs.

According to the SEC, the JV's reps offered cash, gifts, meals, travel, entertainment and sponsorships "to secure new sales and increase existing sales." Bristol-Myers "falsely recorded" the transactions as "legitimate business expenses."

The company has rolled out a suite of reforms, the agency notes. It terminated more than 90 workers and disciplined 90 more, including sales reps and BMS China managers.

The suspect transactions took place from 2011 to 2014, the agency said, and amount to violations of the Foreign Corrupt Practices Act (FCPA). The U.S. government has stepped up FCPA enforcement in recent years, with a laundry list of fines and investigations in the pharma industry.

SEC officials said the violations at Bristol-Myers' China operations weren't isolated events, and that the company didn't crack down on the suspect practices when hints of problems surfaced. "Bristol-Myers Squibb's failure to institute an effective internal controls system and to respond promptly to indications of significant compliance gaps at its Chinese joint venture enabled a widespread practice of providing corrupt inducements in exchange for prescription sales to continue for years," Kara Brockmeyer, chief of the Enforcement Division's FCPA unit, said in a statement about the settlement.

The $14.7 million payment includes a civil penalty of $2.75 million and $11.4 million in disgorged profits, plus interest. The company also has to report to the SEC for two years about its FCPA compliance efforts. In addition to the staff changes, the company has made changes to its accounting and compliance systems, including new checks on all employee expense claims, better tracking of expense reports, and a third-party audit system that includes surprise visits at marketing-sponsored events.

The Bristol-Myers settlement is a tiny fraction of the nearly $500 million fine GlaxoSmithKline ($GSK) paid in China after a high-profile investigation into widespread bribery there. The U.K.-based company 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).

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