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Monday, May 20, 2024 | Back issues
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Drugmaker Settles Chinese Bribery Charges

WASHINGTON (CN) - Bristol-Myers Squibb agreed Monday to pay more than $14 million to settle charges that they bribed Chinese hospitals for their business.

The Securities and Exchange announced the deal with its filing today of an administrative cease-and-desist order.

It says sales representatives for the Bristol-Myers Squibb majority-owned joint venture BMS China traded cash, jewelry and meals for meetings with Chinese health care providers that generated more than $11 million in profits for the drugmaker.

BMS China characterized the bribes as legitimate business expenses in its records, and Bristol-Meyers Squibb did not investigate claims from former employees that the joint venture faked invoices, receipts and orders to fund the illegal payments, according to a statement from the SEC.

Regulators slammed the New York-based company for its delayed response to signs of the bribery scheme.

They noted for example that a review of expense reports from BMS China sales staff in 2009 observed fake invoices and receipts submitted by sales representative. Other audits turned up altered purchase orders and attendance sheets for meetings that were never held, according to the SEC order.

The SEC said former BMS China employees who admitted to having used the fake expense claims claimed to have done so to benefit Chinese health care providers and to boost BMS sales. These workers characterized the practice as "widespread" at the company, according to the order.

Several former employees emailed the BMS China president in November 2010 and January 2011, saying they had used the fake expense claims to buy gift cards for and to entertain health care providers, according to the order. They purportedly said that the practice was the only way to meet their sales targets.

At least one sales representative hid gifts to pharmacy employees as a "departmental development fee," according to the order.

The SEC says BMS China never investigated these claims.

"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 press release.

Bristol-Myers Squibb will not admit to or deny the SEC's findings, but will nonetheless return $11.4 million in profits and pay a civil penalty of $2.75 million as part of the settlement after the SEC found it violated the internal controls and recordkeeping provisions of the Foreign Corrupt Practices Act.

The company also agreed to report to the SEC for two years on its efforts to curtail corruption and comply with the Foreign Corrupt Practices act.

"We have resolved this matter with the United States Securities and Exchange Commission, and are committed to the highest standards of business integrity, vigilance and ethics across our organization," a representative for Bristol-Myers Squibb said in an email.

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