WASHINGTON — Pfizer has agreed to pay the federal government $60 million to settle allegations that its employees bribed doctors and other foreign officials in Europe and Asia to win business and boost sales.
The Securities and Exchange Commission said Tuesday that Pfizer’s overseas subsidiaries made illegal payments to health care workers in China, Italy, Russia, Croatia and other Eastern European countries. As early as 2001, Pfizer sales representatives tried to conceal the bribes by recording them as legitimate business expenses for travel, entertainment and marketing purposes, the agency said.
“Pfizer subsidiaries in several countries had bribery so entwined in their sales culture that they offered points and bonus programs to improperly reward foreign officials who proved to be their best customers,” said Kara Brockmeyer, chief of SEC’s foreign enforcement division.
Pfizer’s China operation created a point program that allowed doctors to purchase gifts based on points earned for prescribing Pfizer medications. In other cases, Pfizer would invite high-prescribing doctors to club-like meetings as a reward for choosing Pfizer products.
The settlement includes alleged violations by Wyeth, the New Jersey-based drugmaker which Pfizer acquired in 2009. Wyeth gave up more than $17 million in profits, plus $1.6 million in interest. Pfizer agreed to disgorge $16 million in profits and interest of $10.3 million.
[Pfizer maintains significant operations in North Carolina, including a major production plant once operated by Wyeth in Sanford.]
The 1977 Foreign Corrupt Practices Act makes payments to foreign officials to win business illegal. It was created after a SEC investigation in the 1970s found that 400 U.S. companies had paid $300 million in bribes abroad, according to the Justice Department.
Bristol-Myers, based in New York, said April 26 it received a subpoena in March from the SEC and the company is cooperating.
Glaxo said in its 2010 and 2011 annual reports that the SEC and the Justice Department were conducting an industry-wide investigation into whether drug companies bribed officials in Argentina, Brazil, Canada, China, Germany, Italy, Poland, Russia and Saudi Arabia.
Glaxo, which operates its U.S. headquarters in Research Triangle Park, N.C., is among the companies that received inquiries, and it is cooperating, the London-based company said. Stephen Rea, a spokesman, said Aug. 6 the company had nothing to add.
“We continue to cooperate with the ongoing investigation,” he said by e-mail.
AstraZeneca received inquiries from the SEC and the Justice Department, according to the London-based company in its 2010 and 2011 annual reports. The company also “is investigating indications of inappropriate conduct in certain countries, including China,” according to the 2011 report. The investigations are continuing and the company is cooperating, Sarah Lindgreen, an AstraZeneca spokeswoman, said by e-mail on Aug. 6.
The SEC said the payoffs were made “without the knowledge or approval of officers or employees of Pfizer, but the inaccurate books and records of Pfizer subsidiaries were consolidated in the financial reports of Pfizer.”
Pfizer alerted U.S. authorities in 2004 after probing the claims. More payments were found when the drugmaker bought its Wyeth unit in 2009.
“The actions which led to this resolution were disappointing, but the openness and speed with which Pfizer voluntarily disclosed and addressed them reflects our true culture and the real value we place on integrity and meeting commitments,” Amy Schulman, Pfizer’s general counsel, said in an e-mailed statement. “We expect every colleague across Pfizer to adhere to the highest standards of conduct.”
As part of the settlement, Pfizer’s HCP subsidiary agreed to pay $15 million to resolve similar bribery allegations with the Department of Justice. In addition to the settlement fee, the Pfizer unit agreed to a two-year deferred prosecution agreement.
“The actions which led to this resolution were disappointing, but the openness and speed with which Pfizer voluntarily disclosed and addressed them reflects our true culture,” Schulman added.
The charges against Pfizer were brought under the Foreign Corrupt Practices Act, which bars publicly traded companies from bribing officials in other countries to get or retain business. In the past five years, the Justice Department has investigated a number of pharmaceutical and medical device companies that operate overseas in connection with the law.
Last year J&J agreed to pay $70 million to settle civil and criminal charges of bribery brought by the Department of Justice.
Industry experts say giving gifts and payments to doctors is not unusual for drug and medical device companies who operate in dozens of countries.
(The AP and Bloomberg contributed to this report.)