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Drug, Device Makers Investigated Over Payments to Overseas Doctors

Aug 16, 2010 | Parker Waichman LLP

GlaxoSmithKline, Merck, Johnson & Johnson and Eli Lilly are among a dozen drug and medical device makers under investigation for possible violations of the Foreign Corrupt Practices Act. The act bars U.S. companies from bribing government or corporate officials in other countries to win business, among other things.

According to a report in The New York Times, the US Department of Justice and the Securities and Exchange Commission (SEC) are trying to determine if companies made illegal payments to doctors and health officials in foreign countries. As the report points out, it is legal for drug and device makers to pay US doctors consulting fees to market their products at medical conventions and other gatherings. However, in other countries, healthcare professional are often government employees, and such payments could constitute bribes, and as such might violate the Foreign Corrupt Practices Act. This would be especially true if the payments were not disclosed to oversees governments.

Another concern for US officials, the Times said, are unusually large payments made to foreign doctors charged with overseeing a growing number of clinical trials that are conducted abroad. A recent report by the inspector general of the Department of Health and Human Services. found 80 percent of the drugs approved for sale in 2008 involved trials in foreign countries, and 78 percent of all people who participated in clinical trials were enrolled at foreign sites. One legal expert told the Times that if evidence shows that such payments have influenced the results of some clinical trials, prosecutors will be inspecting the trials closely.

According to the Times, an official at the Justice Department alerted drug makers that the agency would be focusing on the drug industry during a speech given in November.

“In some foreign countries and under certain circumstances, nearly every aspect of the approval, manufacture, import, export, pricing, sale and marketing of a drug product may involve a ‘foreign official,’ ” as defined by the Foreign Corrupt Practices Act, Lanny A. Breuer, the assistant attorney general for the agency’s criminal division, said in the speech. “The depth of government involvement in foreign health systems, combined with fierce industry competition and the closed nature of many public formularies, creates, in our view, a significant risk that corrupt payments will infect the process.”

GlaxoSmithKline, Merck, Johnson & Johnson, Eli Lilly, Medtronic, and Zimmer are just some of the firms that have recently disclosed investigations relating to their oversees operations, the Times said.

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