As discussed in a July 2010 Subject to Inquiry post, DOJ put Big Pharma on notice that it intended to aggressively investigate potential violations of the Foreign Corrupt Practices Act (FCPA) within the pharmaceutical and medical device industry. Well, they meant what they said.
Johnson & Johnson, the New Jersey-based multi-national pharmaceutical, medical devices and consumer health care company, recently agreed to pay $70 million in criminal penalties to resolve violations of the FCPA, including allegations of kickbacks in connection with the United Nations Oil for Food program. The criminal penalties included settlements with both the SEC and DOJ: 1) $48.6 million in disgorgement and prejudgment interest to the SEC and 2) $21.6 million as part of a deferred prosecution agreement with DOJ. The civil penalties to the government agencies relate to allegations that Johnson & Johnson’s subsidiaries provided improper payments to public health officials in Greece, Poland and Romania in attempts to secure: 1) contracts; 2) sales of surgical implants; and 3) prescriptions for pharmaceutical products. Additionally, the subsidiaries provided kickbacks to Iraqi officials to obtain 19 contracts to provide humanitarian supplies under the Oil for Food program. Johnson & Johnson did not admit the SEC’s allegations, but consented to the United States District Court for the District of Columbia’s order permanently enjoining Johnson & Johnson from future violations of sections of the ’34 Act.
Despite the criminal penalties, the DOJ and SEC press releases both highlight Johnson & Johnson’s cooperation in the investigations into the alleged violations. The SEC reported that, “J&J’s internal investigation and its ongoing compliance programs were essential in gathering facts regarding the full extent of J&J’s FCPA violations.” Johnson & Johnson’s cooperative efforts were recognized by DOJ, with the department considering Johnson & Johnson’s: 1) “timely voluntary disclosure, and thorough…investigation of the underlying conduct;” 2) “extraordinary cooperation” by Johnson & Johnson in providing assistance to DOJ, the SEC and other foreign enforcement authorities; and 3) the “remedial efforts and compliance improvements” initiated by Johnson & Johnson. In fact, due to Johnson & Johnson’s cooperation and remedial efforts, DOJ reduced the amount of criminal fines and will not require Johnson & Johnson to retain a corporate monitor. Mythili Raman, the Principal Deputy Assistant Attorney General for the DOJ Criminal Division recently stated, “We are committed to holding corporations accountable for bribing foreign officials while, at the same time, giving meaningful credit to companies that self-report and cooperate with our investigations.” Johnson & Johnson also received a lesser fine from the UK Securities Fraud Office due to cooperation, agreeing to pay a fine of nearly £5 million ($7.9 million) and additional prosecution costs.
This does not appear to be the end of the DOJ’s efforts against Big Pharma. According to a recent Reuters article, both Eli Lilly & Co. and Baxter International are under government scrutiny regarding bribery laws. The article suggests that both companies are cooperating with the inquiries.