Major pharma companies are paying multi-million dollar fines for alleged bribery in emerging markets, but these markets remain highly profitable.
Recent payments by Pfizer ($60m) and Johnson & Johnson ($70m) to settle charges under the Foreign Corrupt Practices Act (FCPA) represent only a small fraction of their revenue from the countries where the alleged offences took place.
However, steep increases in FCPA fines have been threatened if evidence suggests that pharma corporations regard them as a manageable cost.
Comparable European legislation, such as the Bribery Act in the UK, is tightening the net around overseas sales operations that pander to a culture of ‘goodwill’ gifts and other inducements.
Pfizer’s income from emerging markets is predicted to reach $10bn, while J&J has reported $6.5bn sales in Brazil, Russia, India and China.
Global Data analyst Michael Leibfried said: “The $60 million fine for Pfizer to a lay person sounds like quite a bit of money, but in perspective it took less than two days of Lipitor sales during its peak. It’s really just chump change for them.”
However, according to Kara Brockmeyer, chief of FCPA investigations within the Securities and Exchange Commission, no FCPA prosecution has so far needed to be repeated.
“I would hate to think the companies view enforcement actions as the cost of doing business,” she commented. “If we find that out, it will certainly increase the size of the penalty.”
In relation to the Pfizer settlement, she noted that a number of the company’s overseas subsidiaries “had bribery entwined in their sales culture”. Pfizer has since introduced an anti-corruption audit programme.
Novo Nordisk and Teva have also undergone FCPA investigations, with Latin American markets being a particular focus.