Corporate Compliance and the Foreign Corrupt Practices Act

By: Alaina Anderson, CIS Compliance Manager
alainaanderson@cis-partners.com

It seems with every corner we turn, there are more reasons to have a comprehensive corporate compliance program. Here in the pharmaceutical arena, we often discuss the Office of Inspector General (OIG) Compliance Program Guidance for Pharmaceutical Manufacturers, the False Claims Act, the Anti-Kickback Statute, the PhRMA Guidelines and various state laws on the related topics.

However, it appears that the Foreign Corrupt Practices Act (FCPA) should be held in the same light as the above mentioned laws and guidelines. This is essentially an anti-kickback law regarding conduct with foreign officials. In my eight years in the industry, I have not worked with a pharmaceutical company that did not conduct business across international borders, which means this law likely applies to a great number of pharmaceutical companies.

The FCPA specifically applies to:

• US persons, or agents thereof
• US companies, or agents thereof
• Entities subject to US securities laws, or agents thereof
• Any person committing a prohibited act of corrupt payments while in the territory of the US

The anti-bribery provisions of the FCPA prohibit “payments, offers, or authorization of the payment of money or anything of value to a foreign official, either directly or through an intermediary, in a corrupt effort to obtain or retain business, or to receive an improper commercial advantage.[i]” A prohibited activity could take on limitless forms and activities it seems. What we have observed from those in our field, including medical device companies, is that these prohibited practices are taking place to gain or retain business at hospitals. Remember, many countries have government funded healthcare which means healthcare professionals can qualify as ‘foreign officials’ under the FCPA.

A few accounts from the 2009 Global Ethics Summit cite the Deputy Chief of the Criminal Fraud Section of the Department of Justice (DOJ), Mark Mendelsohn, and his predictions for 2009. He anticipates an increase in activity through additional enforcement resources and increasing multi-jurisdictional investigations. Additionally, he specifically called out the enforcement efforts involving pharmaceutical and medical device industries, domestically with the Anti-Kickback Act and internationally with the FCPA.

Most of the concerns heard earlier this year at CBI’s Pharmaceutical Compliance Congress in relevance to FCPA adherence are regarding interactions with third party vendors. The discussions at the Compliance Congress emphasized the following: If experiencing cultural or regional resistance to a written agreement or the terms of a written agreement, it is recommended that your legal department/firm handles the negotiations. But the fact remains that here in the US, a written agreement is expected and audit rights must be followed; simply naming your audit rights in the agreement is not nearly enough.

In order to adhere to the FCPA and avoid related allegations, a comprehensive compliance program is recommended. Such a program includes:

• Written policies and procedures
• Training on applicable laws, regulations, policies and procedures
• A hotline for reporting compliance issues
• Auditing and monitoring activities

Additionally, and more specific to the FCPA, your organization should develop guidelines relevant to business hosting, gifts, and entertainment appropriate to the local jurisdictions in which it does business, including internal controls such as pre-authorization.

It is vital that reported allegations whether involving internal or third party personnel is taken seriously. Allegations should be investigated in a timely fashion and documentation should be maintained that describes the investigation and remediation, if applicable. And last, but far from least, remember to include FCPA as a regular part of your corporate compliance auditing and monitoring program. If you do discover inappropriate activities related to the FCPA, it is vital that you disclose them to the DOJ.

Sources:
[i] Pilchen, S. M. et al. FCPA and False Claims Act Enforcement: Corruption Crackdown in the US and Abroad presented March 12, 2009.

Gerlach, P.V. et al. (2007). US and PRC anti-bribery laws: regulation: risk and prevention in the life sciences industry. Retrieved from www.practicallaw.com/7-378-8724

Myers, C. (2009) FCPA Enforcement Under the Obama Administration: Siemens Case Sets New Precedent. Retrieved from www.hklaw.com/id24660/PublicationId2578/ReturnId31/contentid53964/