Bristol-Myers Squibb to pay $14M to settle China bribery charge

By Cate Chapman on October 7, 2015

Bristol-Myers Squibb agreed to pay more than $14 million to settle charges that its joint venture in China made cash payments and provided other benefits to health care providers at state-owned and state-controlled hospitals in exchange for prescription sales.

Without admitting or denying that it had violated the Foreign Corrupt Practices Act, the pharmaceutical company consented to returning $11.4 million of profits plus prejudgment interest of $500,000 and paying a civil penalty of $2.75 million, the US Securities and Exchange Commission said in an Oct. 5 press release.

According to the SEC’s order instituting settled administrative proceedings, Bristol-Myers Squibb lacked effective internal controls over interactions with health care providers at BMS China, its majority-owned joint venture.

Between 2009 and 2014, BMS China sales representatives sought to secure and increase business by providing health care providers in China with cash, jewelry and other gifts, meals, travel, entertainment, and sponsorships for conferences and meetings, the SEC said. BMS China inaccurately recorded the spending as legitimate business expenses in its books and records, which were then consolidated into the books and records of Bristol-Myers Squibb.

Among the findings in the SEC’s order:

  • Bristol-Myers Squibb failed to respond effectively to red flags indicating that sales personnel provided bribes and other benefits to generate sales from health care providers in China.
  • Bristol-Myers Squibb did not investigate claims by certain terminated employees of BMS China that faked invoices, receipts, and purchase orders were widely used to fund improper payments to health care providers.
  • Bristol-Myers Squibb was slow to remediate gaps in internal controls over interactions with health care providers and monitor potential inappropriate payments to them that were identified repeatedly in annual internal audits of BMS China between 2009 and 2013.

“Bristol-Myers Squibb’s failure to institute an effective internal controls system and to respond promptly to indications of significant compliance gaps at its Chinese joint venture enabled a widespread practice of providing corrupt inducements in exchange for prescription sales to continue for years,” said Kara Brockmeyer, chief of the Enforcement Division’s FCPA Unit.

The SEC’s order finds that Bristol-Myers Squibb violated the FCPA’s internal controls and recordkeeping provisions.The company consented to the order and also agreed to report to the SEC for a two-year period on the status of its remediation and implementation of FCPA and anti-corruption compliance measures.