US-based Bristol-Myers Squibb (BMS) has agreed to pay the Securities and Exchange Commission (SEC) $14.6m to settle charges that its Chinese joint venture (JV) allegedly made improper payments and offered benefits to officials at state-owned and controlled hospitals to increase sales in the country.
The company has agreed to pay the amount to settle the SEC's finding that its JV violated the Foreign Corrupt Practices Act (FCPA), after it reportedly made more than $11m in profits from its misconduct.
SEC said that BMS lacked effective internal controls over interactions with health care providers at its Chinese JV BMS China.
Sales personnel at BMS China have allegedly made payments to hospital staff between 2009 and 2014 in the form of cash, jewellery and other gifts, meals, travel, entertainment, and sponsorships for conferences and meetings.
The SEC said the joint venture had inaccurately recorded the cash and gifts as legitimate business expenses in its books and records of BMS.
The SEC's evidence showed that BMS 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.
The company was also accused of failing to investigate claims by certain terminated employees of the JV and was slow to remediate gaps in internal controls over interactions with healthcare providers and monitor potential inappropriate payments to them that were identified repeatedly in annual internal audits of BMS China between 2009 and 2013.
SEC Enforcement Division FCPA Unit chief Kara Brockmeyer said: "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."
According to the SEC, the $14.6m fine includes the $11.4m in profits plus prejudgment interest of $500,000, and a civil penalty of $2.75m.
For a two-year period, BMS has also agreed to report to the SEC on the status of its remediation and implementation of FCPA and anti-corruption compliance measures.
Last year, UK-based GlaxoSmithKline (GSK) was fined £297m by the Changsha Intermediate People's Court in Hunan Province, China, over bribery charges. The fine follows GSK China Investment (GSKCI) being found guilty by the court of bribing non-government personnel. Under Chinese law, the company offered money or property to non-government personnel, in order to obtain improper commercial gains.
