Anti-Bribery and Anti-Corruption Laws
What Life Sciences Needs to Know About Anti-Bribery & Anti-Corruption Laws
Compliance is non-negotiable in healthcare. The obligations of life sciences differ from other segments, and the Department of Justice (DOJ) has been targeting pharmaceutical and medical device companies regarding anti-bribery and anti-corruption laws.
The DOJ’s focus on fraud settlements overlaps some of the anti-bribery and anti-corruption laws. Still, it’s critical to understand the individual statutes and what constitutes bribery and corruption in the eyes of the law. A thorough understanding leads to a more proactive stance.
In this post, we’ll uncover those specifics and clarify some areas that now seem gray.
FCPA Bars Payments to Foreign Officials
The FCPA (Foreign Corrupt Practices Act) became law in 1977. Its goal was to make “bribes” from companies to foreign agents in exchange for business illegal. In addition to the anti-bribery provision, the law also has one relating to accounting. This aspect states that organizations must maintain records that “in reasonable detail, accurately and fairly reflect the transactions and dispositions of [its] assets.”
Breaking down the law, you’ll find some areas are unclear and open to interpretation. Regarding enforcement, it’s often a combined effort of the DOJ and SEC (Securities and Exchange Commission).
Who Is an Agent?
The DOJ’s guidelines on who an agent is are open-ended. The definition of a foreign agent is any official or candidate of a foreign political party. It can also pertain to anyone working for or on behalf of a government. That can be a larger group in countries like China, where companies are mostly state-run.
Further, the broad interpretation could even apply to relatives or associates of those officials. Thus, extreme care and caution about business dealings are essential for life sciences.
What Is a Bribe?
The law says a bribe is anything of value, meaning it could include more than just monetary gain. In the statute, there is no minimum amount; rather, a bribe is a bribe. With a wide lane to operate in, buying someone a cup of coffee could be a violation of FCPA.
That’s the extreme and likely not the intention of the law. Instead, its inception was to end bribery in terms of travel gifts or five-star meals.
In many cases, however, payments are necessary to conduct business. To ensure legitimacy, they must be monitored for compliance.
Applying FCPA in the Most Reasonable Manner
A life sciences organization must apply FCPA most reasonably. That requires careful management and documentation of payments in the course of business. You also need to know the role of any payment receivers to define if they are a foreign agent.
Having technology and processes in place to scale this kind of compliance monitoring is beneficial. The larger the company and more interaction with other countries, the more probability for FCPA non-compliance.
What Are the Consequences?
Violation of the FCPA typically results in a payment settlement. There have been several recent cases of note.
Alexion Pharmaceuticals: They paid $21 million to resolve claims they violated the accounting provision of the FCPA.
Cardinal Health: The pharmaceutical company also settled accounting violations, paying $8 million.
Fresenius Medical Care AG & Co: This German-based medical device and equipment company agreed to pay over $231 million to the SEC and DOJ regarding multiple violations of the law over 10 years.
Anti-Kickback Statute Makes Pay for Play Criminal
Another anti-bribery and anti-corruption law applicable to life sciences is the Anti-Kickback Statute. It prohibits payments for referrals relating to any service covered by Medicare and Medicaid.
In the case of pharmaceutical companies or medical device manufacturers, the most common violations occur when groups incentivize clinicians to prescribe or refer. This could be a direct financial payment or lavish gifts. Revenue sharing is also a violation. Some companies in the field attempt to cover up these bribes through speaker programs, an area the DOJ has under a very sharp lens right now. They even issued a Special Fraud Alert for Speaker Programs in November of 2020.
Multiple high-profile fraud settlements have been in the news in the past few years regarding this activity. To heed the DOJ guidance, many organizations rely on speaker program monitoring to ensure there is no illegal activity.
Other schemes under this umbrella involve fake trials or research fees set up by organizations to funnel payments to physicians.
The Stark Law, a Subset of Anti-Kickback
The Stark Law, or Physician Self-Referral Statute, also falls under anti-bribery laws. It prohibits physicians from receiving financial compensation for ordering, referring, or performing some service. Those services include labs, physical therapy, home health, prescription drugs, hospital services, medical equipment, and more.
If there’s a financial relationship between the referrer and the service, it’s illegal. However, there are exceptions. They vary greatly and are something legal counsel should interpret.
Anti-Corruption Concerns with Clinical Trials
Clinical trials are an integral part of life sciences. Even with strong compliance programs in place, sometimes areas of R&D aren’t included. Clinical trials have unique and very real anti-corruption compliance challenges.
In clinical trials, a government agent or official plays a role in every part of the process. There can certainly be risks at the regulatory approval phase. Organizations make payments to certain healthcare professionals (HCPs) during this time who could also be foreign officials under FCPA and other laws.
There are many relationships and stakeholders during this, and life sciences companies must be acutely aware of every component, from academic and healthcare facilities as well as others. Plus, in many cases, these trials are global, which adds more complexity to the scope.
Managing Compliance in Clinical Trials
Ideally, you need to have a specific compliance program around trials. This should include a risk assessment. Next, you’ll need to complete due diligence of trial sites, investigators, committees, and more. Documentation of all these activities needs to be as transparent as possible. The DOJ indicates that those that self-disclose and fully cooperate and fully cooperatewith any investigation will likely receive a presumption of non-prosecution.
Is Your Organization Meeting Anti-Bribery and Anti-Corruption Compliance?
Compliance is a constant process for life sciences organizations. Laws can change, as can interpretations. It’s never an area of the business you can take your eye off, but there are ways to simplify and streamline.
We are compliance experts in the Life Sciences industry, and can help build and support your program. If you would like to learn more about the variety of solutions we offer, click here to schedule a demo.