Bitter Pill

Rahman Ravelli | View firm profile

Aziz Rahman explains
why the latest pharmaceutical bribery scandal emphasises the need for companies
to have a strong compliance policy.

AstraZeneca has become the latest global drug maker to face
financial penalties as part of a probe into companies that paid bribes to boost
sales. In paying $5.5M to settle the allegations, it has shown both the damage
bribery can cause to a company and the authorities’ determination to punish
such behaviour.

According to US legal papers, the firm had been accused of
making improper payments to health care providers in Russia and China. Perhaps
most tellingly, the papers show that from 2005 until at least 2010, AstraZeneca’s
internal accounting controls were incapable of tracking interactions between
its China and Russia subsidiaries and state-appointed healthcare officials in
those countries.

AstraZeneca sales and marketing staff and company managers
at the subsidiaries designed and authorised schemes to use gifts, conference
expenses, travel and cash to influence drug purchasing.

Confirming the settling of the accusations, an AstraZeneca
spokeswoman, announced: “We began enhancing our compliance programme prior to
the start of the investigation. Strong ethics and acting with integrity are
central to AstraZeneca’s code of conduct.”

Prevention

This seems like a classic case of closing the barn door
after the horse has bolted. In recent years, several drugs companies have
reached multi-million dollar settlements in the US for allegedly violating the
Foreign Corrupt Practices Act. In 2014 Chinese authorities fined
GlaxoSmithKline nearly $500 million for bribery offences.

It’s fair to assume that many, if not all, of those
companies wish that they had had enhanced compliance procedures in place before
rather than after incidents of bribery became apparent. Some of them have had
compliance procedures in place but, as the AstraZeneca statement indicates, it
is clear these were either not fit for purpose or properly enforced.

A carefully devised and well-enforced compliance programme
will go a long way towards preventing bribery being carried out in a company’s
name; regardless of where the company is based or where it trades. At the very
least, it gives the company a chance to identify any wrongdoing which, although
the bribery may have occurred, can still be very valuable.

Leniency

If a company can show that it did all it reasonably could to
be legally compliant, this will be taken into account by investigators. This
can be reflected in a lenient sentence.

But such leniency will only be granted if the authorities
can see evidence of:

* A strong anti-fraud culture in the workplace that has been
promoted at all levels of the company.

* A commitment to being aware of (and combating) the risks
of bribery in the geographical areas and business sectors in which the company
trades.

* Commitment to carrying out due diligence regarding anyone
who works with or on behalf of the company – agents, business partners and those
in temporary roles.

* Clear procedures for reporting wrongdoing, which have been
implemented, regularly reviewed and publicised to all staff and associates.

Self-report

At present, the authorities are keen for companies to
self-report any wrongdoing. With Deferred Prosecution Agreements (DPA’s) now part
of the British legal system, a thorough compliance procedure can help a company
identify problems with bribery and enter into negotiations with the relevant
authorities.

And with the UK’s Bribery Act covering the worldwide
activities of any company based in or doing business in the UK, its scope for
prosecutions is large. This makes it particularly important for every company
with a UK connection to make sure its house is in order – wherever it does
business.

As part of a DPA, the prosecutor can tell a company that has
been acting illegally that a prosecution will be deferred or postponed if
certain conditions are met. The conditions could be a fine, payment of reparation
to victims, introducing new preventative measures or subjecting the company to
reviews or ongoing monitoring.

If a company complies with the DPA, it will suffer a far
lesser punishment than if it did not comply with it – or it was not given the
chance to enter into one. But the chances of a company being given the chance
to enter a DPA will be very slim if its compliance procedures are weak or
non-existent.

At a time when bribery is high on the authorities’ agenda,
compliance has to be seen as the prescription for companies looking to ensure a
healthy and legal future.

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