The U.S. Department of Justice targeted Alexion — a pharmaceutical company relocating to New Haven in January — for bribery investigations last month, continuing the government’s yearslong trend of looking into pharmaceutical companies for overseas bribery.
In October, the DOJ joined the Securities and Exchange Commission — which had already begun an inquiry in May 2015 — in investigating Alexion for violating the Foreign Corrupt Practices Act, according to the company’s quarterly SEC filing. The FCPA, a 1977 law prohibiting bribery of foreign officials, served as the basis for the DOJ’s recent requests for documents and the SEC’s May subpoena to the biotech company. The six-month investigation into Alexion is among the most recent events in the government’s decadelong trend of cracking down on pharmaceutical companies for FCPA prosecutions, said Rebecca Hughes Parker, an attorney and managing editor of The Law Report Group, a legal issues publication. Though Alexion’s SEC filing does not reveal why the government suspects FCPA violation, if the company is charged it may face a settlement of several million dollars.
“The government thinks that there is a lot of bribery going on. They found it and they started learning more,” Parker said. “When they find a scheme like that, they think that the same scheme is happening in other similar companies in the industry. The more they find the more they keep going.”
Biotech workers abroad are especially susceptible to FCPA violations because of their frequent interaction with foreign health workers, Parker said. Due to the public nature of many foreign health care systems, health care workers are often considered government employees. This means that interactions between pharmaceutical companies and foreign health workers are often under legal suspicion of violating the FCPA.
Parker added the trend began when the government began to discover bribery cases involving American pharmaceutical companies abroad, and then suspected that many similar cases existed. In recent years, several national governments have also begun to prioritize anti-bribery enforcement, though the U.S. remains the leading enforcer of such laws, Parker said. She added that government officials see bribery as one of the more difficult industry practices to eliminate once it takes hold.
Mead Johnson, Bristol-Myers Squibb, Bio-Rad and Stryker are several pharmaceutical companies that have been charged with FCPA violations in the last two years. Mead Johnson and Bristol-Myers Squibb both settled with the SEC this year for over $12 million each after bribing health care workers in China. In October 2013, Stryker paid $13.2 million for violations in five different countries. Over a year later, Bio-Rad settled for $55 million in November after bribing Russian, Thai and Vietnamese officials.
Alexion representatives said in a Friday statement to the News that they are fully cooperating with SEC’s and DOJ’s orders. Alexion did not elaborate on the nature of the investigation. Legal news service Law360 reported the complaints stem from Alexion operations in Japan, Brazil, Turkey and Russia.
“Alexion has long been committed to operating at the highest level of business ethics worldwide and has a robust global compliance program,” Alexion Senior Director of Communications Kim Diamond wrote in the statement.
Alexion’s filings only reveal the company is under investigation for “grant-making” activities, which does not indicate the nature of the suspected violation. In most FCPA cases, biotech employees paid doctors to prescribe drugs or bribed health care officials to clear legal barriers for a drug, said SEC Director of Enforcement Andrew Ceresney in a March 2015 speech. Though certain cases are common, almost any act seeking to gain an unfair business advantage abroad by paying a health care worker would trigger the FCPA, Parker said.
The outcome of the investigation into Alexion will likely take at least another half year. Richard Cassin, an attorney and editor in chief of the FCPA Blog — a platform exclusively dedicated to FCPA cases — said most investigations last between one and two years, though some can last much longer. Both Cassin and Parker said that even if charged, Alexion will likely settle with the SEC and DOJ rather than go to court.
Cassin added that around 150 companies are currently under investigation for the FCPA and that most investigations do not result in charges. In 2015, nine corporations have been charged by either the DOJ or SEC. The fact that the DOJ and SEC are investigating Alexion is not a significant development, considering the number of investigations launched each year, said Mike Koehler, an attorney and founder of the FCPA Professor blog — another platform dedicated to FCPA cases.
If the SEC or DOJ charges Alexion, the results of the investigation will become public. Until then, the investigation is kept private, Cassin said.
“The only way to find out more about an investigation is by what the company says,” Cassin said. “The SEC and DOJ don’t comment.”
Dr. Leonard Bell MED ’94 co-founded Alexion in 1992 to commercialize his research at Yale.