Pfizer agrees to pay $60 million to settle bribery charges

Jeff Horwich Aug 8, 2012

Pfizer agrees to pay $60 million to settle bribery charges

Jeff Horwich Aug 8, 2012

Jeff Horwich: Industry watchers say the drug company Pfizer has just joined a dubious top 10 list. It just became number six on the list of companies forced to give up profits because of foreign bribery. Pfizer has just agreed to pay $60 million to the Department of Justice and the SEC. Pfizer makes Lipitor, among other drugs.

The charge: violating the U.S. Foreign Corrupt Practices Act. In a nutshell, Pfizer’s drug sales reps paid bribes to get Pfizer drugs used by doctors in countries like China, Russia and Bulgaria.

Erik Gordon is a professor at the law school and the Ross School of Business at the University of Michigan. Welcome to Marketplace.

Erik Gordon: Thank you.

Horwich: What kinds of supposedly shady things were Pfizer’s reps doing to win business in some of these countries?

Gordon: You know, some of the things they were doing were actually pitiful. They were bribing doctors with items such as eyeglasses, iPhones, trips to medical conferences that they couldn’t otherwise afford. These are not Beverly Hills doctors; these are doctors that are quite low-paid and are apparently very cheaply bribed.

Horwich: I remember something about a point system, I guess, that doctors could rack up points as they prescribed Pfizer drugs? That sounds like fun.

Gordon: Yeah, it’s pretty funny. In China, you accumulated enough points and I guess depending on how many points you got, you either got a pair of kind of chintzy eyeglasses or some designer eyeglasses.

Horwich: So this kind of stuff is not kosher, according to the U.S. Foreign Corrupt Practices Act. And Pfizer, as I understand it, essentially turned itself in, right? How surprising is that?

Gordon: It’s not real surprising, because the penalties can be pretty severe. So you’re better off going in and saying, ‘Look, here’s what we discovered, we didn’t know it was going on, we don’t condone it, we’re firing the people and we will cooperate with you.’ And then you get a relatively bearable settlement and, in this case, a little pat on the back from the government, which said, ‘Well Pfizer really did a good job of helping us investigate this’ — which is a lot better than having the government hate you and want a big fine and want to send somebody to jail.

Horwich: The U.S. Justice Department suggests there could be more investigations where this one came from. How widespread do you think this kind of stuff is in other countries?

Gordon: I think it’s really widespread because in many countries, the only way you can do business with the government is to bribe government officials. And in many countries, health care is run by the government. When you add those two things together, you have to expect that there’s going to be corruption in a large number of countries across a large number of drug companies — otherwise they just can’t do business there.

Horwich: Erik Gordon with the University of Michigan’s law school and Ross School of Business. Thanks very much.

Gordon: Thank you Jeff.

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