Corrupt pharmacists, physiotherapists, doctors and care workers could face up to five years imprisonment if found guilty of corruption or bribery, according to a new law being introduced by the German government. This week, German Chancellor Angela Merkel’s Cabinet signed off on the anti-corruption plan presented by the German Justice Minister. Some commentators say that the laws are a response to a ruling made three years ago by the Federal Court of Justice (BGH) where Germany’s highest court overturned a conviction for a pharmaceutical firm representative who had awarded bonuses to doctors as part of the company’s incentive scheme for prescribing certain drugs, finding that this did not constitute corruption. The new law is specifically designed to strengthen the controls on the interactions between pharmaceutical companies and doctors.

In Australia, earlier this year the Australian Federal Police laid bribery and corruption charges against directors of an Australian company – an almost unprecedented move in Australia. Unlike their regulator counterparts in other jurisdictions (particularly in the US and the UK), the AFP have until now, been very reluctant to exercise their anti-bribery powers, but with a reported further 14 active foreign bribery investigations at the moment (only 9 of those publicly known), the time is ripe for Australia’s regulator to start flexing its powers against bribery and corruption. Neville Tiffen, director with Transparency International Australia, calls this “a wake-up call to all directors and executives, both listed and non-listed companies,” and a warning to check that anti-bribery and anti-corruption compliance programs are up to date, not just for the sake of the company and shareholders, but to avoid potential personal liability as a director. For those in the health and pharmaceutical sector, this should be a particular focus.

Australia already has a robust compliance regime in place with stiff penalties. Bribery and corruption are serious criminal offences under Australian Federal and State laws. Federal law prohibits the bribery of both foreign public officials and Commonwealth public officials. Much like Germany’s new law, some State laws also apply to any person engaging in corrupt activity (whether it involves public officials or not). Foreign bribery offences under the Commonwealth Criminal Code 1995 (the “Code”) prohibits the provision or offering of a benefit, not legitimately due, to a foreign public official. Under section 70.2 of the Code, it is an offence if a person (which includes a corporation) provides or offers a benefit to another person where the benefit is not legitimately due and its intention is to influence a foreign public official in the exercise of their duties to obtain or retain business or a business advantage that is not legitimately due. In addition, some States go further. Part 4A of the NSWCrimes Act 1900, for instance, prohibits “secret commissions” and other corrupt practices and does not need to involve public officials. Specifically, section 249B prohibits a person from corruptly giving or offering any benefit intended to induce or reward the doing or not doing of something. Both the person receiving the benefit and the person giving the benefit are liable to imprisonment for 7 years.

The spotlight on corruption in Australia has intensified recently, with a number of high profile corruption inquiries at both the State and Federal level. The issue of corruption in government and the political sphere has garnered widespread public attention, particularly following the resignation of the New South Wales Premier after hearings of the Independent Commission Against Corruption last year. Greater enforcement of the Foreign Corrupt Practices Act 1977 in the US and the Bribery Act 2010 in the UK (as well as enforcement of those laws internationally) suggests that Australia’s corruption regulator will soon makes its presence more visible.

Those in the health and pharmaceutical sector operating internationally and engaging with public officials in any capacity (or contracting with third parties who do so) are particularly vulnerable to these laws. You need to consider now what further measures are needed to avoid prosecution. In the case of corruption involving foreign officials, this is particularly relevant in circumstances where the current penalties for individuals are up to 10 years imprisonment and/or a fine of up to $1.7 million and for corporations the penalties are significantly harsher, being the greatest of: $17,000,000; three times the value of benefit obtained; or 10% of the company’s turnover in the 12 months prior to committing the offence. Knowing who you are dealing with in international markets will be critical to avoid allegations of corruption or bribery. Recent surveys of those in the health and pharmaceutical sector suggest that the biggest risk influence in 2015 will be the practical implementation of changing regulatory expectations, which puts organisations in a much less certain place about how they provide evidence of compliance with the unknown qualitative expectations. This includes compliance with Australian anti-bribery and anti-corruption laws.

To keep ahead of the game, you should review and update anti-corruption compliance policies, including provisions for anonymous reporting, hotlines and whistleblower policies. Organisations should consider:

  • developing programmes designed to encourage employees to report bribery and corruption issues internally rather than going to the press or regulator in the first instance, ensuring that such programmes include robust anti-retaliation provision;
  • whether it is appropriate to offer incentives to employees for appropriate internal reporting of potential violations and cooperation in any ensuing investigation;
  • implementing a comprehensive action plan that will allow immediate responses to whistleblower tips and ensure an expeditious resolution of any investigations;
  • conducting anti-bribery and anti-corruption training to all staff to ensure everyone is aware of what is allowed, particularly in the context of facilitation payments; and
  • offering regular training on the internal reporting policy and procedures so that employees know the process and the people involved.

Organisations that have effective policies, codes of conduct, compliance programmes and crisis management protocols will be in a stronger position to demonstrate compliance with anti-bribery and corruption laws.