Now that the fanfare is over, it has been suggested by several commentators, including Jonathan Russell in The Telegraph, that the Serious Fraud Office (“SFO”) will need to take “a big scalp” before the Bribery Act becomes a real deterrent to companies carrying out corrupt activities. Richard Alderman, the Director of SFO, accepted this when, speaking to The Telegraph, he emphasised that the SFO will be going after, “big companies, with big pockets that are capable of engaging in big acts of bribery.”
In a previous post, I identified the construction and extractive industries as being among those whose companies are most likely to use legal or illegal payments to influence the state. Another, whose ‘big companies’ may soon find themselves in the spotlight for all the wrong reasons, is the pharmaceutical industry.
In a recent article that appeared in the Independent on Sunday, Brian Brady and Jonathan Owen highlighted that the Bribery Act could restrict, if not bring to an end, the lavish hospitality offered by the pharmaceutical industry to healthcare staff, who influence how the UK’s annual National Health Service (“NHS”) drugs budget of £12 billion is spent. While, unsurprisingly, the relevant NHS staff insist that they are not swayed by hospitality, the reality is that drugs firms would not spend the billions that they do worldwide if they did not expect to see some return on their ‘investment’.
In this regard, Brady and Owen note that, while British drugs companies do not disclose spending on hospitality and sponsorship, figures from US company reports reveal that, in 2010: Bristol-Myers Squibb spent £2.24 billion on “marketing, selling and administrative costs"; and, Merck spent £1.6 million on grants, donations or payments to more than 146 health institutions and patient organisations in the UK. While such figures do not, of themselves, evidence any wrongdoing on the part of the drugs companies in question, the scale of them, and the fact that they potentially relate to contracts issued on behalf of the NHS (a state organisation), means that the drugs companies will undoubtedly find themselves on the SFO's radar. Further, they would certainly fall within the category of ‘big companies, with big pockets’.
This issue has been recognised by the trade bodies representing the drugs industry, the Association of the British Pharmaceutical Industry (“ABPI”) and the Prescription Medicines Code of Practice Authority (“PMCPA”). The recent publication of a memorandum of understanding by the ABPI and the PMCPA, which was prepared in consultation with the SFO, highlights how the SFO intends to act in relation to breaches of the ABPI’s code of conduct. In it, there is a general acceptance that while, "...sensible proportionate promotional expenditure is entirely legitimate and not outlawed by the Bribery Act," and that the SFO, "...will not routinely intervene in matters covered by the code," it, "...reserves the right to take action if the issue is deemed serious enough to merit SFO investigation".
Such scrutiny is nothing new to the pharmaceutical industry. In August 2010, it was reported by the Financial Times that the US Department of Justice ("DOJ") is scrutinising payments by leading pharmaceuticals companies for hospitality, consultants, licensing agreements and charitable donations in markets around the world as part of a wide-ranging corruption probe.
The SFO and DOJ have already made it clear that they will be cooperating with regard to their investigations and, consequently, any pharmaceutical companies that are found in breach of the Bribery Act may also find themselves being investigated and prosecuted under the equivalent US Foreign Corrupt Practices Act ("FCPA"). They may then find that their pockets are not quite so deep once the SFO and DOJ are finished with them.