US, UK, China stepping up probes into food, drug companies: lawyers

US, Britain and China step up investigations of food and drug sectors

PUBLISHED : Monday, 21 October, 2013, 3:56am
UPDATED : Wednesday, 23 October, 2013, 7:11am

US, British and Chinese authorities are stepping up investigations of corruption in the food and drug industry and other sectors on the mainland, according to speakers at a conference in Beijing last week.

US authorities started 10 investigations under the US Foreign Corrupt Practices Act (FCPA) in China in recent years, said John Tan, counsel with Reed Smith, an international law firm. Also this year, they began investigating 11 pharmaceutical firms and medical device makers globally under the act, he added.

FCPA is a US law forbidding companies with a US connection from bribing officials in countries outside America.

In recent years, investigations under the act had focused on Asia and the life sciences industry, Tan said.

"The US Department of Justice believes there is significant corruption of drug firms overseas and this is a priority," a former US Department of Justice official had said in a speech.

In 2012, pharmaceutical giants Eli Lilly and Pfizer paid a combined US$74 million in fines to US authorities as a result of FCPA investigations into the bribing of officials in various countries including China, according to the Securities and Exchange Commission (SEC).

In August, Eli Lilly said it was "deeply concerned" at Chinese media reports that it had bribed doctors on the mainland. Three medical device firms were also fined for FCPA violations last year, the SEC's website said.

Last year, the SEC received 324 whistle-blower complaints, of which 27 came from China, Tan said. China was the source of the fourth-most whistle-blower complaints to the SEC last year.

Meanwhile, a new whistle-blower law for food safety took effect in Shanghai in January, making the city one of the first regions in China along with Sichuan province to have such a law, said Helen Zhang Haixiao of mainland law firm Zhong Lun.

"The central government is making Shanghai a test bed for new laws," said Zhang. Under Shanghai's whistle-blower law, a monetary reward of 500 yuan (HK$630) to 200,000 yuan was given in the case of a successful prosecution, she said.

On the first day in January the Shanghai whistle-blower law took effect, 24 complaints about food safety were received, Zhang added.

Britain's Serious Fraud Office (SFO) was currently considering six investigations into potential violations of the Bribery Act, a British law similar to FCPA, Tan said.

The Chinese government is investigating British drug giant GlaxoSmithKline for alleged bribery, rendering the company vulnerable to the Bribery Act.

"The new leadership at the SFO is more aggressive about the UK Bribery Act," said Tan.

Even drug companies not under investigation were being affected by the Chinese government's investigation of pharmaceutical firms, said Joshua Berlin of Elsevier Business Intelligence.

Correction: An earlier version of the story contained several errors: US authorities are pursuing 10 investigations under FCPA that started in recent years, not in the last year. The investigations involve both pharmaceutical and medical device makers. British authorities are considering, rather than conducting, six investigations. And the first quote attributed to John Tan was a paraphrase of a speech given by a former US Department of Justice official.