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Generic prescription giant to pay more than $283 million to resolve corruption charges

Drug ManufactureTeva Pharmaceutical Industries, the world’s largest manufacturer of generic prescription drugs, and its Russian subsidiary, Teva, agreed to resolve criminal charges and to pay a criminal penalty of more than $283 million for schemes involving the bribery of government officials in Russia, Ukraine, and Mexico.

“Teva and its subsidiaries paid millions of dollars in bribes to government officials in various countries, and intentionally failed to implement a system of internal controls that would prevent bribery,” Assistant Attorney General Leslie R. Caldwell said Thursday.

“Teva’s egregious attempt to enrich themselves failed, and they will now pay a tough penalty,” said William J. Maddalena of the FBI’s Miami Field Office.

Teva executives and Teva Russia employees paid bribes to a high-ranking Russian government official to influence him to use his authority to increase sales of Teva’s multiple sclerosis drug, Copaxone, in drug purchase auctions held by the Russian Ministry of Health, the companies admitted. 

The corrupt arrangement occurred at the time the Russian government was seeking to reduce the amount spent on costly foreign pharmaceutical products, such as Copaxone. Between 2010 and 2012, under an agreement with a repackaging and distribution company owned by the Russian government official, Teva earned more than $200 million in profits on Copaxone sales to the Russian government. In addition, the Russian official earned about $65 million in corrupt profits through inflated profit margins granted to his company.

Teva also admitted paying bribes to a senior government official in the Ukrainian Ministry of Health to influence the Ukrainian government’s approval of Teva drug registrations, which were necessary for the company to market and sell its products in the country. Between 2001 and 2011, Teva engaged the official as the company’s “registration consultant,” paid him a monthly fee, and provided him with travel and other valuable items totaling about $200,000. In exchange, the official used his official position and influence in the Ukrainian government to influence the registration in Ukraine of Teva pharmaceutical products, including Copaxone and insulins.

In addition, Teva admitted it failed to carry out an adequate system of accounting controls and failed to enforce the controls it had in place at its Mexican subsidiary, which allowed bribes to be paid by the subsidiary to doctors employed by the Mexican government. Teva admitted that its Mexican subsidiary had been bribing these doctors to prescribe Copaxone since at 2005.

Teva executives in Israel responsible for the development of the company’s anti-corruption compliance program in 2009 had been aware of the bribes paid to government doctors in Mexico. However, Teva executives approved policies and procedures that they knew weren’t sufficient to meet the risks posed by Teva’s business and weren’t adequate to prevent or detect payments to foreign officials. Teva also admitted that its executives put in place managers to oversee the compliance function who were unable or unwilling to enforce the anti-corruption policies.

Teva entered into a deferred prosecution agreement on the criminal charges. Under its agreement with the U.S. Department of Justice, Teva will pay a $283 million criminal penalty. Teva also agreed to enhance its compliance program, carry out internal controls, and pay an independent corporate compliance monitor for three years.

Teva Russia signed a plea agreement on criminal charges, which requires court approval

In related proceedings, the U.S. Securities and Exchange Commission filed an order against Teva, requiring the company to pay about $236 million for repayment of ill gotten gains to the SEC. 

The combined total amount of U.S. criminal and regulatory penalties to be paid by Teva is nearly $520 million.

Copyright 2016, Rita R. Robison, Consumer Specialist

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