Teva Pharmaceutical Industries, a manufacturer of generic pharmaceutical products, and Russian subsidiary Teva Russia, agreed last week to resolve criminal charges, and to pay a criminal penalty of more than $283 million, in connection with schemes involving the bribery of government officials in Russia, Ukraine and Mexico in violation of the Foreign Corrupt Practices Act, according to the Department of Justice.
According to the companies' admissions, Teva executives and Teva Russia employees paid bribes to a high-ranking Russian government official intending to influence the official to use his authority to increase sales of Teva's multiple sclerosis drug, Copaxone, in annual drug purchase auctions held by the Russian Ministry of Health.
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The arrangement occurred at the same time the Russian government was seeking to reduce the amount spent on costly foreign pharmaceutical products, such as Copaxone. Between 2010 and at least 2012, due to 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. Moreover, the Russian official earned approximately $65 million in profits through inflated profit margins granted to the official's company.
Teva also admitted to paying bribes to a senior government official within 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 things of value totaling approximately $200,000. In exchange, the official used his official position and influence within the Ukrainian government to influence the registration in Ukraine of Teva pharmaceutical products, including Copaxone and insulins.
In addition, Teva admitted that it failed to implement an adequate system of internal 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 least 2005.
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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, according to the DOJ. Nevertheless, Teva executives approved policies and procedures that they knew were not sufficient to meet the risks posed by Teva's business and were not adequate to prevent or detect payments to foreign officials. Teva also admitted that its executives assigned managers to oversee the compliance function who were unable or unwilling to enforce the anti-corruption policies that had been put in place.
Teva entered into a deferred prosecution agreement in connection with criminal information, filed last week in the Southern District of Florida, charging the company with one count of conspiracy to violate the anti-bribery provisions of the FCPA and one count of failing to implement adequate internal controls. Per its agreement with the department, Teva will pay a total criminal penalty of $283,177,348.
Teva also agreed to continue to cooperate with the department's investigation, enhance its compliance program, implement rigorous internal controls and retain an independent corporate compliance monitor for a term of three years.
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Teva Russia has signed a plea agreement in which it has agreed to plead guilty to a one-count criminal information, also filed last week in the Southern District of Florida, charging the company with conspiring to violate the anti-bribery provisions of the FCPA. The plea agreement is subject to court approval. The case was assigned to U.S. District Judge Kathleen M. Williams of the Southern District of Florida and Teva Russia's initial court appearance has been scheduled for Jan. 12, 2017.
In related proceedings, the U.S. Securities and Exchange Commission filed a cease and desist order against Teva, whereby the company agreed to pay approximately $236 million in disgorgement to the SEC, including prejudgment interest. Thus, the combined total amount of U.S. criminal and regulatory penalties to be paid by Teva is nearly $520 million.
The announcement was made by Assistant Attorney General Leslie R. Caldwell of the Justice Department's Criminal Division, Assistant Director Stephen Richardson of the FBI's Criminal Investigative Division, and Assistant Special Agent in Charge William J. Maddalena of the FBI's Miami Field Office.
Twitter: @JELagasse