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Pharmaceutical Industry

The laws and regulations surrounding the patenting, testing and marketing of drugs make compliance especially challenging for the pharmaceutical industry. Adding to the complexity is the fact that most drug companies source products from a range of third-party suppliers, many of which are located overseas. These expansive supply networks create specific challenges related to the Foreign Corrupt Practices Act (FCPA) and the U.K. Bribery Act.

Complex corporate structures can complicate matters further. Many pharmaceutical companies are structured as several independent entities grouped under a single corporate umbrella. In such cases, oversight of the supply chain vendor list becomes increasingly difficult.

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Case Study

Company: Smith & Nephew PLC
Charges: Bribing foreign customers
Penalty:

$22.2 million


Founded in 1856, Smith & Nephew PLC is a global medical device company headquartered in the U.K.& The company, which has subsidiaries in 32 countries, specializes in arthroscopy, wound management, trauma, clinical therapy and orthopedic reconstruction products.

On February 6, 2012, both the U.S. and German subsidiaries of Smith & Nephew were indicted for bribing doctors in Greece in order to influence and win business. Specifically, the company was accused of making illegal payments to government-employed doctors in order to gain sales of particular products. Smith & Nephew tried to hide the payments by categorizing them as marketing services. The SEC claims that the misconduct began in 1997.

Smith & Nephew PLC agreed to settle the SEC’s charges by paying more than $5.4 million in disgorgement and prejudgment interest. Its U.S. subsidiary agreed to pay a $16.8 million fine as part of a delayed prosecution agreement with the Department of Justice

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