Johnson & Johnson Settles Bribery Complaint

Intriguingly, prosecutors said that Johnson Johnson had provided “significant assistance” in their investigation of others in the industry, resulting in a reduced criminal fine for the health conglomerate. At least a dozen other major drug and device makers are under investigation for similar crimes.

A criminal complaint filed by the Justice Department against a Johnson Johnson subsidiary that makes knee and hip implants quoted internal company e-mails as stating that providing “cash incentives to surgeons is common knowledge in Greece,” and that, were the company to stop paying bribes, “we’d lose 95% of our business by the end of the year.”

In a written statement, the company said that it originally reported its illegal marketing activities to the government in 2007. “We are deeply disappointed by the unacceptable conduct that led to these violations,” said William C. Weldon, the company’s chairman and chief executive.

The case is the latest in a string of criminal investigations into illegal marketing practices by drug and device companies. Again and again, companies have agreed to large-sum settlements in cases involving claims that they bribed doctors in the United States to prescribe or implant medical products in patients who are entirely unaware of their doctors’ financial incentives. With the settlement agreement from Johnson Johnson, prosecutors have now begun penalizing companies in foreign bribery cases as well.

According to statements by the Justice Department and the Securities and Exchange Commission, the payments violated the Foreign Corrupt Practices Act, which outlaws bribes paid to foreign government officials. Since health systems in much of the rest of the world are government-run, doctors are considered government officials.

For Johnson Johnson, the settlement comes at a bad time. The company has issued more than 50 product recalls since the start of last year involving such household brands as Tylenol, Motrin, Rolaids and Benadryl. Last year, it recalled two popular hip implants that a recent study suggested may fail early in close to half of the patients who receive them. The recalls came long after surgeons warned the company that the implants were defective.

Mr. Weldon has denied that the company’s many missteps suggest broader problems in the company’s management or its structure as a set of loosely affiliated subsidiaries. In its statement, Johnson Johnson said that it also “hopes to reach a settlement of a related investigation by the U.K. Serious Fraud Office in several days.” To add insult to injury, the company admitted as part of its deferred prosecution agreement with the government to having paid kickbacks to the Iraqi regime of Saddam Hussein under a United Nations oil-for-food program that investigations have since found was rife with fraud.

Article source: http://www.nytimes.com/2011/04/09/business/09drug.html?partner=rss&emc=rss