December 6, 2023

Johnson & Johnson Settles Bribery Complaint for $70 Million in Fines

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. Indeed, Johnson and Johnson’s admission appeared to have set off the industrywide inquiry.

Officials at the Securities and Exchange Commission said that Johnson Johnson’s bribes might have harmed public health in several European countries. For years, the company tried to hide its illegal activities by “using sham contracts, off-shore companies and slush funds to cover its tracks,” said Robert Khuzami, director of the Securities and Exchange Commission’s division of enforcement.

The case is the latest in a string of criminal investigations into illegal marketing practices by drug and device makers. Companies have repeatedly settled allegations that they paid kickbacks to doctors in the United States to induce them to prescribe drugs for, or implant medical devices in, patients who are 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. Some top executives in the drug industry have suggested in recent months that the industry’s marketing practices may need to undergo wholesale changes.

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, because doctors in many other countries are government employees.

For Johnson Johnson, the settlement comes at a difficult 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 might fail soon after surgery in close to half of the patients who received them.

Mr. Weldon has denied that the company’s many missteps suggest broader problems in management or in the company’s structure as a set of loosely affiliated subsidiaries.

Also on Friday, Johnson Johnson agreed to pay $7.9 million to settle bribery allegations with the United Kingdom Serious Fraud Office. And it admitted as part of its deferred prosecution agreement with the United States 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.

According to a criminal complaint here and a case summary in Britain, Johnson Johnson undertook an elaborate scheme to pay about 20 percent of the price of the company’s devices to Greek surgeons.

Such bribes were so routine in Greece, according to the document, that an accountant for the company’s Greek sales agent had trouble understanding why he had to disguise the purpose of the money in his statements to Johnson Johnson.

A December 2001 e-mail from a top Johnson Johnson executive stated that he was “very disappointed to read in your proposal references” to bribes “which cannot be mentioned in written correspondence.” Executives debated how to bring its bribes into compliance with the law, with one executive writing, “when we abandon the consultancy, we might as well abandon the business.”

The company also paid bribes to Polish doctors and administrators who served on hospital committees that made purchasing decisions for medical equipment. Some of the bribes included paying for travel arrangements for doctors to attend medical conferences, a common practice throughout the industry. The company also bribed doctors in Romania who prescribed the company’s drugs.

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