* India cites collusion between drug regulator, pharma firms
* US foreign bribery drug probes focus on sales, marketing
* Report could initiate new US inquiries-sources
By Aruna Viswanatha
WASHINGTON, May 10 Global drugmakers could face
new U.S. scrutiny after a report from lawmakers in India alleged
abuses in that country's drug approval process, lawyers familiar
with such investigations said.
An Indian parliamentary panel on Wednesday said officials of
India's drug regulator had been colluding with pharmaceutical
companies to speed up approval procedures, allowing some drugs
that are not permitted in other countries to go on
The U.S. Justice Department and the Securities and Exchange
Commission are conducting extensive inquiries into nearly every
major drug and medical device manufacturer for potential
violations of a U.S. law that bars bribes to officials of
foreign governments, the Foreign Corrupt Practices Act.
Many of those probes focus on accusations of bribery in
emerging markets, such as China and Latin America, but dealings
in India have yet to come under major scrutiny.
"If the Indian parliament issued a report condemning
practices, then I'm sure my clients will be getting calls from
the DOJ pretty soon," said one lawyer who works with
pharmaceutical companies on such investigations. The lawyer
spoke on condition of anonymity, as did others who represent
drugmakers in FCPA cases.
Other experts familiar with the Justice Department's
"There is certainly going to be Department of Justice
interest, said Howard Sklar, who ran anti-corruption programs
for several major companies and now works at Recommind Inc,
which makes software used in corporate investigations.
The 78-page report by Indian lawmakers named several major
international drug companies including Eli Lilly and Co.
and Novartis. It cataloged a series of procedural
failures that it said raised questions about how certain drugs
were allowed to be sold in India, but it did not directly accuse
the companies of wrongdoing.
"If these Indian drug regulators were in cahoots, then it's
not particularly a stretch of the imagination to say that part
of the reward for their laxity was money, and that is very
clearly a violation of the FCPA," Sklar said.
Officials at the SEC and the Justice Department had no
CLINICAL TRIALS MAY DRAW SCRUTINY
When the Justice Department and the SEC sent letters in
April 2010 to several drug manufacturers including Lilly,
Bristol-Myers Squibb Co. and AstraZeneca PLC in
its foreign bribery probe of the industry, it requested
information on countries like Brazil, China, Greece and Russia
but did not include India in that list, people familiar with the
matter said at the time.
Most of those investigations have focused on sales and
marketing practices, people familiar with the investigations
said, rather than the higher-level drug approval issues that
were cited in India.
Some of those cases are wrapping up. Lilly disclosed last
month it was in "advanced discussions" with the SEC to resolve
foreign bribery issues in Poland and other countries.
Johnson & Johnson paid $70 million last year to
resolve FCPA charges that its subsidiaries made improper
payments to healthcare providers employed at state-run hospitals
in countries like Greece and Iraq to induce them to purchase its
medical devices and drugs.
The same factors have not been at work in India, where much
of the booming medical market is privately run, and expensive,
brand-name products are rarely purchased by public hospitals,
the people said.
But the Justice Department has signaled its interest in
examining possible corruption in the clinical trials process,
said John Kelly, a former federal healthcare fraud prosecutor
now in private practice at the law firm Bass, Berry & Sims.
"With clinical trials, you're going to have constant
interaction with either foreign officials or entities that are
operated by government entities," Kelly said. "If they weren't
(looking at it), they will be now."
Novartis said on Thursday it would investigate the drug
approval irregularities alleged in the report. Lilly said on
Wednesday it "followed all appropriate regulatory processes
required by the regulatory agency in India."