As a follow-up to Sean Griffin’s blog post on International FCPA Enforcement, I wanted to relate some information regarding Japanese companies in the healthcare space.
Japanese companies who are expanding their medical, pharmaceutical, life sciences and other healthcare-related businesses inside and outside of Japan confront a particularly complex set of FCPA compliance issues. Many healthcare-focused entities in Japan and across the globe are either owned or controlled by government agencies so that their employees are often considered “foreign officials” under the FCPA Resource Guide and the Japanese Unfair Competition Prevention Act (UCPL). As Japanese companies and joint ventures acquire healthcare businesses in the U.S. and other countries, it is becoming more important that the operations and policies of these acquisition targets should be closely examined for compliance with the FCPA and the UCPL. For example, it is common for healthcare companies to seek expedited approval of manufacturing practices, laboratory practices, clinical protocols, pricing and prescribing practices, and marketing materials from regulatory officials in many countries. It also common for healthcare companies to provide grants to healthcare professionals performing promising research, to make charitable donations to hospitals and research institutions, and to invite healthcare professionals to educational conferences and meetings. Healthcare companies sometimes use agents or consultants to seek expedited approvals, identify and recommend research partners, grant recipients and to organize conferences and meetings. Many of these activities have the potential to create FCPA and UCPL compliance challenges, as pharmaceutical companies such as Eli Lilly and Pfizer discovered from their multi-million dollar FCPA enforcement penalties.
When Japanese healthcare companies are negotiating acquisitions or joint ventures and are performing due diligence for those transactions, it would be wise to keep in mind the hard lessons-learned from recent FCPA prosecutions, and the likelihood of increased enforcement under the UCPL. In the healthcare area, this means examining in due diligence: (1) past expenditures on regulatory approval “facilitation” payments; (2) procedures for reviewing and approving expenditures on conferences and entertaining, (3) past expenditures on grants and charitable donations, and (4) the payment and supervision of consultants who are involved in the above activities. Assessing the strength of a company’s FCPA compliance and monitoring policies, training programs and other internal controls could provide important reassurance that prospective healthcare business partners and acquisition targets do not pose a high risk for FCPA and UCPL enforcements.
Japanese healthcare companies should remember the examples of Eli Lilly and Pfizer, and take appropriate precautions.
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