It’s kind of ironic that rumours of a UK government review of the Bribery Act 2010 ‒ with a view to potentially relaxing the law ‒ are circulating just as pharma company GlaxoSmithKline finds itself under intense scrutiny for allegations of fraudulent behaviour involving Chinese health authorities.
According to the anti-corruption group Transparency International, a ministerial ‘Star Chamber’ is reviewing the Act with the intention of watering it down to ease the burden on small- and medium- sized enterprises. Secretary of State for Justice and Lord Chancellor Chris Grayling has assured the group that the government has no intention of relaxing the UK’s anti-bribery rules, but he hasn’t denied that a review was taking place.
Though a Ministry of Justice spokesperson wouldn’t confirm the existence of such a review either, it has been reported that the review stems from a report published earlier this year by the House of Lords Select Committee on Small and Medium Sized Enterprises, in which the Act was cited by companies as causing uncertainty and putting the UK at a trading disadvantage.
Deltex Medical Ltd, for example, is quoted as saying:
The Bribery Act is a concern because it creates an imbalance with other markets. We support appropriate measures to uphold industry best practice and ethical business practices. However, the terms of the Bribery Act itself potentially restrict trading opportunities—for example in countries such as China and Brazil that do not conform to the same code of practice as the UK. In our experience, we have had to pay to review potential overseas distributors in China. Many Directors of SMEs are rightly concerned about being able to expand export markets whilst conforming to the Bribery Act.
The committee called for post-legislative scrutiny of the Act by a parliamentary select committee “at the earliest opportunity”.
How does this affect pharma/medtech companies?
Pharmaceutical and medtech companies were anxious about the impact of the Bribery Act even before it came into effect in July 2011. At the crux of the confusion is the issue of so-called ‘facilitation payments’, which in many countries are a regular business practice as noted in Deltex’s example above. The UK’s Serious Fraud Office, however, clearly states that facilitation payments, i.e. money or goods given to a public official to perform, or speed up the performance of, an existing duty, are illegal.
For this and other reasons, the Act is viewed as one of the most stringent anti-corruption laws in the world ‒ some say even more so than the US Foreign Corrupt Practices Act (FCPA), which exempts facilitation payments. The Act’s international reach means that the law can be violated even if a payment takes place outside the UK.
Moreover, under the UK law a pharmaceutical or medtech company may be liable to prosecution for failure to prevent bribery if an “associated person” bribes another person with the intention of obtaining (or keeping) business, or an advantage in the conduct of business, for that company. This doesn’t just apply to company employees ‒ it could also include individuals or companies connected to the company such as contractors and suppliers, according to Ministry of Justice guidance.
The GSK case
According to widespread reports, China has accused GSK of bribing government officials, hospitals and doctors via payments through travel agencies to boost sales. On 15 July the company said it was “deeply concerned and disappointd by these serious allegations of fraudulent behaviour and ethical misconduct by certain individuals at the company and third-party agencies”.
GSK has agreed to co-operate fully in the Chinese investigation and in the meantime, it is reviewing all third-party agency relationships. It has also ceased using the travel agencies that have been identified so far in the investigation and is conducting a thorough review of all historic transactions related to travel agency use.