Bristol-Myers Squibb: The Prescription Targets Behind the Expense Claims

In the Bristol-Myers Squibb FCPA case, the company agreed to surrender $11,442,000 in profits to settle SEC allegations that its China operation funded payments to health care providers through false expense claims. The Foreign Corrupt Practices Act case alleged that sales plans connected the benefits promised to doctors with the prescriptions expected in return. If you worked in sales, finance or compliance, the connection between those plans, the reimbursements and the warnings to management is the part of this case you may recognize.

The Securities and Exchange Commission’s October 5, 2015 order addressed conduct between 2009 and 2014. It described cash, gifts, meals, travel, entertainment and conference sponsorships for healthcare providers at state-owned and state-controlled hospitals. The alleged purpose was to secure new sales and increase existing sales, while the books recorded legitimate business expenses.

The Chinese Joint Venture and the Prescription Business

Bristol-Myers Squibb conducted its China business primarily through Sino-American Shanghai Squibb Pharmaceuticals Limited, a joint venture in which it held a 60% interest. The parent had operational control, including the right to name the president and a majority of the board. The order described a pharmaceutical business whose sales representatives dealt directly with people who could influence prescriptions and drug listings. Its China business grew from more than $200 million in net sales in 2009 to nearly $500 million in 2014.

That is the commercial setting for pharmaceutical bribery involving government doctors. In remarks to the pharmaceutical industry, the SEC’s enforcement director explained that doctors, pharmacists and administrators at public hospitals often decide which products hospitals and pharmacies purchase. A benefit to the prescriber can therefore reach the same person who directs business toward the supplier.

The Bristol-Myers Squibb order alleged that sales representatives offered benefits ranging from food and personal-care items to shopping cards, jewelry, sightseeing and cash. Work plans linked the value of benefits for particular providers to the prescription sales expected. A July 2013 email from a sales representative to a regional manager described the expectation inherited at one hospital:

The SEC also alleged that representatives offered speaking engagements and conference sponsorships in exchange for prescriptions. Pharmacy employees received cash, shopping cards and food as promotional prizes tied to prescription volume, with one representative recording the expense as a “departmental development fee.” We see the same transaction in those descriptions: the sales plan put a price on the prescription, and the expense label gave the payment a more respectable name.

False Expenses Supplied the Money

The SEC alleged that false reimbursement claims generated money for the benefits. This made the expense process part of the alleged payment mechanism, reaching back to the invoices, receipts and event records submitted inside the business.

According to the SEC, a review of travel and entertainment expenses found fake and altered invoices and receipts, including consecutively numbered receipts. The China operation then commissioned monthly reviews after payment, later moving that work in-house.

The irregularities extended to purchase orders, agendas and attendance sheets for meetings with providers that the SEC said likely had not occurred. Reimbursements allegedly entered the China operation’s books as legitimate business expenses and then flowed into Bristol-Myers Squibb’s consolidated accounts. The books-and-records problem crossed the same corporate boundary as the reported earnings.

According to the SEC, some China employees admitted that they submitted false claims and used the money for providers’ benefit. In emails to the China president, former employees alleged that rebates, entertainment and gift cards were the only way to meet sales targets. The order said the China operation did not investigate those claims despite the serious allegations and repeated exceptions.

The Novartis case supplies a close parallel. In its order concerning Novartis, the SEC alleged that Greek sales staff ranked doctors by prescribing preference and volume, treated benefits as investments, and reduced or eliminated them when prescription returns fell short. The useful connection in both accounts is between a benefit and the business expected from its recipient.

The Parent Had the Warnings

According to the SEC, Bristol-Myers Squibb’s annual audits identified substantial gaps in controls from 2009 through 2013, and the results reached its Audit Committee and senior management. The SEC’s account describes failed responses to information already inside the company: ineffective review of travel expenses and gifts, missing payment tracking, weak distributor-rebate controls, and inadequate checks on speakers and sponsorships.

The order said earlier compliance reviews had identified weak approval and documentation of donations, sponsorships and consulting arrangements. They also found that sales-sponsored meetings and conferences were not checked afterward to verify that they had taken place. The order credited later reforms that moved expense review ahead of reimbursement and introduced surprise checks at sales-sponsored events.

Training and staffing offered little reassurance in the SEC’s account. The regional compliance officer was based in the United States and rarely visited China, and much of the limited training was inaccessible to representatives in remote locations. When mandatory anti-bribery training rolled out, 67% of employees in China missed the completion deadline.

An insider may recognize this pattern: a problem reported, then carried into the next sales period. Here, the SEC alleged that audit findings, expense exceptions and employee accounts all pointed toward payments for prescriptions. We would want to understand who received each warning and what happened to the payments afterward.

In the Fresenius Medical Care case, the SEC’s order gives a specific China parallel. It alleged incentive payments to publicly employed providers tied partly to treatments and new patients, with emails suggesting an effort to influence procurement. A 2022 case study in the Journal of Forensic and Investigative Accounting, Fresenius Medical Care: A Case Study on the FCPA, concluded that managers and employees circumvented controls despite flagged transactions and existing policies. For someone reviewing sales incentives, the practical question is what the payment rewarded and whether the controls ever interrupted it.

What the SEC Order Required

The SEC’s case rested on the Foreign Corrupt Practices Act’s rules for honest books and working accounting controls. The SEC alleged that payments for prescriptions were recorded as advertising and promotional expenses, and that the company lacked effective controls over funds advanced or reimbursed to employees.

Alongside the surrender of profits, the order required a $2,750,000 civil penalty. We see a familiar problem with that penalty: it was smaller than the profits the SEC attributed to the conduct. The alleged benefits were a sales investment, with prescription returns written into the plans.

What an Insider Could Connect

The evidence in a pharmaceutical bribery case can sit across sales, finance, medical affairs and audit. A sales employee may understand the prescription target behind an event or gift, while someone processing expenses may recognize the claim that financed it. An auditor or compliance employee may know when management learned that a meeting’s paperwork or a payment’s stated purpose did not hold up.

We work with you to connect that knowledge to the recipient, the business sought, the reimbursement and the response inside the company. In the Bristol-Myers Squibb account, those connections appeared in ordinary work plans, emails, expense reviews and audit findings. Knowing why a payment was approved can give those records a meaning that their accounting labels conceal.

The SEC’s whistleblower program can pay eligible whistleblowers a combined 10% to 30% of qualifying sanctions collected. We work with you to build the foreign-bribery case behind an award claim, connecting what you know to the payments and the business they bought.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. If your information also involves false claims for U.S. government money, we assess that part of the case with you.

You Know What the Expense Was For

If you know how a prescription target became a gift, a speaker payment or a false expense, speak to one of our Whistleblower Experts about what that expense really paid for. We build the case with you and bring in FCPA whistleblower lawyers who understand pharmaceutical sales, public-hospital relationships and the accounts behind them. We stay beside you from the first conversation, working to turn what you know into your strongest FCPA whistleblower case.