Teva: The Bribe Behind the Distributor Payment

In the Teva FCPA case, Teva Pharmaceutical Industries Limited agreed to pay more than $236 million to the Securities and Exchange Commission to resolve foreign-bribery allegations involving Russia, Ukraine and Mexico. The Commission alleged that many bribes were concealed as legitimate distributor payments. If you worked in pharmaceutical sales, distribution or finance, that is the part you may recognize: the payment had a business description, while the government said it bought influence over drug approvals, purchases and prescriptions.

The Commission announced the Foreign Corrupt Practices Act settlement on December 22, 2016. Teva also reached a separate criminal agreement with the Justice Department.

What Teva Was Alleged to Buy in Russia, Ukraine and Mexico

The SEC accused Teva of paying foreign government officials in Russia, Ukraine and Mexico to expand its business. The Commission’s complaint alleged more than $214 million in illicit profits from payments intended to increase market share and obtain regulatory and formulary approvals, favorable drug purchases and prescription decisions. Returning those alleged profits was part of the civil settlement.

In Russia, Teva admitted in its deferred prosecution agreement and statement of facts that it used a distributor’s high margins to pay a government official for influence over government purchases of Copaxone, its multiple sclerosis drug. The official controlled the distributor even though its controlling shares were held in his spouse’s name. The SEC’s complaint alleged that Teva’s approval forms disclosed the spouse’s ownership but omitted the official’s operational control and the influence Teva expected him to exert. Someone who prepared the approval could know what the form left out.

In Ukraine, the SEC alleged a different route: Teva contracted directly with an official who could influence drug registration. The complaint described payments for registering and promoting Teva drugs, including Copaxone, and company-funded vacations to Israel. Teva allegedly recorded the payments as sales and marketing expenses and consultancy fees. Here, the useful connection for an insider is between the services billed and the official authority behind the promised registration.

In Mexico, the SEC alleged that Teva moved payments to government-hospital doctors through its Copaxone distributor after a promotional-budget cut. Teva Mexico gave the distributor additional margins through improper discounts, while a manager supplied a subordinate with doctors’ names, phone numbers and payment amounts. The complaint alleged that the payments bought Copaxone prescriptions and were recorded as reductions of revenue. We see the absurdity in that arrangement: cutting the promotional budget allegedly changed the route to the doctors while keeping the payments going.

The Distributor Payment Hid the Beneficiary

In remarks accompanying the announcement, the SEC’s Miami Regional Office director described that disguise directly:

The industry mechanics explain why that description matters. A distributor buys and resells products, leaving a margin between its purchase price and the customer’s price. In its 2015 pharmaceutical-industry remarks on FCPA payments and controls, the SEC’s enforcement director explained how that margin can fund bribes while the manufacturer’s accounts show ordinary expenses. Someone inside the sales channel may understand what the margin was intended to fund even when the ledger description gives no hint.

In the separate Fresenius Medical Care case, the SEC found that shifting phony doctor commissions to a West African supplier lowered the manufacturer’s recorded expenses and concealed payments to hospital officials. For the person who negotiated the margin or approved the supplier arrangement, the business explanation can reveal what the expense line hides.

Approvals and Public Purchases Put Officials Inside the Sale

Regulatory approvals, formulary placement and favorable drug purchases were among the commercial benefits alleged in Teva’s SEC case. These are different decisions inside the pharmaceutical business. The person controlling market access can hold a different role from the person deciding which drugs a public hospital will purchase.

The SEC’s pharmaceutical-industry remarks describe routine contact between pharmaceutical representatives and doctors, pharmacists and administrators at public hospitals. Those people can decide what the hospital or pharmacy buys. The same remarks identify placement on an approved drug list or formulary as another recurring target for bribery, and describe separate contact with licensing and inspection officials.

For someone working with public customers and government decision-makers, the recipient’s job explains the value of the payment. A contract, an invoice and a transfer can show that money moved. The pending approval, purchasing decision or official relationship can explain what the company expected to get for it.

Prescriptions Can Be the Sales Target

The SEC also alleged that Teva sought favorable prescription decisions. Its earlier pharmaceutical-industry remarks described pay-to-prescribe schemes in which public doctors or public hospitals receive benefits in exchange for prescribing particular medicines or products. The decision being purchased can sit with the clinician whose prescriptions create sales.

In the separate Novartis Hellas case, the parent company’s SEC order described benefits to doctors being reduced or eliminated when the prescription return fell short. The payment description tells one story. The sales team’s measure of success can tell another. In a pharmaceutical bribery case, the relationship between a benefit and the prescribing it was meant to buy can be more revealing than the expense category alone.

The Accounting Controls Behind the Payment

The SEC alleged that Teva failed to maintain proper internal accounting controls to prevent bribes paid to win business. That connects the commercial story to the records and approvals behind the payment. A distributor relationship passes through decisions about why the business needs the intermediary, who approves the compensation, what the payment buys and how finance records it.

For us, the company’s response to a questioned payment is part of the story. The Justice Department’s September 2024 compliance evaluation asks about the business rationale for third parties, compensation, actual performance and continuing oversight. Those questions give substance to due diligence after a distributor has been approved. An employee who knows what was questioned and what happened afterward may connect a warning to the next payment.

What an Insider Can Connect

For the Teva allegations, the central question is what lay behind the distributor payment and which government decision it was intended to influence. We work with the business knowledge that gives payment records their meaning. Different people may know different parts of the transaction:

• The sales or regulatory decision. Who could affect a purchase, approval or prescription, and what the company expected from that person.
• The money and the service. Who approved the distributor’s compensation, who benefited, and what work the payment was supposed to buy.
• The accounting and the response. How the transaction was recorded, what finance or compliance questioned, and whether that changed the relationship or subsequent payments.

The person who approved an invoice, negotiated a distributor arrangement or questioned an expense may understand a connection that the document never spells out. Our whistleblower experts bring that account together with the payment and decision records, then bring in FCPA whistleblower lawyers who understand pharmaceutical sales and accounting.

The Reward Depends on the Kind of Case

For qualifying foreign-bribery information, the SEC whistleblower program can pay eligible whistleblowers awards totaling 10% to 30% of qualifying money collected. We assess the information you hold and the reward program that fits it.

A separate whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers for fraud involving U.S. government claims. We bring in whistleblower lawyers with the expertise your facts require.

You Know What the Payment Was For

If you know what a distributor payment really bought, speak to our whistleblower experts about the sale, the recipient and the accounting. We build the case with you, bring in pharmaceutical bribery whistleblower lawyers, and stay beside you through the process.