The same day that the 2020 Resource Guide was released, the Securities and Exchange Commission (SEC) announced it had settled a Foreign Corrupt Practices Act (FCPA) enforcement action involving Alexion Pharmaceuticals Inc. (Alexion) who agreed to pay more than $21 million to resolve charges that it violated the books and records and internal accounting controls provisions of the FCPA. According to the SEC Press Release, the case was resolved via a Cease and Desist Order (Order) where Alexion “agreed to cease and desist from committing violations of the books and records and internal accounting controls provisions of the FCPA and pay $14,210,194 in disgorgement, $3,766,337 in prejudgment interest, and a $3.5 million penalty.” Yesterday I begin a two-part blog post series looking at this enforcement action by reviewing the bribery schemes. Today I conclude by considering how the use of data analytics could prevent these types of corruption schemes from even getting off the ground.

Turkey

Alexion Turkey used a sales program called the Named Sales Program (NSP) to mask its corrupt payments to sell its Soliris therapy. Alexion Turkey illegally paid Health Care Providers (HCPs) employed at state-owned healthcare institutions for services, including research and educational events to get through this process. This bribery scheme led Alexion Turkey to hire a consultant to facilitate the payment of bribes. It was accomplished by paying the consultant fees and alleged expense reimbursements.

How could data analytics have helped here? The most basic way would be to test the expenses charged back by the consultant against other similarly situated consultants. Such benchmarking is straight forward with a comparison of the fees and expenses charged back to the company for reimbursement. From there, a compliance professional could next consider the HCPs the consultant had formal relationships with and test the number of products prescribed or sold through those HCPs.

According to the Order, each patient’s application to begin Soliris therapy required review and approval by HCPs appointed to serve on commissions in Turkey’s Ministry of Health, separate approvals to pay for the prescription and recurring approvals to continue the patient on Soliris therapy. The Order noted, “The Consultant passed a portion of these funds on to Turkish government officials, in the form of cash, meals, or gifts, to secure favorable treatment for Soliris.” The compliance function could review the timing of the illegal payments, even if they were masked as legitimate business entertainment for instance, to see if approvals were given at or near the time of such business entertainment or expenditure. Finally, “These HCPs were responsible for approving or denying patient prescriptions for Soliris and had influence over key regulatory matters, such as treatment guidelines and reimbursement criteria.  Alexion Turkey paid these HCPs to influence them to approve patient prescriptions and support regulatory actions favorable to Soliris.” Once again, a simple correlation could be run to see if corrupt payments were made at or near the time that a quid pro quo was paid back to Alexion.

The consultant used this money as a slush fund to make bribe payments in the form of cash, meals, or gifts to HCPs to secure favorable treatment for Soliris. Certain Alexion Turkey employees recorded these payments inaccurately in the books and records. In one of the most improbable scenarios recently seen in a FCPA enforcement action, one “Alexion Turkey manager directed that the description of the Consultant’s claimed expenses should be written in pencil. The use of pencil would allow the description of the expenses to be easily changed or concealed.” HCPs were paid over $100,000 and Alexion Turkey made some $7.5 million in ill-gotten gains as a result.

Russia

In Russia, the bribery scheme was a bit different. The Order noted, “Certain state-employed HCPs also served in official roles at the regional and federal levels of the Russian government healthcare system. These HCPs provided expert opinions relied upon by decision-makers regarding the allocation of regional healthcare budgets and the regulatory treatment of Soliris.  Alexion Russia senior managers believed that these HCPs had decision-making authority regarding regional healthcare budgets and regulatory decisions.” This is a variation of the Key Influencer bribery scheme used by Novartis in Greece.

Yet once again, a very straight-forward approach could be used. Simply correlate the dates of payments, entertainment or any other thing of value provided to these officials and the dates of their actions back which promoted Alexion products. You could even start with a chart listing dates of benefits provided to the corrupt HCP(s) and then date of benefit back to Alexion, regardless of what that corrupt act was for the company.

Alexion Russia paid HCPs employed at state-owned healthcare institutions for services, including research, consulting on specific topics, and hosting educational events and activities. Here, in addition to the correlation of corrupt benefits provided to the HCPs with the benefits provided back to Alexion, the compliance professional could look at the overall spend on educational events and activities. Any sophisticated gift, travel and entertainment recordation system provider would be able to help you understand when the total amount paid looks askance.

Brazil and Colombia

Finally, there were bribery schemes involving Alexion Brazil and Alexion Colombia. Here the local business units either created or directed third parties to create inaccurate financial records concerning payments to third parties. In one instance, Alexion Brazil caused a PAO to pay for the manager’s personal expenses for alcohol and personal travel. To fund this bribe, they had the corrupt manager submit a fictitious invoice, which was then reimbursed by Alexion Brazil. In another, a senior manager “directed a PAO to submit an invoice that falsely described that the funds would be used for “legal support” services. This inaccurate invoice allowed Alexion Colombia to approve the payment locally instead of obtaining approval for the payment through the global grant process, as required by Alexion’s policies.”

Any international corporation worth is salt will run data on its foreign business unit expenses. Even if corrupt payments are hidden in such apparently legitimate expenses, the power of data analytics is to identify anomalies for further investigation. This means that if legitimate expenses increase significantly as their payment is used to fund bribery, a robust but even high-level data analytics approach would uncover the “patterns in raked leaves” and allow a deeper dive investigation.

The fact that compliance functions did not previously have access to this data or was seen as somehow outside the compliance function’s remit simply no longer is valid. In the 2020 Update to the Department of Justice’s (DOJ’s) Evaluation of Corporate Compliance Programs it asked,  under the section entitled Data Resources and Access, the following questions Do compliance and control personnel have sufficient direct or indirect access to relevant sources of data to allow for timely and effective monitoring and/or testing of policies, controls, and transactions? Do any impediments exist that limit access to relevant sources of data and, if so, what is the company doing to address the impediments?

The clear import is that a compliance professional must have access to the data and then actually do something with it going forward.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2020

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