Device makers under scrutiny in international bribery beef

August 16, 2010 by MassDevice staff

The U.S. government is investigating whether medical device and pharmaceutical companies are guilty of bribing foreign officials: Doctors in foreign countries who work for their governments' healthcare systems.


Federal investigators are looking into payments to foreign physicians by at least three major medical device makers and several pharmaceutical firms, examining whether the practice runs afoul of the Foreign Corrupt Practices Act.

G-men want the skinny on consulting arrangements by companies including Medtronic Inc. (NYSE:MDT), Zimmer Holdings (NYSE:ZMH) and Johnson & Johnson (NYSE:JNJ) with doctors overseas, according to regulatory filings.

Fridley, Minn.-based Medtronic said in an annual filing with the Securities & Exchange Commission that the SEC is expanding an investigation begun in 2007 into "potential violations of the U.S. Foreign Corrupt Practices Act in connection with the sale of medical devices in an unspecified number of foreign countries," adding Turkey, Italy and Malaysia to a list that already included Greece, Poland and Germany. The SEC is seeking "any information concerning certain types of payments made directly or indirectly to government-employed doctors," according to the filing.

Johnson & Johnson, based in New Brunswick, N.J., also revealed a federal probe into its overseas practices, saying it blew the whistle on itself in February 2007, informing the SEC and the U.S. Dept. of Justice that "subsidiaries outside the United States are believed to have made improper payments in connection with the sale of medical devices in two small-market countries, which payments may fall within the jurisdiction of the Foreign Corrupt Practices Act," according to a regulatory filing. Other countries are getting into the act as well, according to JNJ, pursuing the company's disclosures to the American agencies.

And Zimmer came clean in a filing of its own over a federal probe into its foreign sales operations, as well as a pair of investigations by two state attorneys general.