Some of medtech’s biggest players are getting a beating in the Indian media, where reports this week accused them of turning a blind eye to unethical behavior from their distributors in the country.
A series of reports originating from the Times of India claim companies such as Medtronic (NYSE:MDT), Abbott (NYSE:ABT) and Johnson & Johnson (NYSE:JNJ) have looked the other way when their Indian distributors hiked prices for drug-eluting stents and then used the proceeds to bribe doctors.
The reports focused largely on Medtronic’s devices, claiming the medtech giant let its distributors triple prices on imported DES:
"Stents manufacturer Medtronic Inc. exports the device to India at a cost of ₹30,848 [about $506], which is further sold by the importer Medtronic Pvt. Ltd (IMPL) to local distributor Bhalani Biomedicals Pvt Ltd for ₹67,000 [about $1,099], which are further sold to hospitals for more than one lakh against the Maximum Retail Price of ₹1.62 lakh [about $2,657].
In yet another example, the stents were imported for ₹40,710 [about $668] but patients were charged ₹1.2 lakh [about $1,968] for the device after completing a similar cycle that included companies – Holland-based stent manufacturer Abbott Vascular Devices Holland BV, Abbott Healthcare Pvt Ltd India, distributor Sinocare and Hinduja hospital."
The article further alleged that "the cash thus generated was used to bribe doctors to persuade them to use their company’s devices," adding that Medtronic in particular used distributor Bhalani to "distance itself from the bribery as it went against the corporate ethics Medtronic claims to adhere to."
Medtronic didn’t comment directly on the specific allegations in the Indian reports, but spokeswoman Cindy Resman told MassDevice.com that the company is constantly on the lookout for unethical behavior.
"Medtronic has a comprehensive compliance program and specific compliance standards applicable to employees, distributors and other relevant partners. Our employees and representatives are required to undergo regular training and are provided resources to ensure that they understand our compliance standards and policies and applicable laws," Resman wrote. "Furthermore, the program assesses the conduct of our employees and representatives, including distributors, regularly and is set up to identify inappropriate activity. Medtronic also fully investigates all credible allegations of wrongdoing and takes appropriate disciplinary other remedial measures against employees or business partners found to engage in conduct inconsistent with Medtronic’s policies or applicable law. We do not condone, nor tolerate, improper payments, and we will continue our efforts to ensure compliance with all applicable laws."
The recent allegations date back to a 2012 investigation citing corrupt stent sales practices at government hospitals in Mumbai.
India’s Maharashtra Food & Drug Administration has lobbied to bring medical devices, including DES, under cost-control measures that apply to drugs sold there, but the agency has reportedly not had a response to an investigation submitted last year to the National Pharmaceutical Pricing Authority, according to the International Business Times.
That report included details of alleged overcharging by Medtronic, Abbott, and Johnson & Johnson, which no longer markets DES since its Cordis division bailed on stents a couple of years ago.
A J&J representative referred MassDevice.com to its "Citizenship & Sustainability report," which states that:
"J&J prohibits, directly or indirectly, offering, promising, giving, or authorizing anyone to give anything of value to or for anyone acting in an official capacity for or on behalf of: a national, regional or local government; an agency, department or instrumentality of a national, regional or local government; a government-owned or government-controlled company; or a public international organization to influence any official act (or failure to act), or any decision in violation of his or its lawful duty; or induce the use of his or its influence to affect any governmental act or decision; or secure any improper advantage in connection with business. Furthermore J&J Companies will strictly comply with applicable commercial bribery rules."
Abbott representatives did not return requests for comment.