The head office of the international pharmaceutical company “Eternity” (hereinafter referred to as “Eternity”) received a hot-line anonymous message about sales managers discriminating against some authorized distributors in a certain Russia's region by distributing a life-saving medication (LSM) “Panacea”.
Furthermore, they provided examples of skyrocketed personal expenses of the sales managers in that region, as well as the complaints of other distributors who had been frequently refused operations by the Eternity sales managers by reason of the LSM allegedly being not in stock.
According to the whistle-blower the LSM “Panacea” had been purchased in the preceding year by the public healthcare facilities in that region under a competitive tender for the LSM “Panacea” delivery won by a distributor Pharmamaker. Despite the fact that there were a number of “Panacea”'s generics produced by other pharmaceutical companies, none of the other participants in that public tender could be more successful than Pharmamaker, their sometimes more attractive pricing proposals notwithstanding.
The head office administration initiated the internal investigation for checking the whistle-blower’s allegations and, correspondingly, detecting eventual violations of anti-corruption laws (in particular, FCPA).
STEP 1
The analysis of accounting data in the Eternity regional branch has detected only the two LSM “Panacea” deliveries (2,504 and 3,202 doses) made during the review period by the regional branch, however, not to a secondary (as it was detected) distributor Pharmamaker, but to the Eternity's primary distributor with a like name – to a company “Pharma-Maker”.
Making use of standard audit right provided by the agreements between pharmaceutical companies and distributors, we have received access to the Pharma-Maker financial data. It was found that it was two weeks after the LSM “Panacea” delivery from the Eternity regional branch that the Pharma-Maker company donated all of 5,706 doses, as a gift, to the public health facility Powderpill located in the same region. It is worth noting that the regional sales managers agreed upon granting of a 50 per cent discount by selling both medication batches, under the pretext that the Pharma-Maker would purchase pharmaceuticals to be then donated to the Powderpill health facility.
STEP 2
The analysis of the public data on the competitive tenders for purchases of pharmaceutical drugs of the LSM “Panacea” type has confirmed that only one tender with specified parameters was held by the public health facility Teresa during the review period. There were two distributors participating in that tender, namely, (1) primary distributor Pharma-Maker, and (2) secondary distributor Pharmamaker. When analyzing the details of the said tender it was detected that:
- despite of the fact that the product name “Panacea” was not specified in the description of the purchased life-saving medications, the unique application form described in the tender documents served actually as a tacit barrier against the distributors of the “Panacea”'s branded equivalents;
- though not legally affiliated, the companies Pharma-Maker and Pharmamaker could be regarded, in the language of the American anti-corruption laws (FCPA), as related companies, because the founders of the said companies have close family ties with each other;
- the number of the LSM “Panacea” doses that were ordered and actually delivered by the secondary distributor Pharmamaker (total of 5,706 doses) corresponded exactly with the number of doses that were previously sold by the Eternity regional branch to the primary distributor Pharma-Maker and then “donated” to the Powderpill health facility.
STEP 3
The analysis of the contracts that the Eternity regional branch concluded with medical officers within the framework of various marketing activities has brought to light that the Eternity regional branch had concluded civil contracts with two medical officers, namely, (1) Mr. Pellet, a chair of the tender committee for the public procurements from the public health facility Teresa, and (2) Mr. Thermometer, a head physician of the Powderpill health facility that received the “donated” LSM “Panacea” products to be then sold through tendering. The subject of those contracts included the services provided by medical officers to the Eternity regional branch and associated with writing a research article on a disease that could be treated by using the LSM “Panacea”. It emerged from publicly available sources that a similar article (however, an extended one) had been published three years earlier by other authors. On the one hand, this fact is indicative of a possible corruption of medical officers (in terms of anti-corruption laws, in particular, FCPA) who, as state employees, could influence the public tender results. On the other hand, a honorarium of several million rubles to have been paid for such an explicit plagiarism can be one more argument allowing us to assert that a total of 5,706 doses of the LSM “Panacea” donated to the Powderpill health facility were the same 5,706 doses purchased later on by the public health facility Teresa through public tender.
STEP 4
We have examined the facts mentioned in the allegations of some regional distributors, interviewed their representatives, and investigated the official responses from the Eternity regional branch managers concerning the LSM “Panacea” stock status. The obtained data made it clear that even though the LSM “Panacea” was available in stock at the Eternity regional branch in amounts exceeding the volumes ordered by distributors as of specific date, the sales managers provided false information aimed at limitation of the number of bidders in the above mentioned tender.
STEP 5
The indicators obtained at investigative steps 1-4 have been corroborated through a “Secret Patient” operation by comparing the batch numbers of the LSM “Panacea” used by the public health facility Teresa for medical treatment with the batch numbers of the LSM “Panacea” that were previously sold at a reduction of 50 per cent by the Eternity regional branch to a direct distributor Pharma-Maker to be then “donated' to the Powderpill health facility.
As a result of the investigation, we have detected the collusion between the Eternity regional branch managers and medical officers of the public health facilities, who were secretly remunerated (honorarium for “writing” article) for public purchases of the LSM “Panacea” from secondary distributor Pharmamaker. Previously, LSM “Panacea” with the same batch numbers had been offered to the Powderpill health facility as a donation of a primary distributor Pharma-Maker.
At present, a criminal case against the involved medical officers and distributors has been opened under the Article 159, part 4, while the Eternity has to continue investigation for detecting similar practice at its regional branch, disgorgement calculation and, consequently, calculating the penalty to be paid according to anti-corruption laws (in particular, FCPA).
