Did Pfizer Violate Foreign Corrupt Practices Act in Philippine "Bribe" Flap?

Pfizer should be investigated under the Foreign Corrupt Practices Act for its role in an alleged "bribe" to stave off a price-control law in the Philippines, according to a politician from the archipelago nation.

Although this controversy is riven with politics -- virtually everyone involved seems to have some kind of electoral ax to grind -- it's worth asking: Could Pfizer really have violated U.S. law as it lobbied the Philippines government prior to its introduction of a maximum retail price for branded medicines? The answer: possibly.

First, some background from The Inquirer:

In separate letters, [Sen. Manuel Roxas II] formally asked the US government to investigate possible violations by the drug company of the US Foreign Corrupt Practices Act and other laws "in the company's attempts to influence the Philippine legislature and the government into watering down the Cheaper Medicines Law."
... Pfizer had offered Health Secretary Francisco Duque III five million discount cards estimated to cost P100 million or more in exchange for not implementing the MRP on essential medicines.

Pfizer also offered to print posters with pictures of the health secretary and the president on them, BNET noted earlier.

Pfizer will doubtless argue that its actions were routine political lobbying and not bribery. (It has already called the allegations "absurd.") The company's foreign unit was merely negotiating with government officials and making a counteroffer to proposed regulations, Pfizer's lawyers will say.

They have some evidence to back that position. This "bribe" was made in a meeting attended by the Philippines drug lobbying group PHAP, Albert Mateo Jr, president and country manager of Pfizer Philippines, and executives from Roche, GlaxoSmithKline and Sanofi-Aventis. So there are plenty of witnesses. That's important because it indicates that Pfizer was not being secret about its intentions. If the company really had a corrupt intent -- one of the necessary factors under the FCPA -- then why was it advertising that to its rivals?

The "intent" issue is key, because the U.S. Department of Justice's guide to the law says that Pfizer's offer of posters and drug discount cards in exchange for not being subject to the law might indeed meet the DOJ's definition:

... to induce a foreign official to use his or her influence improperly to affect or influence any act or decision.

The issue of "improperly" is also important. Pfizer's accusers say the offer was made to thwart the law; but an argument can be made that the health secretary had the legal right to shape the detail of the list of drugs to be covered under the law. Therefore, leaving Pfizer off the list -- while dubious -- would not actually be an improper act because it would be within the health's secretary's legal discretion. (The fact that Pfizer did not succeed is irrelevant, according to the DOJ.)

In deciding the "improper" issue, however, there's the question of timing. The MRP law had already been passed when the offer was made, according to this story. All the government had to do was draw up the list of affected drugs. If Pfizer made the offer to get off the list -- to evade the law, in other words -- then that may indeed by the type of "improper" act contemplated by the law. (The fact that a Pfizer lawyer was booted out the Philippines parliament for interfering with a vote on the law won't help, either.)

In the unlikely event that the DOJ proceeds with such a probe, here are the possible penalties for those involved: A fine of up to $2 million for the company; executives could face a fine of up to $100,000 and imprisonment for up to five years.

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