After a pandemic-related slowdown in FCPA enforcement action resolutions, we expect FCPA enforcement activity against life sciences companies to accelerate in 2023.
Historically, the life sciences industry has been a priority target for FCPA enforcement, behind only the oil and gas industry. Life sciences FCPA investigations were a major contributor to the 50% increase in FCPA-related enforcement actions from 2016 to 2020. There is no indication that the industry has fallen off the U.S. government’s radar; four life sciences companies have disclosed FCPA-related investigations since 2020. The Biden administration’s announcement of a first-ever United States Strategy on Countering Corruption indicated that the administration plans to dedicate significant resources to anticorruption efforts in the coming years. This is likely to include enhancing multilateral cooperation and diplomatic engagement, which will have an impact on overall life sciences FCPA enforcement activity.
Life sciences companies face unique corruption risks due to the depth and frequency of their interactions with healthcare providers, who the FCPA often considers to be foreign government officials. Recent enforcement actions have made it clear that healthcare provider interactions that are routine in the life sciences industry — such as sponsorships to conferences, speaking engagements, advisory boards, and training — can be considered violations of the FCPA, depending on the scope of the activity and whether a company had corrupt intent to influence prescribing, formulary, or tender decisions by government-employed healthcare providers.
Another area of FCPA risk for life sciences companies stems from the significant increase in clinical trials conducted overseas, including in markets such as India that pose a higher risk historically from a corruption perspective. As U.S. enforcement agencies open more investigations focused on data integrity or clinical trial fraud outside its borders, there is an increased risk that FCPA violations may be identified as part of those investigations. In addition, postmarket or observational studies that do not have a legitimate scientific purpose have given rise to FCPA enforcement actions against life sciences companies and continue to represent a significant risk.
Finally, life sciences companies should pay special attention to their relationships with third-party partners such as distributors, sales agents, customs brokers, and regulatory consultants as well as to joint ventures. Over 90% of FCPA enforcement actions involve third parties, so proper oversight and controls are essential to mitigating FCPA risk.