Transparency International’s Global Corruption Report 2006 tackles corruption in pharmaceutical sector

Background paper

Geneva, Switzerland, 10 May 2006

Background Paper

Corruption in the regulation, procurement and promotion of pharmaceuticals and medical equipment wastes scarce health resources and can harm patients if they are prescribed unsafe or unnecessary drugs.

Regulation
Heavy government regulation in the pharmaceutical chain – while essential to safeguard the population against sub-standard drugs and unfairly priced goods – makes the sector vulnerable to corruption. If regulators are subject to pressure from commercial groups, health objectives can be compromised.

This can take place in the registration process when the labelling, marketing, usage, warning and prescription requirements for a drug are regulated. In 2004, for example, in the Indian state of Karnakata, the Office of the Drug Controller authorised the use of sub-standard drugs because the drug manufacturers had paid bribes.

Corruption also takes place in the drugs selection process. In Albania, a ministry of health official claimed in 2003 that offers had been made to buy the not-yet-approved list of new members appointed to the national committees for drug nomenclature and drug reimbursement. The bribers wanted the list so that they could individually approach new members to try to influence their selection decisions.

Procurement and distribution
OECD countries spend an annual average of US$ 239 on drugs per person. In developing countries the figure is lower, US$ 20 on average and US$ 6 in sub-Saharan Africa, but represents the largest public health expenditure after personnel costs in most low-income states, and often the largest household health expenditure overall. The large sums of money involved make procurement and distribution of medicines an attractive target for corruption.

In June 2004 the pharmaceutical company Schering-Plough agreed with the US Securities and Exchange Commission to pay a fine of US $500,000 for violations of the Foreign Corruption Practices Act. The company made payments to a Polish charity headed by the director of a regional state-run Polish health authority. The SEC alleged that these payments were made to induce the director to buy Schering-Plough Poland’s products for his health fund.

Kenyatta National Hospital in Kenya lost over US $12 million to procurement fraud between 1999 and 2002.

Marketing practices
The prescribing behaviour of medical professionals, who are frequently paid poorly under national health care systems or who must pay for expensive training programmes to qualify, may be affected by aggressive marketing techniques by pharmaceutical companies. These techniques include offers of dinners and travel, fees for speaking at conferences and financial support for research. These techniques can create a sense of indebtedness that influences prescribing practices of physicians. In the United States, the pharmaceutical, device and biotechnology industries spend some US$ 16 billion per year marketing to physicians.

Another form of corruption threatening the pharmaceutical industry occurs during clinical trials. Doctors are often paid by pharmaceutical companies to recruit patients for clinical trials or sit on clinical trial boards while simultaneously on the payroll of the manufacturing company in question.

Recommendations

Companies, governments and international health organisations must work towards the harmonised regulation of pharmaceutical products on the international market;
Whistleblower mechanisms and protection must be introduced;
Conflict of interest rules must be introduced for physicians and researchers, disqualifying individuals or groups with an interest in the manufacturer from participating in clinical drug trials;
Pharmaceutical companies must be obliged to report all financial contributions made to medical research units;
The pharmaceutical industry must prohibit all gifts to physicians, even items that might be considered useful in a doctor’s practice or education;
Regulators and health officials must refrain from consultations with the drugs industry for anything except scientific matters so that health policy is not unduly influenced by the financial concerns of pharmaceutical companies; and
Companies must sign up to and implement the Business Principles for Countering Bribery, through which enterprises prohibit bribery in any form, whether direct or indirect, and commit to the implementation of a programme to counter bribery.

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