The vast profits to be made from pharmaceuticals encourage sharp business practice. Great caution is needed when appraisal is made of pharmaceutical companies such as AstraZenica, Allergan, Merck, GlaxoSmithKline, Pfizer and the hundreds of other brand names. Indeed a cursory glance at the very lengthy list of worldwide pharmaceutical companies will reveal that there must be a huge market for their wares. In the annual Fortune 500 survey the pharmaceutical industry has regularly made an appearance (Fortune Global 500 2007). Sharp business practice is routinely employed by these pharmaceutical giants.
In December 2010 the premises of Astrazenica were raided by EU officials investigating collusion and price rigging (Duke 2010). A series of co-ordinated raids on Astrazenica offices in Europe unfolded as competition officials swooped without warning. The probe centred on a heartburn medication known as Nexium. Astrazenica deny any violation of EU antitrust rules that prohibit restrictive business practices. If found guilty the companied involved will face a hefty fine. The EU suspects that they planned to delay the entry of a generic drug into the market place. Generic drugs are copycat versions of drugs that are manufactured once the original patent has expired.
This causes the original price to plummet. The EU believes that stalling tactics have been used to delay the entry of generic copies of medicines into the markets in clear violation of competition rules. The very important implication of this sharp business practice is that health authorities such as the NHS lose billions of pounds a year as generic copycat versions are usually much cheaper. The makers of well known heartburn remedy Gaviscon, Reckitt Benckiser, were recently fined ten million pounds for over-charging the NHS (Tobin 2010).Clearly it is in the interests of pharmaceutical companies to behave themselves as such scandals invariably lead to a fall in the share prices.
The Serious Fraud office (SFO) launched an eight year long investigation into five drug companies known as Operation Holbein in 2002 (SFO 2002). More than a million computer drives and files were seized from the homes and offices of the six companies involved (Bowers 2005). The police arrived with search warrants for six pharmaceutical companies but no arrests were made. The six companies accused were Generics U.K. Ltd., Kent Pharmaceuticals Ltd., Regent-GM Laboratories Ltd., the Gold Shield Group Plc., Norton Healthcare Ltd., and Ranbaxy U.K. Ltd. The SFO accused the drug companies of conspiring to defraud the NHS through a price fixing cartel. Unfortunately for the SFO the case was thrown out of court on a technicality by Lord Justice Pritchard (Goswami2011) leaving an eight year investigation in tatters. The reason that the case failed was that the indictment by the SFO was for price-fixing and price-fixing in itself is not a criminal offence. This defeat in a Court of Law has also has caused speculation as to the future of this Government body. The case was a very expensive one but all is not lost a fortunately the NHS has managed to recoup £34 million from the drug companies with the assistance of the Department of Health with civil as opposed to criminal proceedings. The civil proceedings were simple because the drug firms did not have a case and could settle without accepting liability. It is rather touchingly poignant that the operation was probably named after a “portrait of a gentleman” by the artist Hans Holbein that hangs on the wall of the office of the SFO deputy chairman. If only there were more true gentlemen in the unscrupulous world of business. The SFO were right to attempt to bring criminal proceedings against these ruthless companies that were attempting to milk the NHS of billions of pounds with the price-fixing of drugs such as Warfarin that is used to thin the blood in those with thrombosis (Bowers 2005). Altogether at least thirty drugs were involved at great expense to the struggling NHS. Although the SFO was unsuccessful in this case it seems that harsh criticism of this taskforce by journals such as The Lawyer is unmerited.
The SFO has a long list of successful prosecutions to its credit. These include the sentencing in 2008 of five men involved in a ten billion US dollar worldwide Ponzi scheme. Two of the men were former British policemen and one was even a lawyer. The fraudsters were selling gold shares, a commodity, that had did not exist and had not even been mined. Ponzi schemes are fraudulent investment scams that pay the investors dividends using other investors` money rather than from the profits of the actual business venture itself. In effect they are robbing Peter to pay Paul. In some cases there is not even a genuine business venture and the whole edifice is as flimsy as a pack of cards. It is difficult to comprehend that there are so many criminals willing to perpetrate such scams upon naïve and trusting investors. Other high profile examples of Ponzi frauds are the Enron scandal and the Madoff scandal in America.
No comments:
Post a Comment