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An Abundance Of Caution

The Justice Department last week issued its first Foreign Corrupt Practices Act Opinion Procedure Release of the year. No. 09-01 concerns a medical device maker wanting to introduce its product to a foreign government. The Requestor is a U.S. company that's a "domestic concern" -- which probably means a privately-held firm. Unlike its few global competitors, it isn't well known in the target country. To introduce itself, it plans to donate samples to government health centers -- ten devices for ten different centers, worth $19,000 each or $1.9 million for all 100 units.

The medical centers will select the 100 ultimate recipients of the devices. All candidates have to be financially needy and generally can't be family members of government officials.

The DOJ said the Requestor's plan won't trigger any FCPA enforcement action. Why not? Because the donated devices won't go to government officials but to needy patients. Bottom line: No foreign official, no FCPA offense.

Sound familiar? It should. The same question came up in FCPA Opinion Procedure Releases No. 97-02 (November 5, 1997) and No. 06-01 (October 16, 2006). We talked about them here. So if the question's been asked and answered twice already, why did this Requestor ask again? Probably because medical device makers are already feeling the heat of the FCPA.

The DOJ and SEC are investigating their overseas sales practices. In 2007, Depuy and four other device makers paid $310 million to settle charges they paid kickbacks to induce U.S. doctors to buy their products. The same year, Johnson & Johnson (which owns Depuy) self-disclosed that "subsidiaries outside the United States are believed to have made improper payments in connection with the sale of medical devices in two small-market countries." So the SEC and DOJ want to know whether the companies bribed overseas doctors at government-owned hospitals to use their products.

Biomet Inc., Stryker Corp., Zimmer Holdings Inc., Smith & Nephew plc and Medtronic Inc. disclosed FCPA investigations during 2007; Wright Medical reported a similar investigation in June 2008.

View a copy of Opinion Procedure Release 09-01 (August 3, 2009) here.
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Full post as published by The FCPA Blog on August 11, 2009 (boomark / email).