Affiliations: John Molson School of Business, Concordia University, Montréal (Québec), Canada. Tel.: +1 514 848 2424; ext: 2778; E-mail: D.Peltier-Rivest@concordia.ca
Abstract: This paper analyzesthree recent cases of pharmaceutical corruption and
develops a governance framework, using the fraud diamond theory [7], for the prevention of corruption. Pharmaceutical companies rely
heavily on marketing strategies to gain the loyalty of prescribing doctors
and patients [32]. These aggressive marketing activities
sometimes take an illegal twist by turning into corruption. In 2011, Johnson
& Johnson agreed to pay US$70 million to settle Department of Justice
charges related to foreign bribery. This paper shows that the following
strategies are effective at preventing pharmaceutical corruption: Offering
employee assistance programs and revising performance goals tied to sales or
stock prices; using transformational leadership; offering and certifying
employee training on key company policies and anti-bribery legislations;
using open-door policies and anonymous reporting mechanisms; assessing
corruption risks associated with doing business in the world's poorest
countries and contracting with third-party agents; implementing proper
anti-corruption controls such as segregating the research funding function
from the sales division; and detecting common corruption schemes, such as
fictitious marketing agreements with off-shore entities and sham contracts
with doctors, through the analysis of relevant red flags. This paper
contributes to academia and the forensic accounting profession by discussing
strategies and red flags analyses that should be implemented by
pharmaceutical companies to prevent corruption. It extends previous research
by tying together various strategies into a single framework for the
prevention of pharmaceutical corruption. This framework will help deter
pharmaceutical corruption and improve internal controls in this industry.