The world's largest pharmaceutical companies are facing a corruption investigation in the United States over claims that the hospitality lavished on those who prescribe their treatments could constitute bribery.
Britain's two biggest drug groups, GlaxoSmithKline (GSK) and AstraZeneca, are among those facing the investigation, which is being carried out jointly by the Department of Justice (DoJ) and Securities and Exchange Commission (SEC). The investigation is thought to centre around allegations that drugs companies might have contravened the Foreign Corrupt Practices Act (FCPA), which limits their ability to spend on such "soft' inducements" as hospitality, charitable donations and other non-business activities.
The list of the companies under investigation contains many of the global pharma industry's biggest names: Pfizer, Bristol-Myers Squibb and Eli Lilly are among those under the spotlight.
The DoJ is looking into claims that the industry has for years ignored obligations under anti-bribery legislation, and that the situation is so stark, some of the hospitality extended to those that buy treatments could amount to bribery.
The probe is into activities outside the US. If found guilty, the industry could face fines totalling millions of dollars.
Both GSK and AstraZeneca acknowledged the investigation yesterday. It is understood that GSK received a letter at the end of April, which said that the DoJ was making preliminary inquiries under the FCPA.
"GSK confirms that investigations by the US Department of Justice and the Securities and Exchange Commission regarding the sales and marketing of pharmaceutical products outside of the USA have commenced," the group said in a statement. "These inquiries relate to the USA Foreign and Corrupt Practices Act. GSK has been contacted by these agencies in this context and is helping with the preliminary inquiries."
A spokesman for AstraZeneca, said: "AstraZeneca plc has received inquiries from the US Department of Justice and the Securities and Exchange Commission in connection with an investigation into Foreign Corrupt Practices Act issues in the pharmaceutical industry. AstraZeneca is cooperating with their inquiries."
The group pointed out that it had made the disclosure as far back as March, when it reported its first-quarter results.
Analysts downplayed speculation that the investigation could lead to large fines, adding that soft inducements are regarded as normal.
"As part of their continuous career development, physicians attend medical conferences once or twice a year," said Savvas Neophytou of Panmure Gordon.
"Often the pharmaceutical industry pays for physicians' travel expenses and meals," he explained. "At such conferences, drug reps often hand out corporate toys as learning aids when physicians complete certain tasks in exercises often designed to promote a company's product."
Mr Neophytou added: "Is this clever marketing or bribery? In our view most physicians remain fiercely independent and take part in such activities for what they were intended: to comprehend better new treatment guidelines and up-to-date medical data.
"Even if the industry is found to have crossed some lines, we take examples from similar FCPA investigations that to conclude the investigation is likely to take a number of years and could result in penalties that the industry should be able to absorb easily."
News of the investigation did little to upset investors as GSK's share price gained 2.38 per cent to close the day on 1,224.5p. AstraZeneca's shares lost just 0.02 per cent, ending the day on 3,295p.