India drugs inquiry could prompt new U.S. scrutiny

By Aruna Viswanatha

WASHINGTON (Reuters) - Global drugmakers could face new U.S. scrutiny after a report from lawmakers in India alleged abuses in that country's drug approval process, lawyers familiar with such investigations said.

A parliamentary panel on Wednesday said officials of the Central Drugs Standard Control Organisation (CDSCO) had been colluding with pharmaceutical companies to speed up approval procedures, allowing some drugs that are not permitted in other countries to go on sale.

The U.S. Justice Department and the Securities and Exchange Commission are conducting extensive inquiries into nearly every major drug and medical device manufacturer for potential violations of a U.S. law that bars bribes to officials of foreign governments, the Foreign Corrupt Practices Act.

Many of those probes focus on accusations of bribery in emerging markets, such as China and Latin America, but dealings in India have yet to come under major scrutiny.

"If the Indian parliament issued a report condemning practices, then I'm sure my clients will be getting calls from the DOJ pretty soon," said one lawyer who works with pharmaceutical companies on such investigations. The lawyer spoke on condition of anonymity, as did others who represent drugmakers in FCPA cases.

Other experts familiar with the Justice Department's workings agreed.

"There is certainly going to be Department of Justice interest, said Howard Sklar, who ran anti-corruption programmes for several major companies and now works at Recommind Inc, which makes software used in corporate investigations.

The 78-page report by the parliament's health committee named several major international drug companies including Eli Lilly and Co. (LLY.N) and Novartis (NOVN.VX). It cataloged a series of procedural failures that it said raised questions about how certain drugs were allowed to be sold in India, but it did not directly accuse the companies of wrongdoing.

"If these Indian drug regulators were in cahoots, then it's not particularly a stretch of the imagination to say that part of the reward for their laxity was money, and that is very clearly a violation of the FCPA," Sklar said.

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India drugs inquiry could prompt new U.S. scrutiny