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Former DOJ FCPA Unit Chief Calls On Enforcement Agencies To Consider Domestic “Safe Harbors” In FCPA Matters Involving Life Sciences And Healthcare Companies


It is as predictable as the sun rising in the east and dogs barking.

A former DOJ or SEC enforcement official leaves the government for private practice and criticizes certain aspects of FCPA enforcement and/or make recommendations for FCPA reform.

Patrick Stokes (Gibson Dunn and the DOJ’s former FCPA Unit Chief as well as the DOJ’s principal representative at the OECD Working Group on Bribery) is the lead author of this recent article published in Health Lawyer titled “Safe Harbors (And Other Strategies) For Life Sciences And Healthcare Companies In the International Anti-Corruption Storm.”

In it, Stokes and his co-authors call on the FCPA enforcement agencies to consider domestic “safe harbors” in FCPA matters involving life sciences and healthcare companies.

In pertinent part, the article states:

“For life sciences and healthcare companies accustomed to operating within the bounds of U.S. fraud and abuse laws, certain gaps between domestic and international anti-corruption laws can cause compliance challenges. This article focuses on two such gaps.

First, unlike the Anti-Kickback Statute (AKS), the Foreign Corrupt Practices Act (FCPA) lacks safe harbors that expressly permit a range of routine interactions between pharmaceutical, medical device, and healthcare companies, on the one hand, and individual healthcare professionals (HCPs) and institutions, on the other Attorneys from the FCPA Units of the U.S Department of Justice (DOJ) and U.S Securities and Exchange Commission (SEC) generally do not approach these issues from a U.S healthcare compliance perspective; they are often skeptical of certain arrangements with HCPs that are common in the United States and can be structured to comply with the law based on well-known statutory exceptions or regulatory guidance.  In recent enforcement actions, both DOJ and the SEC have targeted conduct that, had the defendant companies more carefully structured their business arrangements with HCPs, might have satisfied the standards of an AKS safe harbor, and thus presented far less significant corruption risks.

Second, whereas the Prescription Drug Marketing Act (PDMA) generally authorizes pharmaceutical companies to provide free prescription drug samples to HCPs and other healthcare institutions for promotional purposes here in the United States, the FCPA itself offers less certainty as to the circumstances under which free samples and other demonstration products are appropriate. Because life sciences companies routinely provide free prescription drug samples or demonstration devices to providers to familiarize them with the products’ therapeutic benefits and/or to help patients begin a course of treatment, the FCPA’s ambiguities can result in confusion and regulatory exposure for these companies.


DOJ and the SEC should recognize risk-mitigating factors outlined in the AKS safe harbors and the PDMA in evaluating FCPA enforcement actions. By providing clearer guidance on the FCPA’s bounds, or at least weighing these factors more explicitly and heavily in exercising enforcement discretion, DOJ and the SEC would narrow the gaps between domestic and international anti-corruption enforcement, clarify their expectations for overseas pharmaceutical and device sales and marketing activities, and confirm that certain beneficial sales and marketing practices do not run afoul of the FCPA.”

The article continues:

“[T]he FCPA currently only includes one exception and two affirmative defenses and these provisions do not cover the full scope of conduct protected by the AKS safe harbors. Because Congress and HHS rightly recognized the value of the common arrangements protected by the AKS exceptions and safe harbors, DOJ and the SEC can, and should, incorporate the core principles underlying the safe harbors into their enforcement approach to the FCPA and their associated policy statements.

To provide clarity on their approach to activities like those covered by the AKS safe harbors and PDMA, DOJ and the SEC could supplement the FCPA Resource Guide that they jointly publish, which provides “detailed information about the statutory requirements of the [FCPA] while also providing insight into DOJ and SEC enforcement practices.” In particular, DOJ and the SEC could use hypotheticals in the FCPA Resource Guide to emphasize that beneficial practices by life sciences and healthcare companies, like those protected by the AKS safe harbors and PDMA, are unlikely to result in any FCPA enforcement action. A hypothetical applying the FCPA’s exception for reasonable and bona fide product promotion to pharmaceutical sampling and demonstration devices, for example, would provide welcome comfort to life sciences companies operating overseas.

DOJ also could update its FCPA Corporate Enforcement Policy to delineate specific requirements that a company should follow when considering engaging in a relationship with an HCP — and incentivize compliant arrangements by providing some comfort regarding the likelihood of enforcement. Alternatively, the Fraud Section could also issue a memorandum, similar to those previously issued, laying out revisions to its FCPA enforcement strategy and discretion, and specific requirements and guidance to companies regarding how best to comply with DOJ’s expectations.

The SEC has offered less enforcement guidance related to the FCPA than DOJ.  Nevertheless, when evaluating whether a company has violated the FCPA’s internal controls provisions, the SEC could consider implementing a presumption similar to that discussed above: if a company takes all necessary steps required under guidelines that mirrored the AKS safe harbors or the PDMA requirements, then the SEC would presume that the company’s internal controls are sufficient with respect to that proposed arrangement.”

In conclusion, the article states:

“Key gaps between domestic fraud and abuse laws and the FCPA can give rise to a mismatch between life sciences and healthcare companies’ commercial operations and compliance programs, on the one hand, and DOJ and the SEC’s expectations with respect to international anti-corruption compliance, on the other. The exacting standards set by the AKS safe harbors and the PDMA offer no protection for interactions with foreign HCPs. But principles underlying the safe harbors and the PDMA — and companies’ associated compliance controls — can help drug, device, and healthcare companies mitigate international anti-corruption risks. By leveraging these domestic controls to enhance international compliance programs, drug, device, and healthcare companies can meaningfully mitigate core corruption risks.”

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