Medtech Insight is part of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC’s registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

This copy is for your personal, non-commercial use. For high-quality copies or electronic reprints for distribution to colleagues or customers, please call +44 (0) 20 3377 3183

Printed By



This article was originally published in The Gray Sheet

Executive Summary

BAXTER TWO-YEAR PROHIBITION AGAINST NEW SALES TO SYRIA/SAUDI ARABIA represents "the most stringent denial period ever imposed against a company under the antiboycott provisions of the Export Administration Act and the Export Administration Regulations," the Department of Justice notes in a March 25 press release. Under the antiboycott provisions, American firms may not provide "documentary or oral information to [Arab League] boycott authorities about a company's past, present, or proposed business dealings with or in Israel or with blacklisted persons," according to the plea agreement between Baxter and the Justice Department. Under an agreement with the Department of Commerce that resolves charges that Baxter violated the antiboycott provisions, the company "will be prohibited from entering into or negotiating new contracts to export goods or technology to Syria and Saudi Arabia for a period of two years, and may not export to either country during that period except to fulfill pre-existing contracts," according to the Justice Department. At a March 25 press conference, Baxter Senior Vice President Anthony Rucci said that the restriction "only addresses new contracts over the next two years, and it is a specific prohibition of U.S.-produced goods." Baxter estimates that sales to Syria and Saudi Arabia account for no more than $2 mil. annually. The agreement also calls for Baxter to enter into a consent decree with Commerce's Office of Antiboycott Compliance, under which the firm is to pay $6 mil. in civil fines for violation of the provisions. Marshall Abbey, Baxter senior vice president and general counsel, will pay $101,000 to settle civil charges. The company also has agreed to plead guilty to criminal violation of the antiboycott statute and to pay a $500,000 fine. Baxter notes in a March 25 release that it has also settled three derivative suits filed by shareholders, subject to shareholder notification and to Delaware Chancery Court approval. The court has enjoined "further shareholder derivative suits," according to the firm. Baxter says the settlement for the derivative suits will involve investment in Israel rather than remuneration. Baxter will take a $7.5 mil. charge for the first quarter to cover legal fees, fines and settlements, but predicts that the move will not affect earnings for the year. Rucci noted during the press conference that sales for the first quarter were up 5%, compared to an expected increase of 8% to 8.5%. Rucci indicated that the lower sales reflect a general "softening" of the market. The firm reported net earnings of $561 mil. on sales of $8.47 bil. in fiscal 1992. The agreements, which represent the culmination of a three- year Commerce Department investigation and a two-year grand jury inquiry into Baxter's late-1980s business dealings in the Middle East, are "the first criminal action" and "the largest civil penalty" to result from antiboycott statute enforcement, according to Justice. Baxter was placed on the Arab League "blacklist" of firms with business interests in Israel in the early 1970s, according to the plea agreement. Following Baxter's 1985 purchase of American Hospital Supply Company, Baxter began seeking removal from the blacklist so it could market AHS products in the Middle East. According to the plea agreement, Abbey was aware, by the fall of 1986, that "delisting might be more readily obtained if boycott officials were provided documentary proof that Baxter had completely divested itself of all Israeli holdings." Following the February 1988 sale of its Israel-based Travenol businesses, Baxter prepared a letter and attachments, including bank records and stock transfer receipts, substantiating the sale. The firm sent the package to Syria despite the State Department's refusal to authenticate the documents. Further negotiations with Syrian authorities ensued, including discussions of "fees and penalties" required for Baxter's removal from the blacklist. Baxter never paid these sums. Baxter also sought to establish an intravenous solutions facility in Syria to demonstrate "equal dedication" to its Arab business operations and its Israeli interests. The plea agreement states that "these negotiations were undertaken with the understanding that the venture could not go forward until such time as Baxter was removed from the blacklist." Baxter was removed from the list in January 1989 and that spring, announced the formation of a joint venture with the Syrian Ministry of Defense for the I.V. facility. Baxter abandoned that plan in June 1991 ("The Gray Sheet" June 17, 1991, p. 29). Rucci noted at the Baxter press conference that the government did not find, as "some had alleged," that Baxter "refused to deal with Israel," was involved in bribes, provided "deeply discounted goods to Syria" or indulged in "corrupt foreign practices."

You may also be interested in...

Sun Denied Over US Antitrust Challenge

India’s Sun Pharma has been denied leave to appeal against a US court decision rejecting the company’s bid for dismissal of a multi-district antitrust lawsuit.

Former Sandoz Executive Kellum Admits US Price-Fixing

Former Sandoz executive Hector Armando Kellum has admitted involvement in a US generic price-fixing conspiracy, the US Department of Justice has announced.

99 Days Until MDR: Time Is Running Out For Medtech As Risky, Volatile Future Looms

The last year of the run up to the full implementation of the MDR has been characterized by a flurry of new documents and measures, but industry is adamant that medtech is heading for a crisis that will impact industry and patients alike.




Ask The Analyst

Please Note: You can also Click below Link for Ask the Analyst
Ask The Analyst

Your question has been successfully sent to the email address below and we will get back as soon as possible. my@email.address.

All fields are required.

Please make sure all fields are completed.

Please make sure you have filled out all fields

Please make sure you have filled out all fields

Please enter a valid e-mail address

Please enter a valid Phone Number

Ask your question to our analysts