Accounting madness of Plavix
Back in 2021 Reuters published an article entitled:
“Bristol-Myers, Sanofi ordered to pay Hawaii $834 million over Plavix warning label.” [1]
Explaining that the two companies engaged in unfair and deceptive business practices for more than 10 years.
So I decided to follow how they report and record the penalty in their financial statements. The judge considers the liability of the two companies equal: the penalty is apportioned 50% to each company.
Bristol Myers explain the issue as one of “labelling, sales and/or promotion of Plavix”, [2] or, in my words, lack of adequate labelling and poor promotion. Sanofi explain things more clearly when they state:
“The Hawaii AG (Attorneys General) specifically alleged that Plavix® had a diminished effect in patients of certain genetic backgrounds and that Sanofi and BMS (Bristol Meyers Squibb) had failed to make an earlier disclosure of this information.”
Bristol Meyers is clear in their accounting treatment, whereas to get the information out of Sanofi you have to dig around their financial report to discover an unclear position. I disagree with Bristol Myers and I think I agree with Sanofi.
Bristol Myers “remains confident in the merits of its case and its likelihood of success on appeal and does not believe establishing a reserve is warranted for this matter.” So they make no provision for $417 million despite the court’s decision.
Sanofi explain the judgement but do NOT state whether they have made a provision or not. However in the introduction to the note “Legal and arbitral proceedings”, they make the following statement:
“In the cases that have been settled or adjudicated, or where quantifiable fines and penalties have been assessed, we have indicated our losses or the amount of provision accrued that is the estimate of the probable loss.” [3]
The court ordered Sanofi to pay a penalty of $417 million; this would seem to me to be settled and that the penalties have been assessed, except that they have appealed. But they mention in part B 12:
“Sanofi records a provision when it has a present obligation, whether legal or constructive…”
Here too, it seems to me that a court order to pay a penalty is a present legal obligation. I conclude with these two statements from their annual report that Sanofi have made a provision of $417 million for this case.
If this is true, we are in a ludicrous position of two pharmaceutical companies, jointly prosecuted and jointly judged, where one takes a $417 million charge in their financial statements and the other does not.
This is accounting madness.
[1] Reuters, Bristol-Myers, Sanofi ordered to pay Hawaii $834 million over Plavix warning label, by Tina Bellon, Nate Raymond, 16th February 2021, https://www.reuters.com/article/us-bristol-myers-sanofi-plavix-idUSKBN2AF1YI
[2] Bristol Myers Squibb, Forms 10-K, for the fiscal years ended 31st December 2021 and 2022
[3] Sanofi, Forms 20-F, for the fiscal years ended 31st December 2021 and 2022