Photo/IllutrationSendai Kousei Hospital in Sendai (Toshihiro Okuyama)

A medical equipment manufacturer with a corporate office in Singapore but registered in Bermuda reached out to doctors and a hospital from various nations, including Japan, to provide special benefits through stock option plans.

Those moves were brought to light through documents shared by various media organizations around the world, including The Asahi Shimbun, through the International Consortium of Investigative Journalists (ICIJ). The documents known as the Paradise Papers were obtained by the German daily newspaper Sueddeutsche Zeitung.

One doctor in Sendai, Japan, who received pre-listed shares raked in more than 100 million yen ($880,000) in gains after selling the stock once it was listed on an exchange. The hospital where the doctor worked also gained about 4 million yen after exercising its stock option. The hospital used the company’s products in clinical trials without informing subjects about the stock transactions, and it also used the products on patients.

The company, Biosensors International Group Ltd., manufactures medical devices for interventional cardiology and critical care procedures. It was incorporated in Bermuda on May 28, 1998, and listed on the Singapore Stock Exchange on May 20, 2005. The company was later amalgamated by another company and delisted in 2016.

Internal documents of the company were found in digital files leaked from Appleby, a law firm with offices in Bermuda and other tax havens.

One document contains the minutes of a board of directors meeting held in June 2004. Attached to the document as an exhibit is a list of parties chosen to be granted stock options that allow them to purchase shares at a predetermined price during a specific period.

If the market price exceeds the purchase amount when the stock option is exercised, the difference serves as a gain for the seller. Losses can be avoided by delaying the sale of shares as long as the market price remains below the purchase price. Granting such stock options can be considered one form of providing benefits to the other party.

Discussions were held during a board of directors meeting of Biosensors International about some of the stock options, including the one provided to the doctor in Sendai. The president of the company at the time said all of the optionees have been helpful or are expected to play key roles in the development of the company’s business.

Another document in the Paradise Papers is a list of Biosensors International’s shareholders in January 2005, about five months before its stock was listed on the Singapore exchange. Those shareholders received pre-listed shares.

As a whole, those lists contain the names of at least 14 doctors from seven nations.

In response to questioning by The Asahi Shimbun and another partner of the ICIJ, five doctors--three Japanese, one American-based and one Indian--have admitted to acquiring the shares.

Number of doctors by nation:

United States: 5

Japan: 3

Singapore: 2

Germany: 1

Indonesia: 1

India: 1

Brazil: 1

The three doctors in Japan all at one time worked at the Sendai Kousei Hospital. One doctor who now has his own practice in Sendai was already listed as a shareholder in a 2003 document.

In an interview with the Asahi, the doctor said: “An executive of the company explained that it was necessary to raise research funds. I found potential in the research and invested 60 million yen.”

The research proved successful, and the stock was listed. The doctor sold his shares at a price several times higher.

Another document lists Sendai Kousei Hospital as a recipient of the stock option. In response to the Asahi, a hospital official acknowledged that about 4.4 million yen in gains were obtained when the hospital exercised its option and sold its shares in 2007.

Another doctor at the hospital admitted to receiving the stock option in 2007 and gaining several millions of yen in 2012 when the option was exercised.

Between 2001 and 2003, the hospital conducted clinical trials using a bare metal stent manufactured by Biosensors International. After the device was approved for domestic use in 2006, the hospital used it for treatment of patients.

Between 2007 and 2010, clinical trials were conducted at the hospital on a drug-eluting stent developed by Terumo Corp. based on technology provided by Biosensors International.

The doctor who received more than 100 million yen in gains from his stock sales took part in both sets of clinical trials and also published articles in medical journals about those products.

According to the hospital officials, they have never publicized their transactions of the company’s stock.

“Doctors from our hospital have studied at a noted Los Angeles hospital for separate two-year periods and conducted research there,” Taiichiroh Meguro, a doctor and president of Sendai Kousei Hospital, said in an interview with the Asahi. “Among the experiments conducted were tests on animals of stents used to treat cardiac problems. The president of Biosensors International was very grateful, and I believe the providing of stock options was intended as a show of gratitude to the doctors involved in that research as well as to our hospital for sending those doctors abroad.”

Regarding the use of the company’s medical devices at his hospital, Meguro said that while there was some use, it was not at a high level.

“We have never diverged from the principle of using good products in a fair manner,” Meguro said. “We are proud that we contributed to the development of medicine.”

Regarding clinical trials at his hospital, Meguro said: “The period when we obtained the stock option and gained from the stock sales was one in which there was no relationship to clinical trials (using Biosensors International’s products). So there were no moral or ethical issues involved.”

A lawyer representing the hospital said, “In 2007, there was still no general thinking that we should refuse any granting of favorable recompense from another party.”

In regard to one of the American doctors, an associate director of media relations for the hospital with which the doctor is affiliated, said, “His work did not involve any clinical trials or patients.” She also said that the doctor has never implanted a Biosensors International product into any of his patients.

A well-known Indian doctor, responding to inquiries from The Indian Express, a partner of the ICIJ on the Paradise Papers project, said he had decined the company’s offer of 5,000 shares in 2004, but he accepted the offer in 2013 and sold the shares in 2016. He said that the profit was about $83,400.

“During the time I possessed the shares of Biosensors, from April 2013 to August 2013, I used only seven Biomatrix stents (made by Biosensors),” he said. “From August 2013 to April 2016, no Biomatrix stents or Biosensors products was used by me.”

The doctor said he gave no lectures related to the product, played no role in the purchase or pricing of the product, and declared his shareholding at scientific peer meetings.

“In all fairness, I did this because even though my shareholding in Biosensors was minuscule and is generally not considered as financial interest in a public limited company, I felt that it may be construed as a conflict of interest and hence I did not use any Biosensors products when I possessed the shares,” he said.

The providing of benefits to doctors by companies has been considered problematic because of the possibility that the doctor’s judgement could become biased.

In October 2000, the World Medical Association revised its Declaration of Helsinski on medical ethics to include wording that said, “In any research on human beings, each potential subject must be adequately informed of the aims, methods, sources of funding, any possible conflicts of interest, institutional affiliations of the researcher, the anticipated benefits and potential risks of the study and the discomfort it may entail.”

In 2004, the association also said any gift from a company should be accepted only if it is “of nominal value.”

While the government and various associations based on medical specialties in Japan have followed suit with their own ethical guidelines in regard to “informed consent,” clinical trials for obtaining government approval for drugs and medical equipment are not subject to those guidelines.

Yasushi Miyata, a professor at Aichi Medical University who is knowledgeable about conflict-of-interest issues among doctors, said that social science research abroad has shown that even gifts of nominal value from pharmaceutical companies have an effect on the actions of doctors, including in writing drug prescriptions.

“Recent studies show that accepting industry hospitality and gifts, even drug samples, can compromise judgment about medical information and subsequent decisions about patient care,” one report said.

Another study found, “Although most physicians do not perceive themselves as biased, they do admit that conflicts of interest might compromise other physicians’ decisions.”

Regarding the relationship between the doctors at Sendai Kousei Hospital and Biosensors International, Miyata said: “I believe there is quite a problem from the standpoint of occupational ethics for doctors. The providing of funds based on formal contracts from pharmaceutical companies and medical equipment manufacturers, be it in the form of research expenses or donations for scholarships, is conducted under very strict restrictions at the present time. In that sense, providing benefits directly to individual doctors is inappropriate.

“Moreover, clinical trials and article publication were carried out around the time of the transactions so it would be unavoidable but to have a third party consider those transactions as a recompense for such activities. It might be possible to question the stance of the hospital as a whole regarding whether approval of the clinical trials was conducted in an appropriate manner.”

(Ritu Sarin of The Indian Express in New Delhi contributed to this article.)

* * *

Visit The Asahi Shimbun's special website on the Paradise Papers for videos, photos and graphics on how journalists dug into the more than 13 million documents leaked from Bermuda and elsewhere to uncover shady transactions through tax havens.