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Misconduct in the Pharmaceutical Sector - Novartis

Novartis HQ


Misconduct in the Pharmaceutical Sector - Novartis

12 July 2017 By Ronald Gibson 

As the South African Government and Novartis recently signed a memorandum of understanding relating to pharmaceutical research for the development of new medicinal compounds in South Africa, I decided to do my first article covering misconduct in the pharmaceutical sector about Novartis, as we need to have an idea of the ethics we might expect from them. I will mainly focus on information related to their business dealings in the USA, as there are quite a few Government Oversight institutions and non-profit consumer protection bodies that keep track of companies in the USA. 

Novartis was formed in 1996 after the merger of Ciba-Geigy and Sandoz. Both these companies started off in the production of synthetic fabric dyes, later branching off into pharmaceuticals and agricultural chemicals. During the merger the pharmaceutical and agrochemical divisions of both companies formed Novartis as an independent entity. The other interests were spun off as independent companies like Ciba Specialty Chemicals, a revived Sandoz manufacturing generics, and Syngenta in partnership with AstraZeneca which deals in genetically modified crops. Novartis also owns a large chunk of shares in Roche. 

It did not take long for Novartis to rack up its first fine or settlement, having to pay the US government $8 Million in 1999 to settle a charge of Government Contract Fraud for Ciba-Geigy overcharging the Department of Veteran Affairs (VA)¹. 

In 2004 female employees sued Novartis for institutionalised discrimination against female members of its sales force in pay and promotions and discrimination against pregnant women. This case was at last settled in 2010 at a cost of $175 Million, affecting 5,600 current and former employees². 

Also in 2010, Novartis pled guilty on a criminal charge of marketing a product (Trileptal) off label, or for a use it had not been approved for, and for misbranding. The total fine was $185 Million³. 

But Novartis had not finished for the year of 2010. A subsidiary, Eon Labs Inc, was fined $3,5 Million for Government Contract Fraud after the FDA had withdrawn their approval of Nitroglycerin Sustained Release (SR) capsules, yet Eon still continued to submit false quarterly reports to the government that misrepresented Nitroglycerin SR’s regulatory status and failed to advise that Nitroglycerin SR no longer qualified for Medicaid coverage⁴. 

A further $72,5 Million settlement was reached in 2010 by Novartis Vaccines & Diagnostics Inc. and Novartis Pharmaceuticals Corporation to resolve civil False Claims Act allegations arising from the marketing of the cystic fibrosis drug TOBI, again marketing for off label uses⁵. 

The same year Novartis Pharmaceuticals Corporation (NPC) settled for $237.5 Million to resolve civil allegations under the False Claims Act that the company unlawfully marketed the epilepsy drug Trileptal, Diovan, Tekturna, Exforge, Sandostatin and Zelnorm and paid illegal kickbacks to physicians to induce them to prescribe those drugs. Novartis also entered into a corporate integrity agreement with the Department of Health and Human Services⁶. 

Instead of having a sunny 2010 Christmas in Hawaii, Novartis had to shell out a further $10 Million as their share of the settlement reached between dozens of pharmaceutical companies and Hawaii. Yet not one of the companies admitted liability or wrongdoing in the $82,7 Million settlement⁷. 

And then came 2014, not a good year for Novartis. A whistle-blower named David Kester initiated a case against Novartis after spilling the beans on kickbacks paid to pharmacies. A total of $390 Million was paid to over 40 states to settle the matter. Kester would have done well for speaking out, as a whistle-blower gets 10-30% of what the state recovers⁸. 

In 2006 Donald Galmines, a Novartis sales representative, filed a case against his employer for marketing a product off label, in this case a topical cream for eczema, specifically NOT for use in children under 2 years old. They did this despite knowing that cancer was one of the adverse effects. The US government chose not to take part in this litigation, although they received the lion’s share of the $54,9 Million penalty awarded by the court⁹. 

A Securities and Exchange Commission (SEC) investigation found that, from at least 2009 to 2013, employees of two China-based Novartis subsidiaries gave money, gifts, and other things of value to health care professionals. As a result of this, Novartis had to pay a penalty of $25 Million for violating the Foreign Corrupt Practices Act¹⁰. 

At present there are still 5 cases related to kickbacks, false claims, of label marketing etc. outstanding. 

More recently an investigation was launched by Greek authorities during which it emerged that Novartis had made over 4000 payments to doctors to promote its products¹¹. 

In April of this year, the South Korean government fined Novartis $48 Million for bribing doctors, and arrested 6 current and former executives, which is quite a rare event worldwide as these executives operate with impunity¹². 

In total, Novartis has this far shelled out over $1 Billion in civil and criminal penalties, but still seem to do business as usual. Taking into account the SA government’s reputation relating to business deals, state capture and institutionalized fraud, what are the odds that the relationship with Novartis will not suffer the same ethics violations? 

1. http://s3.amazonaws.com/fcmd/documents/documents/000/001/787/original/novartis-overcharging-va_pr.pdf?1423021693

2. http://s3.amazonaws.com/fcmd/documents/documents/000/002/008/original/novartis-velez_settlement.pdf?1423021931

3. http://s3.amazonaws.com/fcmd/documents/documents/000/002/162/original/novartis-trileptal_plea.pdf?1423022111

4. http://s3.amazonaws.com/fcmd/documents/documents/000/001/781/original/novartis-conrad_pr.pdf?1423020779

5. http://s3.amazonaws.com/fcmd/documents/documents/000/002/004/original/novartis-tobi_pr.pdf?1423021927

6. http://s3.amazonaws.com/fcmd/documents/documents/000/002/165/original/novartis-trileptal_settlement.pdf?1423022114

7. http://s3.amazonaws.com/fcmd/documents/documents/000/002/191/original/glaxo-et-al-hawaii-awp_hipr.pdf?1423022132

8. https://ag.ny.gov/press-release/ag-schneiderman-announces-390-million-national-kickback-settlement-novartis

9. https://www.corporatecrimereporter.com/news/200/novartis-pays-more-than-35-million-to-settle-false-claims-case/

10. https://www.sec.gov/litigation/admin/2016/34-77431.pdf

11. http://www.keeptalkinggreece.com/2016/12/15/greeces-authorities-investigate-whistleblowers-claims-big-pharma-bribed-public-officials-doctors/, http://www.fiercepharma.com/pharma/greece-s-corruption-prosecutor-quits-citing-novartis-bribery-probe

12. http://anticorruptiondigest.com/anti-corruption-news/2017/05/03/south-korea-fines-novartis-48m-over-bribes-to-doctors/


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