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Greek authorities raid Novartis offices in bribery probe

Jaclyn Jaeger | January 5, 2017

Switzerland pharmaceutical giant Novartis is facing a fresh bribery probe, this time in Greece, where authorities there this week raided the company’s offices searching electronic documents and files.

The raid follows allegations made by certain Novartis employees that kickbacks were paid to more than 4,000 doctors and government officials in exchange for the promotion of Novartis drugs, Greek news agency, Protothema, reported.

Greek authorities have asked the U.S. Department of Justice and U.S. Securities and Exchange Commission to assist in the investigation, requesting that they share documents related to the allegations. According to reports by French news agency, Agence France-Presse (AFP), nearly 180 people have been summoned to testify.

The attempted suicide of a Novartis executive in Greece on New Year’s Day brought further urgency to the allegations, prompting Greece’ Minister of Justice Stavros Kontoni to speed up the investigation, which started last month. When questioned by police, the executive reportedly stated, “They will not put onto me all the sins of the company,” seemingly referring to Novartis, AFP reported.

In a statement to AFP, the company has pledged its cooperation: “Novartis is committed to the highest standards of ethical business conduct and regulatory compliance in all aspects of its business and takes very seriously any allegations of misconduct.”

Parallel investigations

Novartis has been plagued by several other kickback scandals. In November 2015, Novartis settled a civil fraud lawsuit for $390 million to resolve claims that the company gave kickbacks to specialty pharmacies in return for recommending two of its drugs, Exjade and Myfortic.

It was the third settlement in that lawsuit; in January 2014 and April 2015, two specialty pharmacies, Bioscrip and Accredo Health Group, agreed to pay a total of $75 million to resolve federal and state claims against them based on the same allegations. In total, the federal and state governments recovered $465 million based on the kickback allegations in its lawsuit.

Then in March 2016, Novartis settled an FCPA enforcement action with the SEC for $25 million after its China-based subsidiaries engaged in pay-to-prescribe schemes to increase sales. An SEC investigation found that employees of two China-based Novartis subsidiaries gave money, gifts, and other things of value to health care professionals, leading to several million dollars in sales of pharmaceutical products to China’s state health institutions.

The schemes lasted several years and involved certain complicit managers within Novartis’ China-based subsidiaries. According to the SEC order, Novartis failed to devise and maintain a sufficient system of internal accounting controls and lacked an effective anti-corruption compliance program to detect and prevent these schemes.

As a result, the improper payments were not accurately reflected in Novartis’ books and records. The SEC order found that Novartis violated the FCPA’s internal controls and books-and-records provisions.

Novartis consented to the order without admitting or denying the findings and agreed to pay $21.5 million in disgorgement of profits plus $1.5 million in prejudgment interest and a $2 million penalty. It also agreed to provide status reports to the SEC over the next two years on its remediation and implementation of anti-corruption compliance measures

One month later, in April 2016, Novartis announced in a securities filing that now Korean prosecutors have also initiated a criminal investigation against it. In that securities filing, Novartis said that in the first quarter of 2016, “the Seoul Western District Prosecutor initiated a criminal investigation into allegations that Novartis Korea utilized medical journals to provide inappropriate economic benefits to healthcare professionals.”