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Pharmaceuticals /Medical Devices /Health
Basel, Switzerland
Nationality of Foreign Officials: China
Summary of Allegations:
From at least 2009 to 2013, employees and agents of Novartis subsidiaries, Sandoz China and Novartis China, allegedly engaged in transactions and provided things of value to doctors and other health care providers to increase Novartis’ sales in China. Things of value allegedly took varied forms, and included gifts, purely sightseeing or recreational travel disguised as educational conferences and other business activities, entertainment, and favors for families of doctors and other health care providers in China.
Employees and managers of the Chinese subsidiaries allegedly attempted to conceal the true nature of the transactions through use of complicit third party vendors. Novartis China allegedly retained numerous third party travel and event planning vendors to arrange the venue, food, entertainment, flights, hotels and transit in relation to their improper marketing activities. They also attempted to conceal the bribes by recording the improper payments on the books and records as legitimate sales, marketing and promotion expenses. For example, sale representatives of Sandoz China allegedly funded cash and gifts provided to high prescribing healthcare professionals through false expense reports approved by subsidiary's management. The false entries were later consolidated to Novartis' financial statements.
Alcon Asia merged with Novartis in 2011. Before and after the merger, Alcon Asia operated in Asia including China and executed agreements of “equipment financing arrangements” (“EFA”). Under the EFA, Alcon Asia would place surgical equipment in public hospitals and clinics with no payment requested but contractual anticipation that the hospitals and clinics would provide direct payments or purchase Alcon’s products. Local managers falsified contracts and documents to facilitate the EFA while Alcon Asia lacked an effective internal control system to discern the falsification and the nature of relevant contracts. The EFA brought about surgical sales but ultimately caused US$50 million in bad debt.
Approximate Alleged Payments to Foreign Officials: cash (including USD 522,000 for illegitimate studies), gifts, travel, financing arrangements relating to the placement of surgical equipment
Business Advantage Allegedly Obtained: use of Novartis' products
Nationality of Foreign Officials: China
Summary of Allegations:
03 April 2018: An employee of Novartis' affiliate in China has alleged that the company has engaged in bribery in the form of kick-backs and money laundering. Allegedly, Novartis held fake academic activities and paid clinical public doctors kickbacks to boost sales of its new drugs such as benazepril and DIOVAN (valsartan) tablets. No additional information is available at this time.
Novartis has launched an investigation into the claim.
Approximate Alleged Payments to Foreign Officials: Unspecified
Business Advantage Allegedly Obtained: Increased sales of drugs.
Nationality of Foreign Officials: Greece
Summary of Allegations:
Since 2007, Novartis' wholly-owned subsidiary Novartis Hellas S.A.C.I. ("Hellas") made illicit payments to employees and doctors in public healthcare providers to boost sales and prescription of Novartis-branded products and falsified the payments as legitimate advertising fees in the books and records. Hellas orchestrated schemes of the international congresses and an epidemiological study that realized a profit of at least US$71.48 million.
Since 2012, Hellas used third-party travel agencies to pay ophthalmologists to attend international medical congresses held in the U.S. or Europe for scientific and educational information; each congresses cost at least US$6,000. Hellas’ internal documents suggest “investments” (sponsorships) to the healthcare providers who were inclined to prescribe Novartis’ drug Lucentis. Besides, Hellas employees held a basket-ball themed presentation to persuade these HCPs to prescribe Lucentis, with the preparation of defense in case the HCPs would prescribe similar products by competing companies.
Hellas also sponsored epidemiological studies with questions and conditions treated by Novartis’ prescribe drugs “EXACTLY.” The company made direct payments to HCPs in exchange for collecting data and information of patients potentially targeted for EXACTLY treatment. A substantial number of HCPs believed they were paid to prescribe EXACTLY.
On 7 April 2017, the justice minister was quoted as saying that "thousands" of doctors and officials had been bribed by Novartis. According to media reports, two Novartis executives provided documents to the U.S. Securities and Exchange Commission showing over 4,000 payments to doctors, including doctors working in the public sector.
In April 2018, two protected witnesses reported that ten politicians, including former Prime Minister Antonis Samaras, EU migration commissioner and the former Health Minister Dimitris Avramopoulos, and the central bank governor Yannis Stournaras received bribes during the period 2006 - 2015 from Novartis in exchange for promoting Novartis’ plan to enlarge market share in Greece and helping Novartis to secure inflated prices for its products even though cheaper alternatives were available.
Approximate Alleged Payments to Foreign Officials:
Business Advantage Allegedly Obtained: promotion of its pharmaceutical products with a profit of at least US$71.48 million
Nationality of Foreign Officials: Poland
Summary of Allegations:
In October 2014, Poland's anti-corruption bureau charged two executives of Novartis with bribery. The executives allegedly gave a health fund official a tourist trip worth more than USD 1,000 in exchange for backing the sale of a particular drug. Both defendants pleaded guilty and are waiting to be sentenced.
Approximate Alleged Payments to Foreign Officials: trip worth more than USD 1,000
Business Advantage Allegedly Obtained: backing the sale of a particular Novartis drugs
Nationality of Foreign Officials: South Korea
Summary of Allegations:
Between January 2011 and early 2016, Novartis Korea employees utilized medical journals to provide inappropriate economic benefits, in form of improper rebates and kickbacks, amounting to 2.59 billion won (USD 2.34 million) in exchange for using Novartis' products.
Novartis Korea allegedly funded academic events organized outwardly by third party medical publications and provided improper benefits to participating doctors disguised as payments for attendance and article contributions.
Novartis Korea orchestrated three bribery schemes to bribe public HCPs to prescribe Novartis products. Novartis Korea utilized third-party medical journals to circumvent the local law which bans direct payments to HCPs. The HCPs received US$268 to US$447 for participating in each round-table meeting. Novartis Korea’s representative would market the products in the meeting or conducted entertainment activities afterward. The expense for each journal was approximately US$2550, totaling at US$16.3 million between 2011 and 2015. Novartis Korea recorded the bribes as advertising fees in books and records.
Novartis Korea also sponsored HCPs to an international medical conference for inducing increased prescription of Novartis products. During the period between 2011 and 2016, it funded 2,032 HCPs for attendance at 381 international conferences. The total cost reached US$7 million and was mischaracterized as legitimate advertising fees. Novartis Korea did not keep an effective internal control system to detect the illicit nature of the fees.
Novartis Korea also devised and funded a local clinical study with US$100,000, and pre-selected 17 HCPs to attend, intending to warm the relationship. Novartis Korea recorded the expense as advertising fees and did not review the study result or submit the study to medical affairs as the internal procedures required.
The schemes realized at least US$13.8 million in profits for Novartis Korea.
Approximate Alleged Payments to Foreign Officials: rebates and kickbacks amounting to 2.59 billion won (USD 2.34 million)
Business Advantage Allegedly Obtained: use of Novartis' products
Nationality of Foreign Officials: Turkey
Summary of Allegations:
Turkish unit of Novartis allegedly paid Alp Aydin Consultancy, Turkish consulting firm, USD 290,000 plus costs during 2013 and 2014 to win about USD 85 million in business advantages.
Novartis allegedly gained USD 20 million from Aydin's ability to have Novartis' new drugs for multiple sclerosis, chronic lung disease and juvenile arthritis added to government-run hospital prescription lists. Novartis also allegedly benefited from advantageous pricing decisions and a special import permit for a drug with an expired manufacturing certificate. Furthermore, Novartis allegedly gained USD 50 million by avoiding international pricing comparison and thus price cuts by obtaining Turkish officials' approval to rename its drugs Ilaris and Gilenya as Ibecta and Fingya.
Approximate Alleged Payments to Foreign Officials: USD 290,000 plus costs
Business Advantage Allegedly Obtained: USD 85 million
Nationality of Foreign Officials: Vietnam
Summary of Allegations:
Since 2007, Alcon, Inc. operated in Vietnam via two representative offices in Hanoi and Ho Chi Ming City respectively. It used a distributor company to sell surgical equipment, lasers, and intraocular lenses to customers including public hospitals and clinics.
The representative offices and the distributor bribed public HCPs to boost sales of lenses. The distributor paid about 200 HCPs, including doctors and nurses, to “encourage doctors to use” the lenses.
The bribery scheme continued when it was merged into Novartis AG in 2011 and became a wholly-owned subsidiary, with financial statements consolidated with Novartis.
During the period, Alcon, Inc. approved the distributor to make direct payments to HCPs with reimbursements up to 50 percent of relevant costs and caused another Alcon entity to offset the debt balance by issuing credit notes as consultancy fees to the distributor. The reimbursements were also falsely categorized later as marketing, human resources, and reconciliation costs.
The bribery scheme realized a profit of US$8,500,000 for Alcon, Inc.
Approximate Alleged Payments to Foreign Officials: $180,000 USD in 2010 and approximately $100,000 USD in 2013 and 2014
Business Advantage Allegedly Obtained: To increase product sales
Agencies: China: State Administration for Industry and Commerce
Results:
Year Resolved:
Compliance Monitor:
Ongoing: Yes
Details:
According to the Wall Street Journal, the State Administration for Industry and Commerce of China began investigating Novartis on 14 August 2013 for bribery and corruption related to medical devices and pharmaceutical drugs.
As of 07 February 2018, it appears the investigation efforts are still ongoing.
Agencies: Greece: Athens Public Prosecutor's Office
Results:
Year Resolved:
Compliance Monitor:
Ongoing: Yes
Details:
In December 2016, a judicial probe was ordered in Greece after the country's justice minister responded to media reports alleging bribes by Novartis to doctors and public officials. As part of the probe, Greek corruption prosecutors have raided the Athens offices of Novartis and have requested the US judicial authorities for assistance. About 178 people in Greece have been questioned as part of the investigation.
On 1 January 2017, a manager for Novartis who had been questioned over the alleged corruption attempted suicide in Athens.
28 March 2017: Greece's prosecutor resigned and claimed that she felt threatened by corrupt state officials who were trying to quash her investigation of Novartis.
On 7 April 2017, the justice minister was quoted as saying that "thousands" of doctors and officials were bribed by Novartis to promote its products. Anti-corruption prosecutors have visited Novartis' location near Athens to gather evidence.
Novartis has stated that it was cooperating with Greek authorities.
06 February 2018: Greek Magistrates have launched a corruption prosecution against an (unnamed) manager at Novartis's Greek branch, who was banned from leaving the country.
Agencies: Greece: Athens Public Prosecutor's Office
Results:
Year Resolved:
Compliance Monitor:
Ongoing: Yes
Details:
06 February 2018: Greek anti-corruption prosecutors have asked parliament to provide files relating to the alleged Novartis bribery scandal to aid them in an investigation of the involvement of unnamed Greek ex-ministers who were in office between 2006 and 2015.
22 February 2018: Ten Greek government officials, including former prime minister Antonis Samaras, have been implicated in the Novartis bribery scandal. Greece’s parliament established a special committee to investigate the politicians and whether any had received bribes from Novartis. All politicians have denied the allegations, claiming that the current government is using the allegations to politically tarnish their reputations.
27 April 2018: a parliamentary committee determined that Greece's parliament has no jurisdiction to investigate the role of the ten politicians alleged to have accepted bribes from Novartis.
29 August 2019: a Greek prosecutor found the investigation into Yannis Stournaras was groundless.
Agencies: Greece: Unspecified
Results:
Year Resolved:
Compliance Monitor:
Ongoing: Yes
Details:
22 February 2018 - Former conservative prime minister Antonis Samaras has filed a civil suit against current Greek Premier Alexis Tsipras, accusing him of attempting to tarnish opposition politicians' reputations by wrongly implicating them in the Novartis bribery claims.
April 2018 - Greece's central bank governor Yannis Stournaras sued two protected witnesses for perjury and defamation over the witness testimony claiming their receipt of bribes from Novartis. Avramopoulos, who was Greek health minister in 2006-2009, has also sued the witnesses.
Agencies: Internal Investigation
Results:
Year Resolved: 2014
Compliance Monitor:
Ongoing: No
Details:
In 2013, Novartis initiated an internal investigation into the allegations in Turkey. Novartis announced that the investigation concluded in 2014 with findings that unsubstantiated the allegations.
In April 2016, Novartis suspended then Novartis Korea's CEO Moon, Hak-sun from his position.
Agencies: Korea: Seoul District Prosecutor's Office
Results: Civil Penalty, Disgorgement, Prosecution of Individuals
Year Resolved:
Compliance Monitor:
Ongoing: Yes
Details:
On 22 February 2016, the Seoul Western District Prosecutors' Office raided Novartis offices in search of evidence the company provided bribes to local doctors.
The South Korean authorities confiscated various documents, including account books, in order to determine whether rebates the drug maker offered physicians may have actually been bribes. The investigation was confirmed and disclosed by Novartis in its SEC Form 6-K filed on 21 April 2016.
On 9 August 2016, the Seoul Western District Prosecutors' Office announced that six former and current Novartis Korea officials, including former CEO Moon, Hak-sun, were indicted over allegations in South Korea. In an official statement, Novartis Korea rejected the allegation, indicating that alleged conduct would not have been sanctioned by the most senior management at Novartis Korea. Novartis Korea further stated that Novartis is implementing a remediation plan in South Korea based on the findings from its internal investigations.
Following the indictment of its former and current Novartis Korea officials, media reported that South Korean prosecutors have asked the government to suspend Novartis’ operations in South Korea.
27 April 2017: South Korea fined Swiss drugmaker Novartis 55.1 billion won (USD 48.80MM) for offering doctors kickbacks to recommend the company’s drugs, and also suspended insurance coverage for some of its drugs.
In early December 2017, Korea's National Tax Service opened a tax investigation into Novartis Korea. Novartis Korea has explained that the investigation is a “regular tax inspection that takes place every four to five years.” However, as the probe is focusing on the company's spending records, the inspection may be related to the firm’s bribery scandal for which a trial is still pending.
Agencies: Poland: Central Anticorruption Bureau
Results: Plea Agreement, Prosecution of Individuals
Year Resolved: 2014
Compliance Monitor:
Ongoing: No
Details:
On 16 October 2014, both executives of Novartis pleaded guilty in a bribery prosecution in Poland and are waiting to be sentenced.
Agencies: Turkey: Ankara Prosecutor's Office, Turkey: Health Ministry
Results:
Year Resolved:
Compliance Monitor:
Ongoing: Yes
Details:
On 1 April 2016, the Ankara chief prosecutor's office said it had launched an investigation into the Turkish unit of Novartis.
In March 2016, Turkey's Health Ministry announced that it has launched an investigation into the allegations in Turkey.
On 11 August 2016, a Turkey Health ministry official, without providing further details, confirmed that the investigation was ongoing.
As of 07 February 2018, it appears the investigation is still ongoing.
Agencies: Turkey: Health Ministry
Results:
Year Resolved:
Compliance Monitor:
Ongoing: Yes
Details:
Agencies: Turkey: Ministry of Labour and Social Security
Results: No Action
Year Resolved: 2014
Compliance Monitor:
Ongoing: No
Details:
In 2014, Turkey Ministry of Labour and Social Security conducted its investigation into the Turkish allegations but concluded that all allegations were unsubstantiated and no action was taken by the Ministry.
Agencies: United States: Department of Justice, United States: Securities and Exchange Commission
Results:
Year Resolved: 2020
Compliance Monitor:
Ongoing: No
Details:
In July 2017, Alcon confirmed receipt of a subpoena from the DOJ and SEC regarding its businesses in Asia.
On 25 June 2020, Alcon Pte Ltd, a former subsidiary spun off Novartis in 2019, reached a deferred prosecution with the DOJ to settle one count of conspiracy to violate the books and records provision of the FCPA in Vietnam. Under the term of the settlement, Alcon Pte Ltd agreed to pay a total penalty of US$8.9 million after a 25 percent reduction of the U.S. Sentencing Guidelines fine range based on its cooperation with the government investigation.
On 25 June 2020, Novartis reached a settlement with the U.S. Securities and Exchange Commission. Under the terms of the SEC’s cease-and-desist order, Novartis will report for three years to the Commission on its compliance and remediation efforts, and will pay a total of approximately US$112.8 million, including disgorgement of US$92.3 million and prejudgment interest of US$20.5 million. No civil penalty was imposed based on the DOJ’s imposition of criminal fines on its subsidiaries.
Novartis subsidiaries Novartis Hellas S.A.C.I. and Alcon Pte Ltd entered separately into deferred prosecution agreements with the DOJ, including criminal penalties of US$225 million and US$8.9 million respectively. The companies received a 25 percent reduction off of the U.S. Sentencing Guidelines range based on their cooperation with the investigation.
Agencies: United States: Department of Justice, United States: Securities and Exchange Commission
Results:
Year Resolved:
Compliance Monitor:
Ongoing: Yes
Details:
In July 2017, Alcon confirmed receipt of a subpoena from the DOJ and SEC regarding its businesses Russia.
Agencies: United States: Securities and Exchange Commission
Results: Cease-and-Desist Order, Civil Penalty, Disgorgement
Year Resolved: 2016
Compliance Monitor:
Ongoing: No
Details:
On 23 March 2016, Novartis agreed to settle charges concerning its pharmaceutical operations in China with the Securities and Exchange Commission ("SEC"). In its Cease-and-Desist Order, the SEC noted that Novartis violated the books and records and internal controls provisions of the FCPA by failing to devise and maintain sufficient accounting controls to detect and prevent the making of improper payments to foreign officials by Sandoz China and Novartis China. Without admitting or denying the charges, Novartis agreed to pay disgorgement of USD 21,579,217, prejudgment interest of USD 1,470,887, and civil penalty of USD 2,000,000. Novartis also agreed to provide status reports to the SEC on its "remediation and implementation of anti-corruption compliance measures" for two years.
Discovery Method: Whistleblower
Details:
A former employee of Novartis in China, following resignation from Novartis, went to the Chinese labor authorities and reported that he had been bribing doctors and other health care providers to boost sales of Novartis drugs in China. In a later interview with a Chinese business magazine, 21st Century Business Herald, he publicly alleged that Novartis bribes medical providers in China.
Following the whistleblower allegations, Novartis initiated an internal investigation through the company's Business Practices Office.
Country: China
Discovery Method: Whistleblower
Details:
An anonymous whistleblower sent a 5,000-word email to Novartis Chief Executive Joe Jimenez and Srikant Datar, chairman of its audit and compliance committee, alleging Novartis of paying bribes in Turkey through a consultaing firm, Alp Aydin Consultancy, to secure business advantages.
Country: Turkey
Discovery Method: Whistleblower
Details:
The 2018 allegations of bribery in the form of Kick-backs and money laundering in China were brought to light by an employee of Novartis' Chinese affiliate.
Country: China