Pharmaceutical giant Novartis AG and two subsidiaries (one current and one former) agreed Thursday to pay the DOJ and SEC $346.7 million in penalties and disgorgement to resolve FCPA offenses in Greece, Vietnam, and South Korea.
In an internal administrative order, the SEC charged Novartis AG with violating the FCPA’s books and records and internal controls provisions. The Swiss pharma agreed to disgorge $92.3 million plus prejudgment interest of $20.5 million. Novartis made over $92.3 million in profits from improper conduct in Greece, Vietnam and South Korea, the SEC said.
In the criminal enforcement action, Novartis subsidiary Novartis Hellas S.A.C.I. paid a criminal penalty of $225 million and entered a three-year deferred prosecution agreement with the DOJ.
Former Novartis subsidiary Alcon Pte Ltd. paid a separate criminal penalty of $8.9 million and also entered into a deferred prosecution agreement.
Novartis and its local subsidiaries and affiliates made improper payments to public and private healthcare providers in Greece, Vietnam and South Korea so they would use Novartis-branded pharmaceutical products. The conduct occurred between 2012 and 2016, the DOJ said.
In Greece, Novartis paid health care providers they deemed “key opinion leaders” over $5,000 each time they attended events. The providers would in turn prescribe Lucentis, a Novartis drug used to treat macular degeneration. Internally, Novartis documents described the arrangement as a return on investment, and some providers had their “inducements” adjusted according to prescription volumes, the DOJ said.
Novartis sales staff would remind providers of their obligation to prescribe and the impact it had on their inducements, according to prosecutors.
Alcon, Inc. merged with Novartis in 2011 and became an indirect wholly-owned subsidiary until being spun off in 2019. The Alcon unit named in the DOJ action, Alcon Pte Ltd, had representative offices in Vietnam and management oversight in Singapore.
Using a Vietnamese distributor, Alcon Vietnam bribed providers to increase sales of Alcon’s intraocular lenses. The payments continued after Alcon merged with Novartis in 2011, the DOJ said.
In South Korea, the Novartis unit there paid over $16.3 million to third-party medical journals, some of which was improperly passed to providers as honoraria payments.
In 2017, the Korean Ministry of Health and Welfare and the Korean Ministry of Food and Drug Safety fined Novartis Korea $50.3 million, and in 2020 another $35,000, for offenses stemming for the same conduct.
“Poor control environments are fertile soil for malfeasance. As illustrated by Novartis’ misconduct, weaknesses in one part of the business can often serve as a harbinger of larger unaddressed problems,” the SEC’s FCPA Unit Chief Charles Cain said in a release Thursday.
Novartis said in a statement Thursday, “As recognized by the DOJ and SEC, Novartis and its subsidiaries, current and former, fully cooperated with these investigations and have already implemented appropriate remedial measures.”
The company also said that all FCPA investigations into Novartis are now closed.
In 2016, Novartis paid the SEC $25 million to resolve FCPA offenses involving two China-based subsidiaries that bribed doctors and other healthcare workers to prescribe its drugs.