Novartis agreed to settle civil charges with the U.S. Securities and Exchange Commission on Wednesday into its healthcare practices in China. The settlement of the investigation into the Foreign Corrupt Practices Act will result in a payment of more than $25 million to the SEC by Novartis.
The SEC alleged that China based units of Novartis made payments to foreign officials, such as healthcare professionals, in order to increase sales of pharmaceutical products. The SEC brought charges for the FCPA violations based on the inaccurate books & records and failure to maintain adequate internal accounting controls.
Among the examples included in the Administrative Order were:
- Cash and gifts funded through false expense reports were used to increase prescriptions by key customers.
- Transportation, accommodations and meals were arranged for healthcare professionals but the educational purpose was minimal in comparison to the sightseeing or recreational purpose.
- A study designed by the sales and marketing team and not approved by the appropriate clinical quality group provided no legitimate medical data and was instead a means to financially reward prescribers.
- Novartis hired vendors to arrange travel and event planning but did not exercise sufficient controls with respect to these vendors.
As a result of these allegations, Novartis will pay a $2 million civil penalty, $21.5 million in disgorgement and $1.5 million in interest. Although this case appears to only resolve issues with China, the company has had other bribery troubles. South Korean prosecutors raided the Seoul-based unit for kickbacks in February and two years ago an employee pled guilty in a bribery prosecution in Poland.
Health care companies in China have been a hotbed of activity for government investigations into suspected FCPA violations. At the end of last year, Bristol Myers paid $14 million in order to resolve its own SEC investigation. Several others face continuing government investigations
If you have questions about this information or want to speak to one of our FCPA whistleblower lawyers about reporting bribery of a government official through the SEC whistleblower program, please contact us via our online contact form.