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Novartis: New criminal probe in Korea for using medical journals to pay doctors

Novartis AG said in a securities filing last week that Korean prosecutors launched a criminal investigation into allegations that "Novartis Korea utilized medical journals to provide inappropriate economic benefits to healthcare professionals."

In February, police in Korea raided Novartis's offices.

"At issue are 'rebates' paid to local doctors -- in the form of cash and other incentives -- that might be construed as illegal kickbacks designed to juice sales," FiercePharma reported.

In the securities filing last week, Novartis said: "In Q1 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."

 The Swiss pharma giant paid the SEC $25 million in March to settle charges that it violated the Foreign Corrupt Practices Act when two China-based subsidiaries bribed doctors and others to prescribe its drugs.

Novartis subsidiaries gave money and gifts to doctors and other health care professionals in China. The bribes led to several million dollars in sales to China state health institutions, the SEC said.

The company improperly recorded the payments as travel and entertainment, conferences, lecture fees, marketing events, educational seminars, and medical studies, the SEC said.

In 2010, Novartis paid $237.5 million to resolve civil allegations over kickbacks paid to doctors to prescribe the epilepsy drug Trileptal and five other drugs. It also paid the DOJ a $185 million criminal fine for off-label marketing of Trileptal.

According to the civil complaint, Novartis paid doctors "honoraria" of between $1,500 and $2,000 to speak at physician "events" about the benefits of Novartis' drugs. Some doctors earned as much as $150,000 a year in honoraria.

In 2007 alone, Novartis paid $9.5 million to doctors through its speakers bureau, the complaint said.

Many of the doctors selected by Novartis as speakers had no publications or teaching positions. "Several speakers," the complaint alleged, "had difficulty with English. Other speakers were simply very poor communicators."

Physician attendance at the "events" was sparse -- often just one or two other doctors. And the venues may have been tables at restaurants, during the dinner hour, although Novartis never really checked who attended or where the events were held, the complaint said.

In a statement emailed to the Wall Street Journal Friday, Novartis said it is cooperating with the Korea investigation.

“Novartis is committed to the highest standards of ethical business conduct and regulatory compliance in all aspects of its work and takes any allegation of misconduct extremely seriously,” the company said.

Novartis AG trades on the NYSE under the symbol NVS.


Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.