Novartis to Settle With US on Kickback Charges

Novartis has agreed to pay $390 million to settle with the US Department of Justice over allegations it used kickbacks to specialist pharmacies to promote sales of some of its drugs, CEO Joe Jimenez said in presenting financial results for Q3 2015.

The deal with the government, which had originally sought $3.35 billion in damages and fines, is subject to approval by the relevant authorities. It would resolve claims related to five drugs for which patients require additional care. A decision is expected in the next few months.

Jimenez said Novartis had decided it was in the company’s best interest to settle quickly, without admitting or denying liability in the case initiated by whistleblower allegations from a former sales manager.

The Swiss drugmaker joins a growing list of pharmaceutical companies under investigation in the US for their relationship with specialty pharmacies, of which Valeant is the most highly visible.

The Swiss drugmaker’s CEO said, however, that the issues affecting Valeant were “completely different” from its own, as Novartis had no direct shipping links with the pharmacies. The financial incentives it offered were intended solely to ensure patients kept taking drugs crucial to their recovery.

As its share price continues to drop, Valeant meanwhile, has called on the US Securities and Exchange Commission (SEC) to investigate allegations made by short seller Citron about its relationship with specialty pharmacy group Philidor. The company said it had also set up an ad hoc committee run by an independent director to look into the charges.

In a conference call with analysts reported in the financial press, CEO Mike Pearson also sought to explain the company’s relationship with the pharmacy group, which helps push sales of some of its expensive drugs.

Pearson said the Canadian drugmaker run from the US acquired an option to buy Philidor in December 2014 and began consolidating its revenues in its own financial reports, without disclosing the arrangement (until Citron revealed it).

He said Valeant’s board of directors had already concluded it had complied with laws governing the booking of revenues.


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