Novartis (NYSE:NVS) and Alexion Pharmaceuticals (NSDQ:ALXN) were charged with violations of the books and records and internal accounting controls provisions of the Foreign Corrupt Practices Act (FCPA).
The Securities & Exchange Commission (SEC) announced that the pharmaceutical companies both committed violations and both agreed to pay millions of dollars to settle the charges. Novartis settled to pay over $112 million and Alexion agreed to pay more than $21 million.
Basel, Switzerland-based Novartis, with its local subsidiaries or affiliates, or former subsidiary Alcon, was found to have engaged in schemes to make improper payments or to provide benefits to public and private healthcare providers in South Korea, Vietnam and Greece in exchange for prescribing or using Novartis or Alcon products.
The SEC says the schemes took place between 2012 and 2016 and were known among certain managers of the subsidiaries or affiliates. According to the order, Novartis lacked sufficient internal accounting controls with the Alcon business in China from 2013 to 2015, using forged contracts as part of local financing arrangements that generated large losses and led to Novartis and Alcon writing off more than $50 million in bad debt.
Novartis agreed to pay disgorgement of $92.3 million and $20.5 million in prejudgment interest, plus it will comply with a three-year undertaking to self-report on the status of its remediation and implementation of compliance measures. Additionally, Novartis and Alcon entered into deferred prosecution agreements with the U.S. Justice Dept. and agreed to pay more than $233 million in criminal fines.
“We are pleased that all outstanding FCPA investigations into the company are now closed,” Novartis general counsel Shannon Thyme Klinger said in a news release. “Today’s settlements represent another milestone in our commitment to resolving legacy compliance issues and ensuring that Novartis truly lives its values. We have implemented and continue to implement initiatives to ensure we operate with the same high ethical values wherever we do business, and we remain focused on building trust with society.”
Boston-based Alexion is said to have made payments to foreign government officials to secure favorable treatment for its primary drug, Soliris, according to the SEC.
From 2010 to 2015, the SEC said Alexion Turkey paid Turkish government officials to improperly influence them to approve patient prescriptions and provide other favorable regulatory treatment for the drug. Similarly, from 2011 to 2015, the order finds that Alexion Russia made improper payments to Russian government health care officials to favorably influence the regulatory treatment of Soliris, as well as the budget allocated to the drug.
Alexion Turkey and Alexion Russia maintained false books and records of the payemnts, while further investigation found that the company’s subsidiaries in Brazil and Colombia failed to accurately maintain books and records.
The company did not admit or deny the SEC’s findings, but agreed to cease and desist and pay more than $14.2 million in disgorgement, nearly $3.8 million in prejudgment interest and a $3.5 million penalty.
“Alexion is pleased to have reached a resolution and to have such a strong and effective compliance culture and program in place today,” the company wrote in a news release. “We are proud of the actions we’ve taken that have expanded and strengthened our compliance organization, enhanced third-party payment processes and procedures, revamped our HCP engagement process and improved anti-corruption training for employees, among many other continued enhancements implemented by the current management team to meet the high standards that patients, physicians and the public expect from a leading global company.