June 28, 2020

DOJ and SEC reach settlement of FCPA charges regarding conduct by Novartis and subsidiaries

On June 25, 2020, the US Department of Justice (DOJ) and the US Securities and Exchange Commission (SEC) announced that they had reached settlements with Novartis AG, a global pharmaceutical company headquartered in Switzerland, Novartis Hellas S.A.C.I. (Novartis Greece), a subsidiary of Novartis AG, and Alcon Pte Ltd (Alcon Pte), a former subsidiary of Novartis AG and currently a subsidiary of Alcon Inc., a multinational eye care company.  The settlements require the payment of over $346 million in criminal fines, disgorgement, and prejudgment interest. 
According to its settlement with the DOJ, Novartis Greece made improper payments to state-owned and state-controlled hospitals, clinics, and healthcare providers in Greece from approximately 2009 to 2015 in an effort to increase sales and usage of Novartis products.  Similarly, Alcon Pte acknowledged making improper payments from 2011 through 2014 to state-owned and state-controlled hospitals and clinics in Vietnam to increase sales of intraocular lenses.  According to the charging documents, the improper payment schemes included rewarding or incentivizing doctors to prescribe products in exchange for sponsorship to attend international medical conferences, providing payments to doctors for using products and disguising the payments as part of an epidemiological study, and routing improper payments through third party distributors. 
The DOJ charged Novartis Greece with one count of conspiracy to violate the anti-bribery provisions of the FCPA and one count of conspiracy to violate the books and records provisions.  The DOJ charged Alcon Pte with one count of conspiracy to violate the books and records provisions.  Both Novartis Greece and Alcon Pte entered into deferred prosecution agreements (DPAs) with the DOJ for a period of three years.  Novartis Greece is required to pay criminal penalties totaling $225 million, and Alcon Pte Ltd must pay about $8.9 million.

In a related matter, the SEC reached a settlement with Novartis AG to resolve allegations that it violated the books and records and internal accounting controls provisions of the FCPA.  According to the SEC Order, between 2012 and 2016, current and former Novartis subsidiaries made improper payments to healthcare providers in South Korea, Vietnam, and Greece.  The SEC also accused Novartis of failing to implement sufficient controls in its former Alcon business in China from 2013 to 2015, which allowed the business to use fraudulent contracts as part of a financing arrangement that generated huge losses and led to Novartis and Alcon writing off more than $50 million in debt. 

Under the SEC Order, Novartis must disgorge $92.3 million and pay $20.5 million in prejudgment interest.  Novartis AG also agreed to report the status of its remediation and implementation of compliance measures to the SEC for a period of three years.

DOJ Press Release | Novartis Greece Information | Novartis Greece DPA | Alcon Pte Ltd Information | Alcon Pte Ltd DPA | SEC Press Release | SEC Order