South Korean authorities to raided Novartis offices in search of evidence the company provided bribes to local doctors, according to media reports. The Seoul Western District Prosecutors’ Office confiscated various documents, including account books, in order to determine whether rebates the drug maker offered physicians may have actually been bribes, a new agency reports.
A Novartis spokesman confirmed that its offices in South Korea were visited by local authorities in relation to an investigation, but declined further comment. “The investigation is ongoing and we cannot comment further at this time,” he wrote us.
The probe appears to be at an early stage, but is likely to be closely watched for signs that global drug makers continue to stumble in their practices in various foreign markets.
The bribery issue gained prominence three years ago thanks to a widely publicized episode in China, where GlaxoSmithKline was eventually found guilty by a Chinese court of bribing doctors, hospitals, and other nongovernment personnel and fined more than $490 million.
Some Glaxo employees in China were accused of using travel agencies to issue bogus receipts and channel bribes to government officials, hospitals, and doctors in order to sell more of its drugs at higher prices. Ultimately, five of the company’s managers, including its former top China executive, received suspended jail sentences and about 110 employees were fired.
Glaxo was also probed by authorities in Poland, and the drug maker opened internal investigations elsewhere, including in Jordan and Lebanon.
The scandal in China, however, was watched particularly closely for signs of how the country — which is an increasingly important market in the global pharmaceutical industry — may have tried to boost its own domestic drug makers while simultaneously trying to crack down on corruption.
A few months ago, Novartis agreed to pay about $390 million to wrap up federal kickback claims before the $3.3 billion case went to trial. The Justice Department and a number of U.S. states had sought up to $3.4 billion in damages in the case, which zeroed in on the Swiss drugmaker’s relationships with specialty pharmacies.
The settlement, together with other one-time charges, knocked down Novartis’ third-quarter net income, which declined to $1.8 billion, a 28% decrease year-over-year in constant currencies.
According to the feds, Novartis offered special deals to pharmacies to boost prescriptions of its transplant drug Myforticin a head-to-head competition with Roche’s CellCept. The drugmaker set up another scheme to increase refills of its iron chelation drug Exjade, the government says.
Jeffrey Newman represents whistleblowers