On June 25, 2020, the United States Department of Justice (DOJ) announced an agreement with Novartis Hellas S.A.C.I. (Novartis Greece) – a current subsidiary of Novartis AG – and Alcon Pte Ltd – a former subsidiary of Novartis AG and current subsidiary of Alcon Inc. – over violations of the Foreign Corrupt Practices Act (FCPA). The agreement results in Novartis AG, Novartis Hellas S.A.C.I., and Alcon Pte Ltd paying a combined $345 million.
The allegations resolved in the agreement stem from a Novartis Greece scheme to bribe employees of state-owned and state-controlled hospitals and clinics in Greece and to falsely record improper payments relating to the corrupt scheme and similar conduct. Alcon Pte Ltd had a similar scheme to make and falsely record improper payments in Vietnam.
As part of their agreements, both parties agreed to continue to cooperate with the government in ongoing or future criminal investigations concerning the companies, its executives, employees, or agents. Both also agreed to enhance their compliance programs and report to the government on the implementation of their enhanced compliance programs.
Novartis Greece
According to its admissions in the DPA, between 2012 and 2015, Novartis Greece conspired with others to violate the FCPA by engaging in a scheme to bribe employees of state-owned and state-controlled hospitals and clinics in Greece in order to increase the sale of Novartis-branded pharmaceutical products. More specifically, Novartis Greece paid for employees of the hospitals and clinics to travel to international medical congresses, including to events held in the United States, as a way to bribe the officials to increase the number of prescriptions they wrote for Lucentis, a Novartis Greece prescription drug. As part of the scheme, Novartis Greece employees traveled to the United States, and, while located in the United States, facilitated the provision of the improper benefits to publicly employed Greek health care providers.
Novartis Greece also admitted that between 2009 and 2010, it made improper payments to health care providers in connection with an epidemiological study that was intended to increase sales of certain Novartis-branded prescription drugs. The study was used as a way to make improper payments to health care providers to increase sales of certain Novartis-branded prescription drugs. Novartis Greece employees also recognized that many participating health care providers believed that they were being paid in exchange for writing prescriptions of Novartis products and not for providing data as part of a clinical study.
Therefore, in furtherance of both schemes, Novartis Greece, through its employees and agents, knowingly and willfully conspired with others to cause Novartis AG to mischaracterize and falsely record improper payments related to the international medical congresses and the epidemiological study in Novartis AG’s books, records, and accounts.
Deferred Prosecution Agreement
As part of the resolution, Novartis Greece entered into a deferred prosecution agreement (DPA) in connection with a criminal Information that 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 provision of the FCPA.
Under the DPA, Novartis Greece committed to pay a total criminal monetary penalty of $225 million. The penalty reflects a 25 percent reduction off a point near the midpoint of the U.S. Sentencing Guidelines range because, despite full cooperation and remediation by Novartis Greece, its parent company Novartis AG was involved in similar conduct for which it previously reached a resolution with the United States Securities and Exchange Commission (SEC) in March 2016.
SEC Disgorgement
In a related matter with the SEC, Novartis AG agreed to pay the SEC disgorgement and prejudgment interest over $112 million for its conduct in multiple countries, including South Korea, Greece and Vietnam.
Alcon Pte Ltd.
According to its admissions, from 2011 through 2014, Alcon Pte Ltd knowingly and willfully conspired with others to cause Novartis AG to maintain false books, records and accounts, as a result of a scheme to bribe employees of state-owned and state-controlled hospitals and clinics in Vietnam.
Specifically, the false books and records resulted from Alcon employees in Vietnam making corrupt payments through a third-party distributor to employees of state-owned and state-controlled hospitals and clinics in Vietnam to increase sales of intraocular lenses. Alcon employees in Vietnam would reimburse the distributor for up to 50 percent of the cost of the corrupt payments. Those reimbursements were falsely recorded as consulting expenses, marketing expenses, administration expenses, and human resource expenses.
Deferred Prosecution Agreement
Alcon Pte Ltd, a subsidiary of Novartis AG at the time of the misconduct, entered into a separate DPA in connection with a criminal Information filed in the District of New Jersey. In the Information, Alcon Pte Ltd was charged with conspiracy to violate the books and records provision of the FCPA.
Pursuant to the DPA, Alcon Pte Ltd has agreed to pay a total criminal monetary penalty of approximately $8.9 million. The criminal monetary penalty reflects a 25 percent reduction off the bottom of the U.S. Sentencing Guidelines fine range because of Alcon Pte Ltd’s full cooperation with the government’s investigation.