Following Novartis and its round-the-world scandals since 2014, we’ve stacked up headlines that offer only one interpretation: The Swiss drugmaker has a systemic problem with bribery, kickbacks and, now, questionable payments to political figures.
Perhaps the broader public hasn’t noticed the data-tampering and coverup allegations in Japan, the bribery accusations and fine in Korea, the SEC fine stemming from kickback charges in China, or—just this year—a politically charged pharma scandal in Greece that reads like an Athens-based telenovela.
Maybe new China allegations didn’t make it far beyond the social networks and government officials there. The long-running U.S. whistleblower case and, now, government investigation into kickbacks to doctors? That could have escaped notice outside the pharma-watching crowd, too.
They’ve noticed the latest, that’s for sure. When the name Stormy Daniels, the notorious porn star paid off by Trump’s lawyer Michael Cohen, made its way into stories about Novartis payments to Cohen himself, they noticed. That's one reason why the company has taken such pains to distance CEO Vas Narasimhan, who took over Feb. 1, from the whole murky situation. And it's one reason why the protestations of Narasimhan's innocence aren't enough.
Daniels’ attorney, in an ongoing fight with Trump fixer-cum-lawyer Cohen, on Tuesday tweeted out an “executive summary” of payments made by U.S. businesses to a Cohen company—the very same company, Essential Consultants, Cohen used to pay off Daniels to keep her quiet about an alleged sexual encounter with Trump.
Novartis made that list, with almost $400,000 in payments from October to January of this year, just ahead of CEO Vas Narasimhan’s dinner with Trump and a selected group of CEOs at the World Economic Forum in Davos. The company’s first response? The payments were all made before Narasimhan took the reins. They were for “U.S. healthcare policy” reasons. And any agreements with Cohen? Now void.
A few hours later, Novartis said the payments actually amounted to $1.2 million, under a consulting contract that couldn't be broken even after the company decided Cohen's services wouldn't be useful. And it emphatically stated that anyone who would suggest that those payments had anything to do with Narasimhan's dinner with Trump must have political agendas of their own.
Then, in a series of anonymous interviews with the media—which bore all the hallmarks of a coordinated leak—company insiders not only blamed former CEO Joe Jimenez for accepting Cohen's offer of access for money, but specifically said the $1.2 million contract was about access, not advice.
The rush to keep Narasimhan clean of the allegations is telling. The company wants the slate wiped clean as of Feb. 1, when he took over. Narasimhan himself has said he’s got compliance—and pharma's reputation in general—at the top of his to-do list, and he’s pulled the company’s first ethics and compliance officer onto his executive committee to take on the rehab job. If the Cohen payments taint him, then his moves seem like window-dressing.
Thing is, Novartis has to prove they’re not window-dressing. Simply saying, “Oh, that’s in the past,” isn’t enough to demonstrate history won’t repeat itself. Particularly because the company has said “that’s in the past” with every scandal that’s surfaced over the past several years.
All along, through every set of allegations, Novartis has said it’s cooperating with authorities. And it's cracked down internally: The company has cleaned house in foreign outposts, firing top managers and staffers alike. After Korea levied fines and suspended two Novartis meds, the company said it’s revamping its global compliance approach. And it’s promised to act quickly if Greek authorities confirm accusations there—which include a suitcase full of euros handed off to an ex-prime minister in return for fixing prices on Novartis drugs.
But note this: These Cohen payments are very much present tense, not past. Novartis didn’t report them as lobbying expenditures on its required disclosures, despite a setup with Cohen that was very similar to a lobbying agreement, as a Novartis source told Stat. The idea that Novartis couldn't get out of its contract with Cohen—even after deciding Cohen was useless—just doesn't past the logic test. And $1.2 million is a lot of money, more than Novartis paid its actual lobbyists.
The fact that this all took place before Narasimhan’s tenure doesn’t absolve him—or the company—from responsibility.
Investors agree; they haven’t given Narasimhan a pass. At this year’s shareholder meeting, his first at the helm, several spoke up to say the company needs to do something about its “swamp” of bribery allegations in Greece to avoid becoming a swamp itself. “Corruption cannot be allowed to become a tradition,” Veronika Hendry, president of the sustainable investing proxy group Actares, said during the meeting.
A week later, Narasimhan elevated that chief compliance officer, Shannon Klinger, to the company's executive committee, where she'll report directly to him. That, obviously, is unprecendented. So, we’re giving Narasimhan the benefit of the doubt and believing it’s not for show. We’d like to think he’s serious about cleaning up the company’s act. So let’s hear from him. ASAP, and publicly.
If Narsimhan really means to crack down on compliance and rehab Novartis’ reputation, then transparency has to be part of it. Klinger can’t just work internally. She needs to come up with a companywide report of problems and fixes, and then share that information.
If Novartis doesn’t come clean about what’s been going on behind the scenes and put forth plans to turn over a new leaf—and then follow up by reporting its progress—its promises will be just that. — Tracy | @TracyStaton