After a scandal erupted Tuesday when Stormy Daniels' lawyer claimed Novartis made "suspicious financial transactions" to President Donald Trump's personal lawyer, the drugmaker offered up its own version of events. Novartis admitted its payments totaled $1.2 million—$100,000 a month—to Michael Cohen for consulting, even though it determined after one meeting that Cohen couldn't offer any help.
The initial report of the payments, made public by Daniels' lawyer Michael Avenatti Tuesday via Twitter, said Novartis made the transactions through its subsidiary Novartis Investments to Essential Consultants, a company Cohen also used to pay Daniels $130,000 to keep her quiet about an alleged sexual encounter with the president.
The timing of those payments is nothing short of a PR disaster. According to the report, they came in at $99,980 each, starting from last October to early this January, just weeks before Trump’s dinner with then-incoming CEO Vas Narasimhan—among others—at the World Economic Forum in Davos, Switzerland, Novartis’ home country. Novartis said in a statement that the payments were part of a $1.2 million consulting contract and didn't at all relate to Narasimhan's dinner with Trump. "The engagement of Essential Consultants predated Vas Narasimhan's becoming Novartis CEO and he was in no way involved with this agreement," the company said in its second statement on Avenatti's report.
"[T]his agreement was also in no way related to the group dinner" at Davos, which included 15 European industry leaders, the statement said. "Suggestions to the contrary clearly misrepresent the facts and can only be intended to further personal or political agendas as to which Novartis should not be a part."
Novartis said it struck a one-year agreement with Essential Consultants last February, shortly after Trump was sworn in as President of the United States. The company thought Essential could help advise it on Trump's approach to healthcare policy. But when Novartis met with Cohen in March, it decided that Cohen "would be unable to provide the services Novartis had anticipated," and decided not to work with him.
But, the company said, the $100,000 monthly payments stipulated by the contract still came due. "As the contract could only be terminated for cause, payments continued to be made until the contract expired by its own terms in February 2018."
The Swiss drugmaker has said it has been cooperating with all investigations—including the Cohen probe—and that it’s cracking down on compliance problems. It has sent employees and managers packing and set up compliance training to combat future misbehavior, the company said.
Lawyers from special counsel Robert Mueller’s office contacted the firm last November regarding the transactions, and “Novartis cooperated fully with the Special Counsel’s office and provided all the information requested,” according to the company. “Novartis considers this matter closed as to itself and is not aware of any outstanding questions regarding the agreement.”
Other “possible fraudulent and illegal” transactions noted by Avenatti’s report include $500,000 received from Viktor Vekselberg, a Russian oligarch with close ties to the Kremlin, and $200,000 from AT&T, which has confirmed the payments to several media outlets as a way “to provide insights into understanding the new administration.”
Trump, with his famous “getting away with murder” comment, has made cutting drug prices a key topic, potentially prompting drugmakers to up their lobbying efforts in Washington. According to data compiled by the Center for Responsive Politics, Novartis spent $8.76 million on lobbying the federal government last year, the highest from the firm among the organization’s data available since 1998.
The kickback allegations in the U.S. date back several years. Prompted by a whistleblower lawsuit, the Justice Department is investigating allegations that Novartis hosted sham educational events—fancy dinners where treatment education was cursory to nonexistent—to win doctors over to prescribing the company's drugs. A judge ordered the company to hand over information about almost 70,000 events it hosted, and prosecutors recently said the company was essentially “buying prescriptions.”
The U.S. payments and investigation are among a series of scandals around the world, beginning with data-tampering and side-effects reporting allegations in Japan several years ago. Then-pharma chief David Epstein publicly apologized to the Japanese government for its misdeeds.
Since then, doctor kickback allegations surfaced in South Korea, triggering an investigation that ended last April with Novartis paying a $50 million fine. Then there’s an ongoing probe in Greece, where Novartis is accused of bribing 10 top government officials in exchange for more product orders.
Two years after the company settled a U.S. Securities and Exchange Commission investigation into bribery charges in China, new allegations emerged from that country just recently. A self-identified employee in China accused Novartis of laundering money through fake academic events to cover kickbacks to doctors.
Novartis has previously said it stepped up its global ethics and compliance measures, including revising its ethics policies to help its local units around the world make the right decisions. It also just promoted Shannon Klinger to the position of chief ethics, risk and compliance officer on the company’s executive committee, following the complaints from investors in March.
Editor's note: This story was updated with additional comments from Novartis.