Novartis apologizes for lax business practices in Japan as side-effects scandal widens

Facing its second scandal in as many months, Novartis' ($NVS) Japanese unit has issued an apology for failing to disclose side effects of its drugs Tasigna and Gleevec, which are used to treat leukemia. The apology follows revelations in May that Japan's Health, Labor and Welfare Ministry had started investigating charges that Novartis collected information on 3,000 Japanese patients who were taking Tasigna last year and found 30 cases of side effects, some of which should have been reported to the government within a month but weren't.

"We deeply regret that we have allowed this situation to arise, and offer our deepest apologies to our patients, their families, medical professionals, as well as the public," the company said in a statement obtained by Reuters. "We take it very seriously, that side-effects, which should be extremely important to any pharmaceutical company, were not reported appropriately."

The apology comes at a time when Novartis is still reeling from the arrest earlier this month of its former employee Nobuo Shirahashi, who allegedly provided false data to clinical trial investigators in an effort to promote the company's blood pressure drug, Diovan. Novartis said it expects Japanese authorities to press charges that could bring a penalty of up to ¥2 million ($19,700).

The Diovan scandal erupted last year when several Japanese universities retracted data they had collected on the drug after learning a Novartis employee had been involved in post-marketing studies without disclosing his affiliation with the company. Then the government filed a criminal complaint alleging that Novartis exaggerated its Diovan marketing claims.

Novartis employees may have also been inappropriately involved in the leukemia trials. In March, the University of Tokyo Hospital--which was conducting a trial comparing Tasigna and Gleevec--revealed that several Novartis sales reps processed questionnaires during the trial, violating trial protocol that required doctors to handle the questionnaires themselves.

Novartis has slashed executive pay in Japan, replaced its senior management there, and instituted remedial training for employees--but apparently that's not enough to appease Japanese officials. Japanese news wire Jiji is now reporting that the Health, Labor and Welfare Ministry ordered Novartis to improve its business practices, according to Reuters.

- here's the Reuters story
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