Tokyo prosecutors raid Novartis Japan in Diovan probe

After Japanese authorities arrested an ex-Novartis ($NVS) employee Wednesday, prosecutors raided the company's Tokyo office to continue their probe into data manipulation. The move comes six months after Japan's health ministry first filed a complaint to prosecutors alleging that the company used exaggerated advertising to market the blood pressure drug Diovan.

Novartis will "cooperate fully with the investigation," according to Bloomberg, which interviewed a Tokyo-based spokeswoman for the company.

The Diovan investigation was the first ever action against a drugmaker in Japan, and it shows how serious authorities are about cracking down on questionable promotions. The Diovan advertising at the center of the scandal was based on studies suggesting that the drug could prevent strokes and angina. One key study was retracted last year after concerns emerged that some of the data had been fabricated. The former Novartis employee who was arrested this week, Nobuo Shiraishi, was linked to the discredited studies.

Japan's false-advertising laws can bring penalties of up to two years in prison, plus a fine of up to 2 million yen ($19,600). The government has separately filed a criminal complaint against Novartis related to the allegedly exaggerated Diovan advertising. Novartis is also facing a probe in Japan over allegations that its sales reps may have worked directly with researchers in a study of leukemia drug side effects. That study included the Novartis drugs Gleevec and Tasigna.

Richard Bergström

Novartis continues to apologize publicly for the debacles and has moved quickly to clean up its Japan operation. In April, it pushed out its three top Japan-based staffers, including local office chief Hiroko Ishikawa, and replaced them with British, German, and Canadian executives. Japan accounts for $4.52 billion, or 7.8% of Novartis's total revenues, according to data compiled by Bloomberg.

Whether the personnel shifts will help Novartis move past these scandals so it can continue to grow its business in Japan remains to be seen--but its actions are certainly in line with what other Big Pharma companies have done to smooth over relations in foreign countries. In China, for example, a rash of corruption investigations into GlaxoSmithKline ($GSK) and others is prompting several European pharma companies to hire Chinese nationals, who may be best equipped to navigate local regulations, said Richard Bergström, director general of the European Federation of Pharmaceutical Industries and Associations, earlier this week.

- here's the Bloomberg story

Special Report: Top 10 pharma companies by 2013 revenue - Novartis

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