Bribery/Anti-corruption: Novartis

Thomas Werlen

In October 2010 global pharmaceuticals ­company Novartis was fined $422.5m (£259.7m) to settle charges brought against it by the US Department of Justice (DoJ) under the False Claims Act (FCA). The charges – a ­combination of civil liability and criminal charges – related to the epilepsy drug Trileptal and the ­unlawful use of ‘off-label’ marketing.

The company agreed to pay a $185m criminal fine for the off-label marketing charges, relating to allegations that it was marketing Trileptal for the treatment of bipolar disorder and neuropathic pain, when it had only been approved by the US Food and Drugs ­Administration (FDA) for use as an anticonvulsant drug for treating seizures.

The remaining $237.5m was to resolve civil ­allegations over the payment of illegal kickbacks to healthcare professionals to prescribe Trileptal and other drugs for off-label use. The kickback charges were brought under the qui tam, or whistleblower, provisions of the FCA.

Sharing the spoils

The provisions relate to cases brought to the attention of the government by private individuals, most often by employees. If the government successfully prosecutes the case then the whilstleblower receives a share of any money recovered.

Four former employees received $25.6m as a result of the suit, which related to allegations that Novartis had paid doctors to speak at physicians’ events about the off-label benefits of Novartis’s drugs.

The complaints, however, date back more than 10 years, during which time the company’s general ­counsel and executive committee member Thomas Werlen has overhauled the company’s legal function.

Shortly after arriving at the company from Allen & Overy in 2006, Werlen conducted a widespread review of legal services and introduced a five-year plan to ­overhaul the in-house team. This saw him install a new leadership structure with more central control, as well as set up global practice groups.


“At the time this was quite an ambiguous area,” says Werlen, commenting on the Trileptal investigation. “It wasn’t entirely clear what was legal and what ­
wasn’t. There are some stats that show every drugs ­company has been affected one way or another in the past 20 years. Fortunately, we’re not in the top 10 of
that list.”

Werlen refers to research by the Public Citizen Health Research Group, which found the illegal off-label ­promotion of pharmaceuticals has been responsible for the largest amount of financial penalties levied by the US federal government in the past 20 years. Now, ­however, the firm has one of the tightest whistleblowing procedures in the industry.

“The Foreign Corrupt Practices Act (FCPA) requires us to set up a whistleblowing system for financial fraud,” says Werlen. “We thought it would be a good idea to expand this to cover all kinds of misconduct such as ­failure to comply with company policy and all relevant areas of compliance, including corruption and antitrust.

“We weren’t required to do that by law, but we saw it as an opportunity to identify any kind of misconduct, not just financial fraud. It’s a system that’s now trusted by employees.”

Werlen admits there are examples where cases reported are not violations of the law, which means part of the legal function’s role is to educate employees about the FCA and so-called anti-kickback laws.

“It needs to be made clear what’s allowed and what isn’t allowed,” he says. “Employees can now get those answers from our whistleblower hotline, so it’s not only about calling the hotline to report violations. We do a lot of work educating people about what kinds of things should be reported. It’s a fairly robust system ­compared with some of our peers.”

Coded message

Linked to this, Werlen is currently in the process of reviewing the company’s code of conduct.

“This has been in place for 10 years and now it’s about bringing it to the next level,” says Werlen. “That’s linked to a revamp of compliance in general.
“When reading through it, we can see that particular rules drafted five or 10 years ago might need to be ­clarified. In some ways, it’s less about the content and more about the way it’s communicated where we could improve.”

Thanks to some of the measures contained in the FCPA, Werlen says the company, which has offices in
the UK, is well prepared for the introduction of the Bribery Act.

“For us it’s an addition to an international framework of anti-corruption laws,” says Werlen. “I’d also like to mention other laws in Germany and France that focus on bribery, for example.”

That framework will become increasingly complex in the coming years, but the stringent anti-corruption measures introduced by Werlen means Novartis will not have a problem keeping up.