Novartis Korea Hit With Fine, Product Suspensions Over Illegal ‘Rebates’
Executive Summary
South Korea has confirmed administrative measures including a fine against Novartis Korea for illegal rebate payments following official probes last year.
South Korea’s Ministry of Food and Drug Safety (MFDS) has fined the South Korean subsidiary of Swiss-based pharma multinational Novartis AG KRW200m ($173,988) and suspended sales of selected products for three months, in response to a violation of the country's Pharmaceutical Affairs Act by providing rebate payments to doctors in return for prescriptions of the company's drugs.
The MFDS's administrative measures come after local prosecutors indicted several employees of Novartis Korea without detention in August last year on charges of making illegal rebate payments. The case is still proceeding in court.
At that time, prosecutors asked the MFDS as well as the Ministry of Health and Welfare to take administrative measures against Novartis Korea including business suspension, relevant drug price cuts, and reimbursement suspensions. The ministries have also been requested to suspend the licenses of the doctors suspected of receiving rebates from the company.
12 Drugs Suspended
The MFDS notes on its website that it has levied the fine in relation to 30 variations of 14 Novartis Korea products including Galvus (vildagliptin), Lescol (fluvastatin) and Onbrez (indacaterol) for which the subsidiary provided financial gains with the purpose of promoting sales.
It has banned temporarily the sales of 12 variations of three products - Exelon (rivastigmine tartrate), Trileptal (oxcarbazepine), and Zometa (zoledronic acid) - for three months from March 17 to June 16.
The Ministry of Health and Welfare is also reportedly seeking to take other separate measures that may involve limiting reimbursement of Novartis Korea’s products.
Novartis said in a statement it acknowledges and accepts the decision of the MFDS.
"We do not tolerate misconduct and are continuing to invest significant efforts to fully embed a culture of compliance throughout our Korean organization. The trust of patients, and society as a whole, is central to our long-term success. We aim to meet their changing expectations in a way we can be proud of. Novartis is and remains committed to bringing our life-changing medicines to patients in Korea," Novartis Korea said in an emailed response.
Earlier Indictments
In August 2016, South Korean prosecutors indicted a number of current and former employees of Novartis Korea without detention on charges relating to their alleged involvement in illegal “rebate” payments to doctors in return for prescribing the company’s drugs.
According to prosecutors, the firm’s South Korean subsidiary allegedly paid a total of KRW2.59bn in rebates to doctors through five pharmaceutical journals and an academic journal publishing firm over the period from January 2011 to around January last year.
Prosecutors indicted without detention a total of 34 people including the head of Novartis Korea and five other current or former company officials for their alleged participation in the criminal acts.
At that time, Novartis Korea also said it regretted that some of its employees had violated rules against corporate culture and social expectations for the company and pharma industry by holding small-scale medical meetings by way of the pharma journals.
However, the subsidiary did not agree that such acts had been conducted with the approval of Novartis Korea's management.
Novartis and its licensees in India have recently come under scrutiny over whistle-blower allegations of collusion over the setting of Galvus prices. (Also see "Pricing Tensions Escalate In India; Novartis Under A Cloud" - Scrip, 1 Mar, 2017.)
From the editors of PharmAsia News.
(Modified on March 9 to further clarify the number of variations (formulations and doses) and brands affected, and to attribute the statement to Novartis Korea rather than to its local PR agency.)