Novartis' Latest Ethical Misadventure: Did it Pay to Play ... with the US President?

Amidst the news deluge, a story that stood out in the last few days was that of the strange relationships between a consulting firm set up by President Donald Trump's former lawyer and Trump Organization counsel Michael Cohen, and several large corporations.  As reported on May 8, 2018 by the New York Times, the focus was on the payments made to the firm, Essential Consultants LLC, by a financial firm, Columbus Nova, associated with a Russian oligarch, Viktor Vekselberg, who has been described as "Kremlin-linked."

 Did Novartis Pay Michael Cohen's Essential Consultants LLC for Access to the White House?

However, Essential Consultants LLC also had a poorly described business relationship with Swiss-based multinational pharmaceutical manufacturer Novartis.  Per the NYT,

Among the other payments to Mr. Cohen’s company described in the financial records were four for $99,980 each between October and January by Novartis Investments S.A.R.L., a subsidiary of Novartis, the multinational pharmaceutical giant based in Switzerland. Novartis — whose chief executive was among 15 business leaders invited to dinner with Mr. Trump at the World Economic Forum in January — spent more than $10 million on lobbying in Washington last year and frequently seeks approvals from federal drug regulators.

Additional reporting on this relationship suggests that Novartis may have been trying to buy access to or influence on the Trump administration. More details on the arrangements between the firms came from Ed Silverman in Stat News ,

A Novartis unit called Novartis Investment SARL made four payments, each one totaling $99,980, to the consulting firm, according to documents released by Michael Avenatti, the lawyer for Stormy Daniels, the adult film star whose real name is Stephanie Clifford and who was paid $130,000 by Essential Consultants to keep quiet about her alleged affair with Trump.

In a statement, Novartis says it entered into a one-year agreement with Essential Consultants in February 2017, 'shortly after the election of President Trump focused on U.S. healthcare policy matters. The terms were consistent with the market. The agreement expired in February 2018.'

The first Novartis payment was purportedly made on Oct. 5, 2017, while the subsequent payments followed in successive months — Nov. 3, 2017, Dec. 1, 2017, and Jan. 5, 2018, according to the documents.

A Novartis spokesman said that 'any contracts were done prior to (chief executive officer Vasant Narasimhan) taking over' and that he 'had no involvement whatsoever with this arrangement.' He did not provide any further details concerning the payments, but indicated the agreement had expired.

Narasimhan succeeded Joe Jimenez as Novartis chief executive on Feb. 1 this year, although he attended a dinner with Trump at the World Economic Forum in Davos, Switzerland, on Jan. 25, which Avenatti noted in the documents that he released. A Novartis spokesman later added that Jimenez last met with Trump at a meeting with executives from several drug makers last spring.

Another article by Mr Silverman in Stat gave some further rationale for this agreement.

Michael Cohen, a longtime fixer for the president, reached out to Novartis’s then-chief executive officer Joe Jimenez, promising help gaining access to Trump and influential officials in the new administration, according to an employee inside Novartis familiar with the matter.

Jimenez took the call and then instructed his team to reach a deal with Cohen.

Furthermore, a Novartis empoyee said,

'With a new administration coming in, basically, all the traditional contacts disappeared and they were all new players. We were trying to find an inroad into the administration. Cohen promised access to not just Trump, but also the circle around him. It was almost as if we were hiring him as a lobbyist.'

A Huffington Post article found

an official with one of those companies [Novartis, At&T, or Korea Aerospace], who requested anonymity to speak openly, was more blunt. The official said Cohen 'was promising access to Trump and members of the administration, positioning himself as a lobbyist.'

So there seemed to be a confluence of reporting suggesting that Novartis paid Michael Cohen via the perhaps ironically named Essential Consultans LLC for access to or influence over the Trump administration, and possibly specifically President Trump himself.  Chummy relationships between large health care organizations, particularly large for-profit health care corporations, and US government agencies that regulate health care, or set health policy are old news.  We have frequently discussed the revolving door through which people travel going to and from leadership positions in health care corporations and in health related government agencies.  While we have discussed many examples of health care corporations being accused of, settling allegations of, or even pleading guilty to charges of bribery or kickbacks, I cannot recall any case of a health care corporation paying for access to and possibly raising suspicions about the bribery of the President of the US. That would be a new low in the annals of health care corruption.


Nothing New for Novartis

Thus it should be no surprise that pundits on the business of health care were back on their heels.  John LaMattina, wrote for Forbes,

The most recent revelation involving Novartis is both shocking and depressing.

Also,

One wonders what Novartis was thinking in entering such an agreement. Clearly, any sensible person would look at such an agreement cynically and come away with the view that Novartis was attempting to buy access to the President through his lawyer. Furthermore, the one year contract that Novartis had with Cohen - $100,000/month – is a lot of money for a lawyer with no background in healthcare. Didn’t anyone at Novartis think about how badly this would look if such a deal was made public?

But Mr LaMattina is a former President of Global Research and Development for Pfizer, a company with a long history of ethical misadventures (look here), so may be a bit biased about the integrity of the pharmaceutical industry.

In fact, Mr Silverman's first article suggested that Novartis is not so innocent.

Throughout much of last year, Novartis was embroiled in a bribery scandal in Greece, where the government was probing allegations that the drug maker made payments to numerous politicians to boost sales of its medicines through public agencies.

Also,

In the U.S., the drug maker is defending a long-running lawsuit that is being pressed by the federal government over allegations it provided doctors with paid speaking engagements, fancy meals, and alcohol in exchange for writing prescriptions for its drugs.

The case is being closely watched because the company has been accused of being a repeat offender. How so? In 2010, Novartis paid $422.5 million in penalties and pleaded guilty to a misdemeanor to resolve criminal allegations that it improperly promoted several medicines.

At the time, the company was already operating under a Corporate Integrity Agreement, which required establishing an internal compliance program and reporting violations, among other things. That agreement was signed in September 2010, yet the lawsuit alleged the infractions occurred afterward, suggesting Novartis might face a stiff penalty should it attempt a settlement with the government.

Moreover, those who follow Health Care Renewal would realize that Novartis' record of ethical misadventures is much more extensive than that.


In October, 2016, Novartis settled charges that from 2002-2009 it promoted use a skin cream for pediatric patients for unapproved indications and in ways that could have endangered patients (look here).  

In March, 2016, Novartis settled charges by the US Securities and Exchange Commission (SEC) under the Foreign Corrupt Practics Act (FCPA) thatfrom 2009-2013 it bribed Chinese health care professionals to increase sales (look here).  

In November, 2015 we discussed what were then the latest misadventures by Novartis and its leadership.  At that time, our post included these section headings covering 2014-15:

-  Japanese Health, Labor and Welfare Ministry Found that Novartis Concealed Serious Adverse Effects
- Novartis Executive Pleads Guilty to Bribing Polish Official
- Novartis Subsidiary Sandoz Settles Allegations that it Misrepresented Pricing Data to US Medicaid
- Express Scripts Settles Allegations that it Accepted Kickbacks from Novartis
- Novartis Settles US Allegations of Kickbacks to Enhance Sales of Multiple Drugs

Furthermore, in that post we also documented Novartis' previous record.   In March, 2014, we had noted:
- Italian authorities had fined Novartis and Roche for colluding to promote the use of an expensive opthamologic treatment
- the NY Times published interviews with physicians ostensibly showing how Novartis turned them into marketers for the drug Starlix
- Japanese investigators charged Novartis with manipulating clinical research
- Indian regulators canceled a Novartis import license, charging the company with fraud.

Also,  in 2013, Novartis was fined for anti-competitive practices in its marketing of Fentanyl by the European Commission (look here), and in 2011 its Sandoz subsidiary settled allegations of misreporting prices in the US for $150 million (look here)   Other Novartis misadventures from 2010 and earlier, including the two described in the Stat News article, appear here.  So Novartis has quite an impressive, if not infamous record of ethical failures.

Note that through all these cases, Novartis leadership enjoyed impunity.  No Novartis top manager suffered any negative consequences from any of them (although one apparent mid-level company manager at the Polish subsidiary did plead guilty), and all these previous episodes apparently did not suggest a pattern of recidivism to US authorities this time sufficient to attempt to impose any negative consequences on higher level managers.

So is it at all surprising that the previous Novartis CEO did not see a big problem paying Donald Trump's lawyer and former corporate counsel to a little access to The Donald?

Discussion

Most corrupt actions require two parties.  While it is understandable that there has been tremendous recent interest in evidence that the Trump regime is corrupt (look here), any such corruption had to have been enabled by unethical actions on the parts of others.  Those others likely included large numbers of leaders of large corporations, including health care corporations.  We have shown repeatedly that top leaders of US health care organizations have enjoyed impunity that has allowed them to foster a host of unethical actions, including crimes such as bribery, fraud, and kickbacks, and true health care corruption.

Our societal tolerance of health care (and other forms of) corruption probably enabled the currently breathtaking scope of executive branch corruption.  For a long time we have argued that health care corruption is a major cause of health care dysfunction.  As we wrote in August, 2017, Transparency International (TI) defines corruption as

Abuse of entrusted power for private gain

In 2006, TI published a report on health care corruption, which asserted that corruption is widespread throughout the world, serious, and causes severe harm to patients and society.

the scale of corruption is vast in both rich and poor countries.

Also,

Corruption might mean the difference between life and death for those in need of urgent care. It is invariably the poor in society who are affected most by corruption because they often cannot afford bribes or private health care. But corruption in the richest parts of the world also has its costs.

The report got little attention.  Health care corruption has been nearly a taboo topic in the US, anechoic, presumably because its discussion would offend the people it makes rich and powerful. As suggested by the recent Transparency International report on corruption in the pharmaceutical industry,

However, strong control over key processes combined with huge resources and big profits to be made make the pharmaceutical industry particularly vulnerable to corruption. Pharmaceutical companies have the opportunity to use their influence and resources to exploit weak governance structures and divert policy and institutions away from public health objectives and towards their own profit maximising interests.

Presumably the leaders of other kinds of corrupt organizations can do the same. 

When health care corruption is discussed in English speaking developed countries, it is almost always in terms of a problem that affects somewhere else, mainly  presumably benighted less developed countries.  At best, the corruption in developed countries that gets discussed is at low levels.  In the US, frequent examples are the "pill mills"  and various cheating of government and private insurance programs by practitioners and patients.  Lately these have gotten even more attention as they are decried as a cause of the narcotics (opioids) crisis (e.g., look here).  In contrast, the US government has been less inclined to address the activities of the leaders of the pharmaceutical companies who have pushed legal narcotics (e.g., see this post). 

However, Health Care Renewal has stressed "grand corruption," or the corruption of health care leaders.  We have noted the continuing impunity of top health care corporate managers.  Health care corporations have allegedly used kickbacks and fraud to enhance their revenue, but at best such corporations have been able to make legal settlements that result in fines that small relative to their  multi-billion revenues without admitting guilt.  Almost never are top corporate managers subject to any negative consequences.


The continuing festering of widespeard amorality and corruption at the top of US business has fostered a situation in which now corruption appears to have spread to the top of the US government.
 The only way we can now address health care corruption is to excise the corruption at the heart of our government.