Novartis AG (NYSE:NVS) Executives In South Korea Indicted For Illegal Rebate

Six of Novartis AG (ADR) (NYSE:NVS) executives from a South Korean unit have been indicted for paying rebates to doctors in return for prescribing the company’s drugs to patients. The allegedly illegal sales effort saw doctors at the general hospital receive $2.3 million in payment either through arrangements with publication through conference appearances and fees for articles or cash.

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The drug maker executives allegedly funded academic event that were supposedly organized by publications. Money was allegedly distributed to doctors disguised as attendance fees and for articles that physicians contributed to the publications.

Among those indicted includes CEO Moon Hak-sun, who has been suspended since April. A total of 23 people including six publishers of medical books and magazines and doctors have also been charged for engaging in receiving illegal payments. The illegal activities are said to have occurred from January 2011 until earlier this year. This is according to the Seoul Western District Prosecutors’ Office that raided Novartis’s offices in February looking for evidence that the drug maker had paid bribes.

South Korean health regulators and prosecutors have been cracking down on domestic and foreign firms paying rebates on drug sales since they passed a drug anti-rebate law back in 2013. Novartis executives have rejected the charges, while the main company noted that it does not tolerate misconduct and is already implementing a redemption plan in Korea based on the findings of their investigation.

Novartis has been facing hard times in relation to sales in Asia in the past year. In March, the Swiss drug maker agreed to pay $25 million with the purpose of settling a Securities and Exchange Commission (SEC) Investigation into bribery allegations in China. Novartis employees at two Chinese subsidiaries gave money gifts, vacation and entertainment among other things to health care professionals between 2009 and 2010. That same month, an anonymous source accused Novartis of paying bribes in Turkey by use of a consulting firm to boost the use of its medicines.

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