Novartis
By Philip Mattera
Novartis is the result of the ongoing concentration of the Swiss pharmaceutical and chemical industries. It was formed in 1996 through the merger of Ciba-Geigy and Sandoz, which had earlier in their existence both been part of the Basel cartel formed after the First World War.
Before and after the merger, the businesses that went into the creation of Novartis were frequently at the center of controversies concerning unsafe drugs and pesticides, price-gouging, improper marketing and toxic dumping. The company also had to pay more than $150 million to settle a sex discrimination lawsuit in the United States. Novartis was widely criticized for its drawn-out but ultimately unsuccessful battle against an Indian patent policy designed to make lower-cost drugs more widely available in poor countries.
Product Safety
In 1971 the British Medical Journal reported that clioquinol, a Ciba-Geigy drug that was being used widely to treat dysentery and other intestinal ailments, had been linked to thousands of cases in Japan in which users developed severe damage to eye muscles and nerves, sometimes leading to brain damage or blindness. Under pressure from regulators, the drug was removed from the U.S. market but Ciba-Geigy continued to distribute it elsewhere. A company spokesperson told a New York Times reporter that this was justified because in some cases the benefits might outweigh the risks, but he also admitted that not all patients in poor countries were informed of those risks.
In 1978 a Japanese court concluded that clioquinol was responsible for a degenerative neurological disease (subacute-myelo-optico-neuropathy or SMON) that had killed or injured thousands of persons. The company, which was criticized for excessive marketing of the medication, ended up paying out hundreds of millions of dollars in compensation to settle thousands of lawsuits. In 1985 the company finally took clioquinol off the market worldwide.
During the early 1980s Ciba-Geigy learned that its anti-arthritic drugs Butazolidin and Tandearil had been responsible for several thousand deaths and serious injuries in different parts of the world. After an internal document with that information was leaked to the press in 1983, the company advised health officials of the problem and suggested that the drugs be used only for acute conditions. Under pressure from groups such as Health Action International, the company ceased production of Tandearil but continued to distribute Butazolidin after changing its packaging.
In 1989 the Ciba-Geigy epilepsy drug Tegretol was linked to birth defects and retardation in the children of women who took it during pregnancy.
In the 1990s Sandoz was hit with a wave of lawsuits charging that Parlodel, its drug for suppressing lactation, caused side effects such as heart attack, stroke and seizures, and that the company knew about the problems. The U.S. Food and Drug Administration (FDA) had issued warnings about the dangers of lactation suppressants, and all producers other than Sandoz took their products off the market. After Public Citizen sued the FDA in 1994 to take action against Parlodel, Sandoz finally stopped distributing the drug.
In 1997 Novartis said it would withdraw versions of the laxative Ex-Lax containing phenolphthalein from the U.S. market after the FDA proposed banning the substance as a cancer risk.
In 2001 Novartis failed to win FDA approval for its irritable-bowel-syndrome drug Zelnorm (called Zelmac in Europe), which had been challenged by Public Citizen as posing unacceptable safety risks. The agency later reversed itself and allowed the drug to go on the market. Yet in 2007 the FDA changed course again and asked Novartis to take Zelnorm off the market, based on new research about the risks of heart attacks and strokes.
In 2004 Novartis was charged by the FDA with failing to submit timely and accurate reports about the deaths of dogs treated with a painkiller called Deramaxx in the same class of medicine, COX-2 inhibitors, that had been linked to heart problems in humans.
In 2012 Novartis had to recall batches of over-the-counter drugs such as Excedrin and NoDoz after complaints that containers with some of those products contained broken pills that the FDA warned could have come from powerful prescription painkillers made at the same facility.
Antitrust and Pricing Controversies
In 1990 Sandoz’s anti-schizophrenia medication Clozaril became the subject of controversy because of its high cost (nearly $9,000 for an annual supply plus required weekly blood tests), as well as reports of side effects that included a uncommon but fatal blood disorder. The company bowed to pressure to cut the price and later agreed to end the requirement that users commit to blood monitoring by Baxter International, which had been built into the price. In 1991 Sandoz settled antitrust charges that had been brought by the Federal Trade Commission in connection with the Baxter arrangement, and the following year it and Baxter agreed to pay $21 million to settle a lawsuit that had been brought by 33 states over the tie-in.
In 1999 the U.S. Justice Department announced that Novartis would pay the federal government $8 million to settle charges that Ciba-Geigy had overcharged the Department of Veterans Affairs.
Gleevec (Glivec in Europe), a cancer drug introduced by Novartis, was well received as a treatment for leukemia and certain tumors, but there was controversy over the pricing of the medication, a year’s supply of which in the early 2000s was priced at about $27,000. Novartis sought to quiet the criticism by promising to give the drug away to many of those who could not afford it, but in 2003 it was reported that the effort was falling far short of expectations.
Novartis later found itself in a battle with the Indian government, which rejected the company’s patent application for Gleevec as part of its effort to encourage the production of low-cost generic drugs for poor countries. A wide range of non-governmental organizations, such as Doctors Without Borders and the Interfaith Center on Corporate Responsibility, called on Novartis to drop its suit, but the company pursued the matter all the way to the Indian Supreme Court. In April 2013 the high court ruled against Novartis and affirmed the right of Indian companies to produce generic versions of Gleevec.
In 2013 European antitrust officials accused Novartis of colluding with Johnson & Johnson to delay the availability of a less expensive generic version of a pain medication used by cancer patients.
In 2020 Sandoz entered into a deferred prosecution agreement and agreed to pay $195 million to resolve charges of conspiring to allocate customers, rig bids, and fix prices for generic drugs.
Marketing and False Claims Controversies
In 1980 the FDA barred Ciba-Geigy from proceeding with its plan to promote its Anturane medication as an aid in preventing death in the critical months after a heart attack. The agency said there were mistakes in the tabulation of testing data that put into question the company’s claims about the life-saving attributes of the drug.
In 1989 Ciba-Geigy caused an uproar when it engaged in unlawful promotion of its arthritis drug Voltaren to consumers, including the use of baseball legend Mickey Mantle to tout the drug on talk shows.
In 2003 Novartis pulled a television advertisement for its toenail fungus medication Lamisil after the FDA argued that the ad overstated its effectiveness.
In 2005 a Novartis unit, OPI Properties, agreed to pay $49.2 million in civil and criminal fines and be excluded from federal healthcare contracts to resolve charges relating to its marketing of nutritional products to the Medicare and Medicaid programs.
In 2010 Eon Laboratories, a Novartis subsidiary, agreed to pay $3.5 million to settle allegations that it violated the False Claims Act by submitting inaccurate reports to the government that obscured the fact that the FDA had found that the company’s Nitroglycerin Sustained Release capsules lacked substantial evidence of effectiveness.
Also in 2010, Novartis Vaccines & Diagnostics agreed to pay $72.5 million to resolve charges that its predecessor company Chiron had engaged in illegal marketing of the cystic fibrosis drug TOBI.
In addition in 2010, Novartis agreed to pay $422 million to resolve criminal and civil liability arising from charges that it engaged in illegal marketing of its epilepsy drug Trileptal, including the payment of kickbacks to doctors to get them to prescribe the medication for off-label purposes.
In 2015 Novartis agreed to pay $390 million to settle a case brought by the U.S. Attorney in Manhattan accusing it of making illegal kickbacks to get specialty pharmacies to recommend two of its drugs, Exjade and Myfortic.
In 2016 the U.S. Securities and Exchange Commission announced that Novartis would pay $25 million to settle charges that it violated the Foreign Corrupt Practices Act when its China-based subsidiaries engaged in pay-to-prescribe schemes to increase sales. In 2020 a subsidiary of Novartis agreed to pay $233 million in criminal penalties and $112 million in civil penalties to resolve allegations that it bribed employees of state-owned and state-controlled hospitals and clinics in several countries and falsely recorded improper payments
Also in 2020 Novartis agreed to pay over $642 million in separate settlements resolving claims that it violated the False Claims Act. The first settlement pertained to the company's alleged illegal use of three foundations as conduits to pay the copayments of Medicare patients taking Novartis's drugs Gilenya and Afinitor. The second settlement resolved claims arising from the company's alleged payments of kickbacks to doctors.
Human Rights
In 1976 it was revealed that six boys in Egypt had been paid by Ciba-Geigy researchers to stand in a cotton field while it was being sprayed with the company’s Galecron pesticide. The point of the experiment was to see how much of the chemical would be absorbed into the boys' bodies. Ciba-Geigy had already withdrawn Galecron from the market and temporarily closed its Swiss factory to install advanced protective equipment to prevent workers there from coming in contact with chlordimeform (CDF), the active ingredient in the pesticide.
Ciba-Geigy, nonetheless, kept distributing Galecron in poor countries, where workers involved in cotton growing were typically exposed to high quantities of CDF. In 1992 Ciba-Geigy warned workers at a plant in Louisiana who had worked with CDF during the 1970s and 1980s that they could be at risk of bladder cancer. The company later settled a class action suit by agreeing to spend an estimated $45 million to provide treatment and compensation for those workers and others who had been involved in the manufacture, packaging or application of Galecron.
In 1994 Sandoz acquired Gerber Products, one of the largest players in the baby food and infant formula business. Gerber, along with other companies such as Nestlé, was widely criticized for aggressively marketing its products to mothers in poorer countries, discouraging them from breast feeding. Novartis sold Gerber in 2007.
Environment
A Novartis predecessor company, Geigy, was responsible for introducing to the world the insecticide DDT, which revolutionized pest control in good ways (it killed everything in its path) and bad (it introduced unprecedented levels of toxicity into the environment). DDT, whose dangers were discussed at length in Rachel Carson’s famous book Silent Spring, was later banned for agricultural use by the 2001 Stockholm Convention.
In 1983 the Ciba-Geigy plant in Toms River, New Jersey was placed on the federal Superfund cleanup list because of the large amounts of hazardous waste that had been buried or collected into retaining ponds. The 1,240-acre site became a focus on environmental protests as state regulators decided whether to renew the plant’s discharge permit and whether to approve company plans to build a large new pharmaceutical production facility at the site. The company got a discharge permit allowing it to release an average of more than 5 million gallons of toxic waste water into the ocean, but it was required to reduce some specific pollutants in the effluent.
In 1985 Ciba-Geigy was indicted in New Jersey state court for illegal dumping and for conspiring to deceive government agencies about the nature of the chemical wastes it was discharging. Years later, in 1992, the company agreed to plead guilty to dumping charges and pay $62 million to settle the drawn-out litigation. In 2001 Novartis agreed to spend an estimated $90 million to clean up the site.
In 1986 water from hoses being used by firefighters to battle a large blaze at a Sandoz plant near Basel, Switzerland swept some 30 tons of chemicals containing mercury and toxic phosphate compounds into the Rhine River, killing hundreds of thousands of fish and eels while contaminating the drinking water source for numerous communities. Shortly thereafter, one nearby facility operated by Ciba-Geigy (not yet merged with Sandoz) spilled a smaller quantity of the pesticide atrazine into the Rhine while another Ciba-Geigy plant released an acrid cloud of smoke from a phenol compound experiment that went awry. The accidents set off angry street protests as environmental groups compared the situation to the Chernobyl disaster.
In 1992 Ciba-Geigy reached agreement with the U.S. Environmental Protection Agency (EPA) to change the labeling for atrazine and to undertake greater water monitoring and educational initiatives in connection with the pesticide.
That same year, Ciba-Geigy reached agreement with the EPA to spend $120 million to clean up contaminated soil at its chemical plant in Alabama that had once made the banned insecticide DDT and other chemical products.
In 1997 Novartis Crop Protection was one of nine companies that agreed to pay a total of $60 million to clean up a Superfund site in Aberdeen, North Carolina where toxic pesticide-laden wastes had been dumped for more than 50 years.
In 2000 the Novartis pesticide business was spun off and merged with AstraZeneca’s agrochemicals operation to form Syngenta.
Employment Discrimination
In 2005 a group of women who had worked as sales representatives for Novartis in the United States filed a lawsuit against the company, saying they were discriminated against in pay and promotions, especially after becoming pregnant. In 2010 a federal jury ruled in favor of the women, awarding them $3.3 million in compensatory damages and $250 million in punitive damages. Novartis appealed and then settled the case for $152 million.
Other
In 2013 Novartis faced a shareholder revolt and a huge public controversy after it announced plans to give $78 million to retiring chairman Daniel Vasella so that he would not work for another drug company. Within weeks, the payment was cancelled.
Other Information Sources
Violation Tracker summary page
Watchdog Groups and Campaigns
Center for Science in the Public Interest
Interfaith Center on Corporate Responsibility
Prescription Access Litigation (PAL) Project
Public Citizen Health Research Group
Swiss Alliance of Development Organizations
Key Books and Reports
A Healthy Business? World Health and the Pharmaceutical Industry by Andrew Chetley (1990).
Bad Pharma: How Drug Companies Mislead Doctors and Harm Patients by Ben Goldacre (2012).
Benchmarking AIDS: Evaluating Pharmaceutical Company Responses to the Public Health Crisis in Emerging Markets (Interfaith Center on Corporate Responsibility, 2006).
Branding the Cure: A Consumer Perspective on Corporate Social Responsibility, Drug Promotion and the Pharmaceutical Industry in Europe (Consumers International, 2006).
Corporate Crime in the Pharmaceutical Industry by John Braithwaite (Routledge & Kegan Paul, 1984).
Investing for Life: Meeting Poor People’s Needs for Access to Medicines through Responsible Business Practices (Oxfam International, 2007).
Last updated September 26, 2020