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Novartis Will Pay, But Will Its Execs?

November 4, 2015

All eyes are on the expected $390 million health care fraud settlement between Novartis and the U.S. Department of Justice that was announced as a “preliminary accord” yesterday by the company. Will the DOJ (and the U.S. Attorney for the Southern District of New York who is handling the case) make any individual executives pay (with money or jail time) or will the company just pay a lot of money? Earlier this year, the DOJ made a big deal of its new policy that individuals will be held accountable in white collar crime cases. Now, inquiring minds want to know if there will be individuals held accountable in this case, or will it be business as usual?

With very few exceptions, in health care cases, executives have gotten off scot-free, keeping their bonuses, stock options, and other hefty compensation earned on the backs of the illegal conduct for which the company is paying. As Novartis noted yesterday, this is a preliminary accord. We know that Novartis is a repeat offender, having paid over $420 million in a civil and criminal settlement in 2010 and entered into a Corporate Integrity Agreement. So, what will the U.S. Attorney for the SDNY and DOJ do? (See our earlier blog related to this subject.)

Making individual executives pay is not just punishment for the past, it is deterrence for the future. Read the company’s announcement yesterday and you can see that the seeds of future illegal behavior are already sown–not only by Novartis but other drug manufacturers with whom they are competing for market share on their respective drugs. Sending a strong message now to individuals may go a long way toward offsetting the immediate economic incentive these individuals have to push the envelope. In the process, we will all pay less for our health care and for government programs like Medicare and Medicaid.