I have written extensively about the Novartis International AG (Novartis) Foreign Corrupt Practices Act (FCPA) settlement, which was announced in late June. However, the enforcement action paled next to the Stipulation and Order of Settlement and Dismissal (Stipulation), dated July 1, 2020, entered against Novartis Pharmaceuticals Corporation for its bribery and corruption in the US. The first settlement pertains 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 resolves claims arising from the company’s alleged payments of kickbacks to doctors. The Settlement Agreement (Settlement Agreement) was entered into in the US District Court for the Southern District of New York.

These cases had much for every compliance practitioner to consider, including the specific illegal conduct of Novartis, the deficiencies in their compliance program, compliance function and Chief Compliance Officer (CCO); the role of the whistleblower, corrupt culture and lessons learned. Over the next few blog posts, I will be considering the Novartis US settlements and Corporate Integrity Agreement (CIA). Today I want to consider the CIA.

A CIA sets out the requirements an entity settling with the Office of Inspector General (OIG) of the United States Department of Health and Human Services (HHS) to promote compliance with the statutes, regulations, and written directives of Medicare, Medicaid, and all other Federal health care programs and with the statutes, regulations, and written directives of the Food and Drug Administration. They are long and detailed documents which set out specific goals and requirements. However, for the non-Health Care Provider (HCP) corporate compliance professional they provide a wealth of information about some of the most current thinking on a best practices compliance program and the compliance failures which led to the enforcement action.

Structural Requirements 

1. CCO

The first thing to note is the CIA runs for a period of five years and requires Novartis US to hire and retain a CCO for the pendency of the CIA. Can you imagine ever having to tell anything close to an ethical company that you must hire and keep a CCO for the next five years? That probably communicates all you need to know about the culture of Novartis US. The CIA also mandates that the CCO shall be a “member of senior management of Novartis; shall report directly to the President of Novartis; and shall not be, or be subordinate to, the General Counsel or Chief Financial Officer of Novartis or any Novartis Affiliate or have any responsibilities that involve acting in any capacity as legal counsel or supervising legal counsel functions for Novartis or any Novartis Affiliate.” Finally, Novartis is required to report to OIG, any changes in the identity of the CCO, or any changes that would affect the CCO’s ability to perform the duties or obligations set out in the CIA, within five business days after such a change. Once again you can see the problem the OIG is trying to remedy.

2. Compliance Committee

The company is required to create a Compliance Committee which sits between the CCO and the Board of Directors. In addition to the CCO, the Compliance Committee must include other members of senior management from Novartis and its affiliates necessary to meet the requirements of this CIA. This includes senior executives of relevant departments, such as sales, marketing, legal, Medical Affairs, regulatory affairs, human resources, finance, and operations. In addition to supporting the CCO, the Compliance Committee is required to assist in the analysis of risk areas and overseeing the monitoring of internal and external audits and investigations.

3. Board of Directors

The Board of Directors has specific responsibilities under the CIA. First and foremost, it is required hire an independent Board director who is true compliance professional to sit on the Board. (Hint – call Keith Darcy now). The Board is mandated to meet at least quarterly to review and oversee the Compliance Program. It must submit to the “OIG a description of the documents and other materials it reviewed, as well as any additional steps taken, such as the engagement of an independent advisor or other third party resources, in its oversight of the compliance program and in support of making the resolution below during each Reporting Period”. Significantly, each year the Board must adopt a signed resolution, “summarizing its review and oversight of Novartis’ compliance with Federal health care program Novartis Corporate Integrity Agreement requirements, FDA requirements, and the obligations of this CIA.”

4. Compliance Expert and Certifications

The company is required to hire a Compliance Expert for reporting years two and four. The person must be truly a compliance expert and independent of Novartis US. This Compliance Expert is subject to approval by the OIG. Equally interestingly, a wide range of Novartis executives to personally certify that their business unit is in “compliance with applicable Federal health care program and FDA requirements and with the obligations of this CIA.” Those required to do so include the Head of Novartis Pharma USA; the Executive Vice President, US Novartis Oncology; the Executive Director, Patient Assistance Programs; the head of US Business Planning & Analysis; the US Country Lead; the SVP, Chief Business Officer; the SVP, Chief Medical Officer; the SVP, Chief Regulatory Officer; the SVP, Chief Financial Officer; and General Manager, USA.

Tomorrow, I will consider the compliance program requirements of the CIA and some lessons learned for the compliance practitioner.

Resources

Stipulation and Order of Settlement and Dismissal

Settlement Agreement

Corporate Integrity Agreement

DOJ Press Release

[View source.]