WASHINGTON, D.C. [05/17/18]—U.S. Senator Tina Smith (D-Minn.) is calling for a full investigation of the payments Novartis made to President Trump’s personal attorney Michael Cohen and is asking the leaders of the Senate Health Committee to hold a hearing with the CEO of Novartis as the key witness. Sen. Smith expresses concern that the payments may have played a role in shaping the Trump Administration’s positions on issues affecting Novartis and other drug makers, including importation of cheaper drugs from abroad.
You can read a copy of the letter Sen. Smith sent by clicking here.
“Discovery of these payments comes at a time when Minnesotans and Americans are deeply concerned about the impact that rising drug prices are having on their families and the health care system. Novartis’ business practices exacerbate the frustration felt by far too many families.” wrote Sen. Smith to Chairman Lamar Alexander (R-Tenn.) and Ranking Member Patty Murray (D-Wash.). “For example, Novartis has nine widely-used drugs that generate more than $1 billion in sales, and the company makes other drugs that produce hundreds of millions in sales. Despite these impressive sales numbers, some of the company’s products come with eye-popping, six-figured price tags, but are sold for far less in other countries. It makes sense then that one of the company’s top legislative priorities last year was importation, namely stopping proposals—including those heralded by President Trump on the campaign trail—that would allow more people to import drugs from abroad.”
You can read a copy of the letter by clicking here or reading below.
May 16, 2018
The Honorable Lamar Alexander
Chairman, Committee on Health, Education, Labor & Pensions
U.S. Senate
Washington, DC 20510
The Honorable Patty Murray
Ranking Member, Committee on Health, Education, Labor & Pensions
U.S. Senate
Washington, DC 20510
Dear Chairman Alexander and Ranking Member Murray:
Last week Novartis confirmed that it paid nearly $1.2 million to Michael Cohen, President Donald Trump’s personal lawyer, through a shell corporation, Essential Consultants. The contract between the company and Essential Consultants lasted for one year, ending in February 2018. At the same time these payments were being made, Novartis’ chief executive, Dr. Narasimhan, joined President Trump for dinner at the World Economic Forum in Davos, Switzerland. [1] I find these payments deeply concerning and believe that Novartis and its leadership need to provide more answers. Given the level of Congressional interest in this transaction and its implications, I urge you, as the leaders of the Senate Health, Education, Labor, and Pensions Committee, to open a full investigation of these payments and hold a public hearing with Novartis’ chief executive serving as a principal witness.[2]
The previously undisclosed payments Novartis made to Mr. Cohen raise concerns that the company entered into a financial relationship with the President’s personal attorney in order to not only win over the new Administration, but also prevent the Administration from meaningfully tackling skyrocketing prescription drug prices that are hurting American families.
In fact, the company stated that it entered into the contract with Essential Consultants because it “believed that Michael Cohen could advise the company as to how the Trump Administration might approach certain US healthcare policy matters.”[3] But, as leaders at Novartis likely knew at the time of the contract negotiations, Mr. Cohen has no background in health care policy.
Notwithstanding Mr. Cohen’s lack of government experience and his unfamiliarity with the issues at the very heart of their industry, Novartis elected to enter into a relationship with him. According to a Novartis employee, “[w]e 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.”[4] A senior Novartis spokesman stated that, “[i]n hindsight, this must be seen as a mistake.”[5]
But comments by another Novartis employee make clear that Novartis recognized that it was wrong to engage Mr. Cohen not “[i]n hindsight,” but during the company’s very first meeting with him. It was recently reported that “a group of Novartis employees, mostly from the government affairs and lobbying teams,” met with Mr. Cohen in March 2017. A Novartis employee said that “toward the end of the meeting everyone realized this was a probably a slippery slope to engage him. So they decided not to really engage Cohen for any activities after that.” Nonetheless, Novartis did not cancel its contract with Mr. Cohen, but rather continued to pay Mr. Cohen’s shell corporation $100,000 per month until the agreement was allowed to lapse. According to the Novartis employee, the company chose not to cancel the contract because “[i]t might have caused anger” on the part of the President of the United States.[6]
Discovery of these payments comes at a time when Minnesotans and Americans are deeply concerned about the impact that rising drug prices are having on their families and the health care system. Novartis’ business practices exacerbate the frustration felt by far too many families.[7] For example, Novartis has nine widely-used drugs that generate more than $1 billion in sales, and the company makes other drugs that produce hundreds of millions in sales. Despite these impressive sales numbers, some of the company’s products come with eye-popping, six-figured price tags, but are sold for far less in other countries. It makes sense then that one of the company’s top legislative priorities last year was importation, namely stopping proposals—including those heralded by President Trump on the campaign trail—that would allow more people to import drugs from abroad. It is reported that the company spent $8.8 million lobbying U.S. lawmakers in 2017, which doesn’t account for the previously undisclosed $1.2 million in payments to Mr. Cohen.[8]
The HELP Committee has already held numerous hearings on the impact of rising prescription drug prices, so it would be fitting to hold an additional hearing on the specific circumstances of the Novartis payments and the influence of the pharmaceutical industry more broadly.
What I find particularly troubling in the context of Novartis, is that this is not the first time that the company has faced questions about engaging in pay-to-play schemes and even bribery in order to secure favorable treatment from government officials. In fact, since 2016, Novartis has been involved in investigations regarding bribes and other improper payments in Greece, Turkey, South Korea, and China.[9] In 2016, the Securities and Exchange Commission (SEC) investigated the improper payments in China and determined that, “Novartis failed to devise and maintain a sufficient system of internal accounting controls and lacked an effective anti-corruption compliance program to detect and prevent these schemes.”[10]As a consequence of the SEC investigation, Novartis agreed to pay more than $20 million in fines and implement “anti-corruption compliance measures.” Moreover, the payments the company made to Essential Consultants were initiated after the company agreed to implement these anti-corruption measures.[11] Novartis’ decision to enter into a relationship with Mr. Cohen stands as just one more example in a disturbing pattern of questionable business practices.
I therefore request that you open a full investigation of the payments from Novartis to Mr. Cohen and hold a public hearing, during which Novartis executives are called on to provide information and answer the below questions, as well as those already posed by my colleagues in letters to the company.
1. The Novartis CEO, Dr. Narasimhan, has stated that he was not involved in the contract between Novartis and Mr. Cohen.[12] When did Dr. Narasimhan become aware that Novartis had engaged Mr. Cohen? Had he been made aware of the fact that Novartis was engaged with Mr. Cohen’s firm at the time of his dinner with the President on January 25, 2018?
2. President Trump has failed to enact substantive policies to curb prescription drug prices, despite his campaign promises to do so. For example, President Trump strongly supported reforms that would expand drug importation and allow Medicare to negotiate lower drug prices. The action plan the President released last week does not include these proposals.[13] In what ways does Novartis stand to benefit if President Trump fails to enact policies allowing for more drug importation or for Medicare to negotiate lower drug prices?
3. Comments by a Novartis employee, who said that the company allowed its contract to lapse rather than cancel it, assert that Novartis made that decision so as not to “anger” the President.[14]
i) What factors led Novartis to believe that President Trump might be angered by the contract being cancelled?
ii) At the time the contract was signed, was it the company’s impression that President Trump would know about and/or personally benefit from the payments?
iii) Did Mr. Cohen suggest that the company take certain courses of action in order to please or avoid angering the President?
4. According to news reports, the relationship between Novartis and Mr. Cohen began in early 2017 after Mr. Cohen reached out to Joe Jimenez, the former chief executive officer of Novartis.[15] Has Novartis entered into any similar arrangements with other individuals, or companies controlled by individuals, who are or claim to be affiliated with President Trump or individuals within the Trump Administration?
5. Recent reports suggested that Mr. Cohen drew on the monies paid to the shell corporation Essential Consultants both for his own purposes and on behalf of others. According to the Washington Post, he “allegedly pulled more than a million from the Essential Consultants account into his own account at Morgan Stanley.” Mr. Cohen reportedly also used funds from Essential Consultants to “facilitate[] hush agreements.”[16] Was Novartis aware that Essential Consultants was a shell corporation at the time it entered into an agreement with Mr. Cohen and/or Essential Consultants? Did Novartis have any understanding of how its payments to Mr. Cohen and/or Essential Consultants would be used?
6. A Novartis employee stated that “toward the end of the [March 2017] meeting everyone realized this was a probably a slippery slope to engage” Mr. Cohen.[17] Please explain what the employee meant by a “slippery slope.”
7. Randall Stephenson, the chief executive of AT&T, recently described his company’s decision to hire Michael Cohen as “a big mistake” and “a serious misjudgment.” Mr. Stephenson also said that in hiring Mr. Cohen as a political consultant, “[AT&T’s] Washington D.C. team’s vetting process clearly failed.”[18] What vetting process does Novartis typically engage in before it contracts with individuals who hold themselves out as political consultants? Was that process followed at the time Novartis decided to hire Mr. Cohen? If not, why? If so, does the company maintain that Novartis’ process adequately served its function?
Thank you for considering opening a full investigation and holding a public hearing where members of the HELP Committee will have the opportunity to seek answers to the above questions from Novartis’ chief executive. I look forward to working with you to address this urgent concern.
Sincerely,
###
[1] “Essential Consultants – Novartis Statement,” Novartis (May 9, 2018) (online at: https://www.novartis.com/essential-consultants)
[2] “Senator Murray Demands Transparency on Pharmaceutical Company’s Million Dollar Contract for Access to Trump Administration,” U.S. Senatoe Committee on Health, Education, Labor, and Pensions (May 11, 2018) (online at: https://www.help.senate.gov/ranking/newsroom/press/senator-murray-demand…); Kevin Breuninger, “Democrats Elizabeth Warren, Richard Blumenthal and Ron Wyden demand answers from AT&T and Novartis about payments to Trump lawyer Michael Cohen’s firm,” CNBC (May 14, 2018) (online at: https://www.cnbc.com/2018/05/14/democrats-want-answers-from-att-novartis…)
[3] “Essential Consultants – Novartis Statement,” Novartis (May 9, 2018) (online at: https://www.novartis.com/essential-consultants)
[4] Ed Silverman, “Trump’s Lawyer Pitched Himself as a Fixer to Novartis and Got Paid $1.2 Million,” Stat (May 9, 2018) (online at: https://www.statnews.com/pharmalot/2018/05/09/trumps-lawyer-cohen-fixer-…)
[5] Reuters, “Novartis Calls $1.2 Million Deal with Trump Lawyer’s Firm a ‘Mistake’,” New York Times (May 9, 2018) (online at https://www.nytimes.com/reuters/2018/05/09/business/09reuters-usa-trump-…).
[6] Ed Silverman, “Trump’s Lawyer Pitched Himself as a Fixer to Novartis and Got Paid $1.2 Million,” Stat (May 9, 2018) (online at: https://www.statnews.com/pharmalot/2018/05/09/trumps-lawyer-cohen-fixer-…)
[7] Gene Emery, “Cancer Drug Prices Rising Far Faster than Inflation,” Reuters (October 18, 2017) (online at: https://www.reuters.com/article/us-health-cancer-drug-prices/cancer-drug…).
[8] Jay Hancock, “Why did Novartis Pay Trump’s Lawyer $1.2 Million? Look at It’s Drug Prices,” Kaiser Health News (May 11, 2018) (online at: https://khn.org/news/why-the-drugmaker-that-paid-trumps-lawyer-1-2-milli…)
[9] Nektaria Stamouli, “Greek Parliament Investigates Politicians in Novartis Bribery Probe,” WSJ (February 22, 2018) (online at: https://www.wsj.com/articles/greek-parliament-investigates-politicians-i…); Ed Silverman, “Novartis continues to face a bribery probe in Turkey, after all,” Stat (August 17, 2016) (online at: https://www.statnews.com/pharmalot/2016/08/17/novartis-bribery-turkey/); Ed Silverman, “Novartis execs in Korea are indicted for bribing doctors,” Stat (August 9, 2016) (online at: https://www.statnews.com/pharmalot/2016/08/09/novartis-korea-bribes-doct…); Tracy Staton, “Novartis wraps up China bribery probe with $25M payment to SEC,” Fierce Pharma (March 24, 2016) (online at: https://www.fiercepharma.com/pharma/novartis-wraps-up-china-bribery-prob…).
[10] U.S. Securities and Exchange Commission, “Novartis Charged With FCPA violations,” (March 23, 2016) (online at: https://www.sec.gov/litigation/admin/2016/34-77431-s.pdf)
[11] U.S. Securities and Exchange Commission, “Novartis Charged With FCPA violations,” (March 23, 2016) (online at: https://www.sec.gov/litigation/admin/2016/34-77431-s.pdf); “Essential Consultants – Novartis Statement,” Novartis (May 9, 2018) (online at: https://www.novartis.com/essential-consultants)
[12] Morgan Gstalter, “Drug company CEO: It was a ‘mistake’ to enter into Cohen agreement,” The Hill (May 10, 2018) (online at: http://thehill.com/homenews/news/387125-drug-company-ceo-it-was-a-mistak…)
[13] Robert Pear, “Trump to Drop Call for Medicare to Negotiate Lower Drug Prices ,” New York Times (May 10, 2018) (online at: https://www.nytimes.com/2018/05/10/us/politics/trump-prescription-drug-c…)
[14] Ed Silverman, “Trump’s Lawyer Pitched Himself as a Fixer to Novartis and Got Paid $1.2 Million,” Stat (May 9, 2018) (online at: https://www.statnews.com/pharmalot/2018/05/09/trumps-lawyer-cohen-fixer-…)
[15] Ed Silverman, “Trump’s Lawyer Pitched Himself as a Fixer to Novartis and Got Paid $1.2 Million,” Stat (May 9, 2018) (online at: https://www.statnews.com/pharmalot/2018/05/09/trumps-lawyer-cohen-fixer-…)
[16] Phillip Bump, “How money flowed through Michael Cohen’s multi-purpose shell company,” Washington Post (May 8, 2018) (online at: https://www.washingtonpost.com/news/politics/wp/2018/05/08/how-money-flo…).
[17] Ed Silverman, “Trump’s Lawyer Pitched Himself as a Fixer to Novartis and Got Paid $1.2 Million,” Stat (May 9, 2018) (online at: https://www.statnews.com/pharmalot/2018/05/09/trumps-lawyer-cohen-fixer-…).
[18] Cecilia Kang, “AT&T Chief Says Hiring Michael Cohen Was a ‘Big Mistake,’” New York Times (May 11, 2018) (online at: https://www.nytimes.com/2018/05/11/technology/att-cohen-trump-time-warne…).
English