Reeling from Cohen scandal, Novartis recruits Siemens veteran as new ethics chief

Rebuilding Novartis’ reputation is a top priority for CEO Vas Narasimhan after a series of kickback revelations around the world culminated in a full-blown political scandal in the U.S.—and he's brought in a new ethics policeman to help him do it.

Klaus Moosmayer, chief compliance officer at Siemens, will take on that task as Novartis' chief ethics, risk and compliance officer starting Dec. 1. And he'll have plenty on his plate as allegations continue to swirl about Novartis' $1.2 million consulting deal with President Donald Trump's former personal lawyer and fixer Michael Cohen.

Moosmayer replaces Shannon Thyme Klinger, who was promoted to general counsel in May after Felix Ehrat resigned in the wake of the Cohen scandal.

And Moosmayer will come to the job with some similar rebuilding work under his belt, having worked to clean up Siemens' act in the wake of a corruption scandal that broke in 2006. The German conglomerate had allegedly bribed officials around the world to win public contracts. Siemens in 2008 paid American and European authorities $1.6 billion to settle the charges.

Now, Moosmayer will use what Narasimhan praised as "extensive experience in leading compliance for large global organizations" to help Novartis, which may have blundered into a quagmire as deep as the one Siemens climbed out of 10 years ago. Getting its reputation back in parity with its Big Pharma status is an urgent need for Novartis and Narasimhan personally, who in February inherited a mess in the ethics and compliance arena.

Already featured in a series of headlines for alleged bribery and ethics violations in Europe and Asia, Novartis drew major fire in the U.S. for its $1.2 million in consulting payments to President Donald Trump's personal lawyer and fixer Michael Cohen. After that deal was exposed in May, Novartis admitted to the payments, but said the company decided not to work with Cohen immediately after their first meeting in early 2017.

The company took pains to distance Narasimhan from the arrangement and axed then-General Counsel Ehrat, who admitted he co-signed the contract with ex-CEO Joe Jimenez. Narasimhan, Jimenez and Ehrat have all acknowledged the deal was a mistake. 

However, a report published by Democratic Senators in July almost sent Novartis' salvage efforts back to square one. It found the company interacted with Cohen for longer than Novartis admitted, pointing to an email from Jimenez to the lawyer in June 2017. Novartis denied issuing a misleading public statement, saying that the email was simply a response to Cohen’s request for input on how to lower drug prices.

But the Cohen scandal is only one of many the Swiss drugmaker has been embroiled in, and they've run the gamut from data tampering to political bribery.

In Greece, prosecutors are investigating alleged bribes Novartis made to top government officials in exchange for drug price fixing and larger sales. Separately, the U.S. Securities and Exchange Commission and the Department of Justice have both started probing those allegations.

Meanwhile, the DOJ and SEC are probing Alcon’s practices in Russia and Asia. In the U.S., a whistleblower case now handled by federal prosecutors alleged that Novartis was essentially buying prescriptions via lavish meals for doctors. Other recent kickback scandals in South Korea and China ended with the company paying millions of dollars in a penalty or settlement.

With mounting criticism from the public and investors, Narasimhan has made rebuilding trust and reputation one of five top priorities for the company. Since taking the reins of the company this year, he added more weight to the job Moosmayer is now taking and promised to work out new compliance guidelines, a task that will soon fall on Moosmayer’s shoulders.

"Society has high expectations of the pharmaceutical industry and rightfully so," said Moosmayer in a statement. The new Novartis chief of ethics said he'll work to create "a truly world-class risk and compliance function" within Novartis.

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