That's what Carol Shull, a former brand director, alleges in a wrongful termination lawsuit. She claims she was canned this past March after complaining repeatedly for nearly two years about attempts by the drugmaker to "fraudently inflate" the value of Famvir, a treatment for genital herpes, on its books. Novartis acquired the drug for $1.6 billion back in 2000, but Shull asserts that Novartis managers knew they "overpaid" and the investment would never be recovered, according to the
lawsuit, which was filed in state court in New Jersey. As of now, we are awaiting official Novartis comment.
In her lawsuit, Shull alleges that, beginning in January 2005, when she became Famvir brand director, she was told to ensure Famvir's value through at least 2008-2010 by Novartis managers, including Tom Eberling (who until recently was the Novartis US pharma president). The global Famvir team developed what was called an impairment model - referring to the difference between the current book value and future book value. To avoid impairment, or a preciptious drop, "future value was inflated through high predictions about future sales."
And how were those predictions to be calculated? "These predictions were partially based on the inclusion of worthless clincial trials, each projecting tens of millions of dollars in future value expressed as net present value. Further value was elevated by utlilizing extremely low generic erostion rates compared with industry standards. By employing these measures, Novartis proactively concealed the impending impairment from shareholders and investors," the lawsuit charges. Shull also claims Novartis created a 10 percent "cushion" in future value to prevent PriceWaterhouseCoopers, from "digging deeper into the overall model and valuations."
However, Shull alleges the trials, which were designed to enhance Famvir value by "several hundred million dollars," were never included in the impairment valuation, nor was a patent challenge by Teva Pharmaceuticals. However, she claims she was told by Jeff Fletcher, the global brand director, that one of the trials was potentially valuable because the results could be used for off-label promotion of Famvir as a treatment to prevent genital herpes (as opposed to being merely a treatment).
In her lawsuit, Shul describes various attempts she claims to have made to convince Novartis execs to change their minds about Famvir valuation, but to no avail. She was fired this past March. Meanwhile, Novartis two months ago took a one-time charge of $250 million to $300 million for impairment of its Famvir assets after Teva launched a generic version. Last year, by the way, Famvir generated $166 million in US sales.
UPDATE: A Novartis spokesman writes us on Tuesday with this statement: "We are familiar with Ms. Shull’s situation. When her employment was terminated earlier this year for lawful reasons, it was handled appropriately and fairly. We look forward to defending ourselves in court and responding to these allegations."
7 Comments
Big Pharma misdeeds like the one described above are unfortunately very commonplace. There is no room for honesty. If you don't blindly toe the company line, then you put your job in grave danger. If you disagree with senior management, then you're banished. In many cases, it seems like Putin and Russia!
It really stinks that ethics means little to nothing in today's Big pharma culture. After they got rid of Ms. Shull, they probably blamed her for the failure to deliver and the need to take the write-off. That's how it works!
I told you so! More to come unless FDA and Congress put a break on evil deeds. May the Lord forgive them all.
Those big pharmacy companies always care their wallet than the patients needs. They hire the staff to help them get more money, but for caring the patients. As for the medicine produced by Famvir. I personally have nothing to say because I never use it. I only know a member at STD dating site pozgroup.com said it works better than Valtrex in his blog. Not sure it true.
Wonder if this has anything to do with all of those senior managers who recently "left" Novartis? Shull has a lot of integrity and guts to take on Novartis--no one should be asked to lie...or be fired for doing the right thing.
For many on the Big Pharma senior management teams, there is no Lord - only money! They sold their souls to the devil long ago and should get a good taste of the inferno! Unfortunately, firing good employees for doing the right thing is all too common. The serpents never die, they just slither on to the next company.
Novartis chief denounces U.S. corporate governance rules Daniel Vasella, chief executive of Novartis, the Swiss drugs maker, said U.S. corporate-governance rules were a “headache.†Vasella told the Associated Press news agency that new rules enacted in Washington following the series of high-profile accounting scandals were “onerous†for any company, such as Novartis, that does business in the U.S.
“It’s a real headache from the point of view of the sheer [number of rules],†Vasella said on Monday.
Vasella joins the ranks of executives of multinational companies who argue the new rules come with hefty time and money costs.
The latest regulations, including the Sarbanes-Oxley Act of 2002, set stringent corporate-governance rules to protect minority shareholders’ rights, define clear divisions of responsibility within companies and dictate safeguards to prevent abuse.
“Sarbanes-Oxley profoundly changed the way we talk, and the amount we’re spending – the amount of time and of course the millions [of dollars],†Vasella said.
The Sarbanes-Oxley Act requires companies to document and test their internal checks governing business processes, such as payroll and accounts.
“It is the nature of the beast that each time we have a scandal, regulation goes up,†Vasella said. “It is very tough to go down. I don’t think we should push it further.â€
Vasella, who holds both the chief executive and chairman positions at Novartis, said that although corporate governance activists were urging companies to split those two roles, he saw no problem with one person holding both positions.
“I think that inherently there’s nothing wrong, provided that it fits the company at the stage at which the company finds itself,†Vasella said.
If Vasella has a headache, perhaps it's his conscience pounding on his id! No, not likely. Big pharma can't be trusted now. What would it be like if they had free rein? Chaos and anarchy!