Novartis Now Is Subject to Michael Cohen-Related Probes on 2 Continents

Novartis's (NVS) woes are mounting, even as those of its rival drugmakers seem to be diminishing.

In the wake of President Trump's speech on drug prices last week, most pharmaceutical companies are breathing easier as the plan presented made it clear Trump's tough rhetoric about bringing pharma companies to heel was simply more bluster.

But Swiss-pharmaceutical giant Novartis is now the subject of a pair of investigations on two different continents in connection to the company's payment of $1.2 million to Michael Cohen and his shell company Essential Consultants. Cohen is the longtime lawyer and fixer for President Donald Trump. Cohen has come under the harsh glare of a very public spotlight focused on payments to him from not only Novartis, but AT&T (T) and Korean defense contractor Korea Aerospace Industries as well as an investment tied to Russian oligarch Viktor Vekselberg.

In Switzerland the Attorney General's Office and Basel's Prosecutors Office are in talks about the payments to Cohen according to public statements from those agencies.

Domestically, Novartis received a letter from Senator Ron Wyden, D-Ore that noted that at the same time the company was making payments to Cohen, it was also talking with the White House, the Food and Drug Administration, the Center for Medicare and Medicaid Services (CMS) as well as other federal agencies.

The letter, to Novartis CEO Vas Narasimhan, points out that while the company was negotiating with the CMS over how it might be paid for its CART-Therapy Kymirah, a cancer drug with a price tag of $475,000, the company was making regular payments to Cohen.

Wyden, who sits on the Senate Finance Committee, did more than question the nature of the payments from Novartis. He also gave the company until June 5 to provide a variety of internal documents pertaining to its relationship to Cohen, including contracts between him and the company, complete records of all payments from the company to Cohen, all lobbying contracts for U.S.-based firms, records of all internal and external communications with Cohen, all communications between Novartis and its lobbying firms, an explanation of how the Cohn-Novartis deal came to be, as well as all communications between Novartis and the White House, Health and Human Services, CMS that might be tied to Cohen.

Finally, Wyden's letter also asked for any communications between Novartis and the Justice Department connected to Michael Cohen.

Novartis said that it had answered an inquiry by Special Prosecutor Robert Mueller in November of last year regarding its payments to Cohen. It's worth noting that Wyden has been an outspoken critic of President Trump regarding Mueller's Russian probe, and that some of the information Wyden requested in his letter could provide further information on how Cohen's shell company operated and how funds flowed in and out of the company.

The Treasury Department has opened an inquiry into whether banking records were part of the data that pointed to Cohen's dealings with Novartis and others.

Senator Patty Murray, D-Wash. also sent Novartis a letter regarding its relationship with Cohen and there is a quite a bit of cross over between the two letters.

A spokesman for Novartis told TheStreet that the company had received the letters and planned to cooperate with the Senators. The company has received nothing from agencies in Switzerland and said its unable to comment further.

The Switzerland and senate probes are hardly the first time Novartis has had international crises. In 2017, Novartis came out of pocket for a $49 million fine for bribing physicians in South Korea to proscribe their drugs. The year before Greek prosecutors looked into allegations of bribing public officials. Novartis paid $25 million in 2016 to settle charges it made illegal payments violating the U.S. Foreign Corrupt Practices Act in China.

Domestically, Novartis faces a 2019 trial next year over kickback allegations tied to events enlisting doctors to prescribe Novartis meds. The company paid out $390 million three years ago to make allegations of inducing specialty pharmacies to increase sales. And eight years ago, Novartis paid out $422 million to settle kickback allegations.

The drug giant has come under increased public scrutiny since a memo was released about the business dealings of Cohen and Essential Advisors from Michael Avenatti, the lawyer for adult film actress Stormy Daniels. Daniels is suing Cohen and Trump to be released from a non-disclosure agreement pertaining to an alleged affair between Daniels and Trump in 2006. Daniels and Cohen have both stipulated that Daniels received $130,000 in hush money and Trump lawyer Rudy Giuliani has stated that Cohen was repaid by Trump.

The memo said that Novartis had paid Cohen and Essential almost $400,000 to consult on medical policy issues and the Trump Whitehouse.

The company's story on its relationship with Cohen has evolved, and not in a good way. On May 8, the company told news outlets including TheStreet that it had paid Cohen $400,000 to advise it on "U.S. healthcare matters." Then later on in the day, Novartis bumped that figure up to $1.2 million, noting that although it discovered after its first meeting with him that Cohen couldn't be of any help to the company, it was legally obligated to pay out the full contract.

Subsequently, unnamed company officials told NBC and other news outlets that Cohen had approached former CEO Joe Jimenez to offer Novartis access to Trump and his inner circle in exchange for money, and that Jimenez had ordered associates to get a deal done.

Another leak from Novartis said that the company was essentially paying Cohen as it would a lobbyist, and that Novartis had been promised access to both President Trump and his inner circle.

Since the leaks, the company circulated an email to employees apologizing for its association with Cohen. "We made a mistake entering into this engagement and as a consequence are being criticized by a world that expects more from us," said CEO Vas Narasimhan. The company has gone to great lengths to distance Narasimhan from the Cohen matter, essentially laying the blame on Jimenez.

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