Novartis wants to put more distance between itself and Donald Trump’s beleaguered personal attorney, Michael Cohen.
To that end, it’s parting ways with one of its top lawyers, Felix R. Ehrat, a key player in the drug maker’s $1.2 million deal with Trump’s longtime fixer. That arrangement is being scrutinized by special counsel Robert Mueller.
“Yesterday was not a good day for Novartis,” wrote [CEO] Vasant Narasimhan, a physician and former McKinsey consultant, who joined the drug maker more than a decade ago and oversaw global drug development before being promoted to chief executive this past February.
“Many of you have seen media reports regarding the Novartis relationship with Essential Consultants in the U.S. and many of you will feel disappointed and frustrated,” according to the email, which was shared with STAT by a Novartis employee.
The company announced the move in a statement, which read in part:
Novartis announced today that Felix R. Ehrat, Group General Counsel of Novartis, has decided to retire from the company. Shannon Thyme Klinger, currently Chief Ethics, Risk and Compliance Officer, will be appointed Group General Counsel, effective June 1, 2018.
Mr. Ehrat, who has been Group General Counsel and Member of the Executive Committee of Novartis since 2011, has decided to retire from his position in the context of discussions surrounding Novartis’ former agreement with Essential Consultants, owned by Michael Cohen.
Mr. Ehrat said: “Although the contract was legally in order, it was an error. As a co-signatory with our former CEO, I take personal responsibility to bring the public debate on this matter to an end.”
CEO Vas Narasimhan reinforced the company’s message to stockholders.
In the meeting with investors, Narasimhan cited a number of steps the company is taking in the wake of a series of legal troubles in recent years. Those include putting in place an independent ethics board that looks at access and patient issues, tightening controls and plans to deploy a big data analytics system to monitor email traffic, he said. Ehrat will be replaced by Shannon Thyme Klinger, currently the chief ethics, risk and compliance officer, according to the statement.
“We’ve been taking strong actions, but now I want to take those strong actions even further,” Narasimhan said in the meeting. “Let me be absolutely clear: I never want Novartis to achieve our financial performance or objectives because we compromised on ethical standards or our values.”
Shackled by history
Narasimhan has an uphill battle in convincing the public that Novartis’ activities are aboveboard. The company has a long history of investigations for government kickbacks and bribes, making its deal with Cohen more suspicious.
Since 2015, Novartis has paid out hundreds of millions in settlements and fines as a result of kickback allegations in South Korea, the United States and China and faces an investigation of alleged bribery in Greece. A trial for another U.S. kickbacks case is scheduled for 2019.
Although cleaning house seems necessary for Novartis’ short-term crisis response, the company is holding on to Narasimhan for now. The company hopes the CEO can create a new culture free of corruption.
Narasimhan called the contract a major mistake at a meeting with investors in Basel and said Novartis is developing a principles-, not rules-based system to avert corruption.
“There will always be a way around the rule, whereas if you ask the question, ‘Is this the right thing to do, are you comfortable with this being on the front page of the newspaper?’… that’s going to help get us to a better place.”
The effort to restore public trust
Novartis asserts it received nothing from Cohen in exchange for the payments, yet the company’s timeline leaves questions for skeptics.
Novartis admitted last week it was paying Cohen $100,000 a month. It said it believed that Cohen could advise the company on the Trump administration’s approach to healthcare policies, including the Affordable Care Act.
Novartis said its representatives met with Cohen in March 2017. After that meeting, the company determined he wouldn’t be useful and decided not to engage with him further.
However, Novartis also said it continued to pay Cohen $100,000 a month until February 2018. It said the payments continued because the contract could not have been terminated.
The company seems to be working to make amends.
Narasimhan, who’s meeting with investors Wednesday in Basel, conducted a conference call Monday for 5,000 managers in which he said the company needs to rebuild trust and rethink its approach to the use of consultants and lobbying firms, according to a person familiar with the situation.
What do you think of Novartis’ announcement, PR Daily readers? Is the drug maker doing enough to begin to repair its reputation?