Healthy Skepticism Library item: 12099

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Publication type: news

Cage S.
Ex-employee claims Novartis inflated drug value
Reuters 2007 Nov 27
http://www.reuters.com/article/companyNewsAndPR/idUSL277840020071127?pageNumber=1&virtualBrandChannel=0

Full text:

ZURICH, Nov 27 (Reuters) – A former employee of Novartis AG (NOVN.VX: Quote, Profile, Research) has filed a lawsuit against the company in the United States, claiming that she was fired when she objected to the Swiss firm inflating the future value of one of its drugs.

Carol Shull, who was brand director of Novartis’s antiviral drug Famvir from 2005 until earlier this year, is seeking damages for her discharge, which she claims was in retaliation for her objections to accounting practices for Famvir, court documents showed.

A spokesman for Basel-based Novartis said it was company policy not to comment on pending litigation.

Shull alleged that Novartis management realised it had overpaid when buying Famvir in 2000 from SmithKline Beecham — now part of GlaxoSmithKline Plc (GSK.L: Quote, Profile, Research) — for $1.63 billion, which was shown as goodwill on its balance sheet.

“Ms. Shull was instructed that the future appraisal value of Famvir must be higher than the current book value, in order to avoid a significant write off,” said the filing at the Superior Court of New Jersey, which was dated Nov. 14.

“Communication about the preservation of Famvir’s goodwill also came from the most senior leadership within Novartis, including the then CEO of Pharmaceuticals in Basel, Switzerland, Thomas Ebeling,” the filing said.

Novartis inflated the future value of Famvir with high predictions of sales, partially based on worthless clinical studies and using extremely low and unrealistic generic erosion rates, the filing claimed.

Shull objected to the practice and re-evaluated the drug’s prospects, her attorney, Lampf, Lipkind, Prupis & Petigrow said in the filing.

Shull’s attorney said in the filing: “As a direct and proximate result of plaintiff’s objection to and refusal to participate in activities she believed were fraudulent and/or violations of law and/or public policy, plaintiff suffered retaliatory action insomuch as she was wrongfully discharged.”

Israel’s Teva Pharmaceuticals (TEVA.O: Quote, Profile, Research) launched a generic version of Famvir, for the treatment of herpes, cold sores and shingles, in September this year.

Famvir had global sales of $268 million in 2006.

(Editing by Erica Billingham)