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Sandoz in fraud probe

Sandoz is under investigation by the Serious Fraud Office for alleged criminal marketing practices.

Sandoz, the generic manufacturing affiliate of Novartis, is under investigation by the Serious Fraud Office (SFO) for alleged criminal marketing practices.

The SFO is investigating activities at Sandoz to ascertain if it broke criminal and competition law while selling its products between January 1996 and December 2000.

Sandoz manufactures an extensive range of generic drugs in the UK, including tamoxifen and ibuprofen. However, both Novartis and the SFO were unable to comment on which drugs are being investigated.

During the four-year period in question, Sandoz traded as Lagap Pharmaceuticals and was not part of the Novartis portfolio but as an affiliate of the Swiss-based pharma company today, if Sandoz is found guilty it could be costly for Novartis.

However, Novartis believes that it is in a position to deal with potential liabilities. ìTotal provisions for legal and product liability matters are adequate, based upon currently available information. However, given the inherent difficulties in estimating liabilities, it cannot be guaranteed that additional costs will not be incurred beyond the amounts accrued,î it said.

ìManagement believes that such additional amounts, if any, would not be material to the group's financial condition but could be material to the results of operations in a given period,î the company added.

The inquiry into the generic affiliate's activities is part of a widening investigation by the SFO into price-fixing by pharma companies.

In April 2002, the SFO launched a major investigation into a suspected conspiracy to defraud the NHS through price-fixing on prescribed penicillin-based antibiotics and warfarin between January 1996 and December 2000.

Six companies were named as part of the initial investigation: Generics UK, Kent Pharmaceuticals, Regent-GM Laboratories, Goldshield, Norton Healthcare and Ranbaxy (UK).

The SFO is now planning to interview leading figures at the generics firms at the centre of the allegations. In a statement on the London Stock Exchange, Ajit Patel, CEO and Kirti Patel, executive director at Goldshield said that they might be required to attend interviews between April and June this year.

A spokesman for the SFO confirmed that other, so far unnamed, individuals would also be called for interview.

News of the investigation came as Novartis chief executive Daniel Vasella dmitted that big pharma had lost the trust of consumers and regulators, and called for the industry and its regulators to be more transparent. He also criticised non-governmental organisations and other critics for their attacks on the industry.

30th September 2008

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