Novo Nordisk A/S: The Medicine Discount the Buyer Refused

In the 2009 Novo Nordisk A/S FCPA case, the company agreed to a $3,025,066 civil penalty to resolve Securities and Exchange Commission allegations of kickbacks concealed as commissions on medicine sales to Iraq. The public buyer allegedly refused a discount on the medicines and demanded a hidden payment instead. For someone inside pharmaceutical sales or finance, the revealing detail is what the Commission alleged happened next: an agent’s commission increased, the contract price rose, and the books described an ordinary business expense.

Novo Nordisk is a Danish pharmaceutical company and insulin supplier. In its May 11, 2009 announcement, the Securities and Exchange Commission alleged that the company paid kickbacks from 2000 through 2003 in connection with humanitarian goods sold under the United Nations Oil for Food Program. The settlement under the Foreign Corrupt Practices Act concerned both the company’s accounting and the controls that should have detected and prevented the payments.

Oil for Food Surcharges Came Out of Humanitarian Funds

The Commission alleged that Novo Nordisk’s kickbacks diverted money from a U.N. escrow account into Iraqi-controlled bank accounts, including accounts in Jordan. The Oil for Food Program required Iraq to buy humanitarian goods through that escrow account. Its purpose was relief for a population facing severe hardship under international trade sanctions.

According to the Commission, Novo Nordisk used a longtime agent based in Jordan to submit bids to Kimadia, Iraq’s state company responsible for importing and distributing drugs and medical appliances. Company branches in Athens and Amman handled Iraqi sales and supplied the agent with bid prices. That divided the transaction among the medicine supplier, its regional operations, an intermediary and the government buyer.

According to the Commission, a Kimadia import manager told the agent in late 2000 or early 2001 that winning a contract required a ten percent kickback. The manager instructed Novo Nordisk to raise its prices by the same percentage and pay that amount to Kimadia. The inflated contract would then allow Novo Nordisk to recover the concealed payment when the U.N. approved and paid the contract from escrow.

We see the central abuse in who was supposed to fund the payment. Under the arrangement the Commission described, the supplier would be reimbursed for a secret kickback to the buyer. With relief money. The inflated medicine price would make that possible.

The Buyer Turned Down Cheaper Medicine

Novo Nordisk offered a medicine discount after an officer rejected the kickback demand, according to the Commission. The Kimadia import manager angrily refused the offer. A senior vice president and managers in the Athens and Amman branches then authorized kickbacks despite the officer’s refusal.

The rejected discount makes the alleged demand unusually clear. The buyer wanted a payment outside the humanitarian purchasing arrangement even when the supplier offered a lower price within it. That refusal says more about the transaction than any description of routine local business costs could.

The internal disagreement matters to an insider, too. The Commission’s account identifies an officer who objected, other managers who authorized the payments, and emails discussing concealment. Someone who knows those conversations can explain why a commission changed in a way that the ledger entry alone cannot.

The Agent’s Commission Hid the Kickback

Novo Nordisk allegedly increased its agent’s commissions to fund the payments, describing the extra money as compensation for increased distribution and marketing costs. The Commission alleged that Novo Nordisk recorded the kickbacks as legitimate commissions in its books.

The Commission alleged $1,437,946 in kickbacks paid through the agent on eleven contracts. It separately alleged that Novo Nordisk agreed to pay approximately $1,315,454 on two additional contracts.

The Commission alleged that the payments carried the label “after-sales service fees,” and that no real services were performed. The commission explanation supplied a business reason for the extra expense while the inflated contract supplied the money. Those are connected parts of the alleged scheme: what the buyer demanded, how the agent was funded and what finance recorded.

This is why books and records and internal accounting controls matter to the story. The Commission alleged that Novo Nordisk failed to maintain systems adequate to detect and prevent the payments, and that its accounting failed to describe their nature properly. An employee who understood the commission’s purpose could recognize a concealed kickback in an entry that appeared to pay for distribution.

Pharmaceutical Sales Put Public Purchasing Power in the Deal

In pharmaceutical bribery cases, the person influencing a sale may also exercise public authority. The Securities and Exchange Commission enforcement director’s 2015 remarks on pharmaceutical sales described pharmaceutical representatives’ regular dealings with doctors, pharmacists and public-hospital administrators who decide what hospitals and pharmacies purchase. Novo Nordisk’s alleged transaction involved that purchasing power at the state importer.

The same remarks described a separate industry risk: a distributor can use its margin to create a pool of money for bribes, while the supplier’s accounting treats the payments as legitimate expenses. The Novo Nordisk allegations concerned an agent’s increased commissions. In both arrangements, the insider’s knowledge connects the money given to an intermediary with the public business it was meant to secure.

The Novartis Hellas case offers a pharmaceutical parallel in which internal sales records exposed the purpose behind a benefit. In its 2020 order against parent Novartis AG, the SEC found that Greek sales staff ranked healthcare professionals by prescribing preference and volume, provided inducements as investments, and reduced or eliminated those investments when prescription returns disappointed. The order quoted a manager’s action plan for an ophthalmologist:

The manager’s own plan tied the benefit to prescriptions. A commission description or a promotional expense tells only part of the story when other records show the decision the payment was intended to buy.

What the SEC Settlement Covered

The Securities and Exchange Commission brought its books and records and internal controls charges against Novo Nordisk itself. In addition to the civil penalty, the company consented to a judgment requiring it to give up $4,321,523 in profits. The profits it agreed to surrender exceeded both the civil penalty and the kickbacks the Commission alleged it had paid.

The Commission announced its civil settlement alongside a separate deferred prosecution agreement with the Justice Department. In explaining the civil resolution, the Commission credited Novo Nordisk’s prompt remedial actions and cooperation with the agency’s investigation.

What a Pharmaceutical Insider Can Connect

The evidence connecting the payment to the business decision is unusually concrete in this case: bid prices, commission increases, authorizations, concealment emails and accounting entries. The Commission’s account puts the rejected discount alongside the payment approvals. Together, those records explain why the extra money moved and who understood its purpose.

A person handling regional sales may know why the agent asked for more money. Someone in finance may know the explanation used to approve the commission, while an employee dealing with the customer may know the condition attached to the contract. We work with the person who can connect those accounts to the same sale, including the difference between what management discussed and what the books recorded.

Whistleblower rewards depend on the kind of case that information supports. The SEC whistleblower program can pay whistleblowers a combined 10% to 30% of the money collected in qualifying cases. In a separate case involving false claims for U.S. government money, a whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. Our whistleblower experts develop the case with you and bring in whistleblower lawyers who know pharmaceutical fraud.

You Know Why the Commission Changed

If you saw a pharmaceutical commission increase to fund a payment the books concealed, speak to one of our whistleblower experts about why the commission changed. We work with you to build your strongest FCPA whistleblower case around the customer demand, the approval and the accounting. We bring in FCPA whistleblower lawyers who understand pharmaceutical sales through agents and stay alongside you throughout the case.