Famvir Fraud Alleged in Novartis Wrongful Termination Lawsuit

The value of Famvir, a genital herpes treatment cold sores and shingles, was fraudently inflated by Novartis, charges an ex-employee of the company.  Former Norvatis brand director Carol Shull alleged in her lawsuit-filed in New Jersey state court-that she was wrongfully terminated.  Shull claimed she was fired this past March after complaining repeatedly for nearly two years about attempts by the drug maker to falsely overstate the value of Famvir on its books.  The Swiss company Novartis acquired the drug for $1.6 billion back in 2000, but the lawsuit asserts that Novartis managers knew they overpaid and the investment would never be recovered.  Official comment is pending from Novartis.

The attorney for the Novartis <"http://www.yourlawyer.com/topics/overview/qui_tam">whistleblower states that as a direct result of her objection and refusal to participate in activities she believed were fraudulent and in violation of the law and public policy, Shull suffered retaliatory action by being wrongfully discharged.

Beginning in January 2005, Novartis managers advised Shull that she was to ensure Famvir’s value through at least 2008-2010 and the global Famvir team developed what was called an impairment model.  An impairment model refers to the difference between the current book value and future book value.  To avoid impairment, or an abrupt drop in value, the future value of the drug was inflated via high predictions about future sales.  Predictions were, in part, based on the inclusion of worthless clinical trials, each projecting tens of millions of dollars in future value expressed as net present value; further value was elevated utilizing extremely low generic erosion rates compared to industry standards.  The lawsuit charges that by proceeding in this fashion, Novartis proactively concealed the impending impairment from shareholders and investors.  Shull also claims Novartis created a 10-percent cushion in future value to prevent PriceWaterhouseCoopers, from digging deeper into the overall model and valuations.

According to the lawsuit, the clinical trials, which were designed to enhance Famvir value by several hundred million dollars, were never included in the impairment valuation, nor was a patent challenge by Teva Pharmaceuticals. Israel’s Teva Pharmaceuticals launched a generic version of Famvir, this past September.  The lawsuit also alleges that the global brand director stated that one of the trials was potentially valuable because its results could be used for off-label promotion of Famvir as a treatment to prevent genital herpes, as opposed to merely being a treatment.  The lawsuit describes how Shull attempted, in a variety of ways, to convince Novartis executives to change how they reviewed Famvir valuation and to amend their processes.  Novartis fired the brand director this past March and-two months ago-took a one-time charge of $250 million to $300 million for impairment of its Famvir assets after Teva launched a generic version.  Famvir generated $166 million in US sales last year.

Although Novartis has kept silent about the suit stating it is company policy not to comment on pending litigation, a Novartis spokesman argues that termination of the brand director was lawfully terminated and that her termination was appropriate and fair.  If Shull’s allegations of wrongful termination are valid, the company could be hiding bad numbers from investors.

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