Bad medicine: Suit claims 'kickback' scheme at Sanofi

A new lawsuit claims the recently ousted CEO of Sanofi and other executives at the huge drugmaker conducted a scheme in violation of federal law to funnel tens of millions of dollars in kickbacks and other incentives to get the company's diabetes drugs prescribed and sold.

The whistleblower lawsuit also claims Sanofi CEO Christopher Viehbacher was fired by the company's board in October "in part, because Defendant Viehbacher was involved in the aforesaid illegal and/or fraudulent activity," which allegedly went on "over the course of many years."

Ousted Sanofi CEO Christopher Viehbacher
Eric Piermont | Getty Images
Ousted Sanofi CEO Christopher Viehbacher

The suit filed Wednesday says that Sanofi used contracts that appeared to be for legitimate purposes to direct money to hospitals, doctors and retail pharmacy chains to induce them to purchase and prescribe Sanofi's diabetes medication. It also claims that "approximately $1 billion is missing from Defendant Sanofi which has not been accounted for."

Sanofi itself in October cited poor relations between Viehbacher and the board as the reason he was sacked.

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The bombshell new kickback allegations by a Sanofi paralegal named Diane Ponte—who herself was fired in September after allegedly suffering retaliation for bringing the scheme to light—come two years after the drug company reached an agreement with the Justice Department and several states to pay $109 million to settle claims that it engaged in kickbacks by giving doctors free samples of an arthritis drug as a way to encourage them to buy and prescribe that medication.

Such kickbacks are illegal because they can encourage the prescription of drugs that are covered by federal Medicare and Medicaid insurance programs, and thus have taxpayers foot the bills for medication that might otherwise not have been prescribed.

After that 2012 settlement, Sanofi also had a corporate integrity agreement with the Health and Human Services Department requiring the company to abide by federal health-care laws and to report illegal activities by the company and its employees, Ponte's suit said. However, a check of HHS' database of such integrity agreements indicated that pact had not been executed as of yet.

Sanofi on Wednesday indicated it had not yet been served with Ponte's lawsuit, but in a statement said, "Sanofi does not comment on litigation."

On Thursday, after reviewing the suit, Sanofi issued a new statement, which said: "Diane Ponte is a disgruntled former employee who is opportunistically attacking our company. Ponte filed for violations of New Jersey state employment law, specifically the New Jersey Conscientious Employee Protection Act ('CEPA')."

"The employment law allegations are without merit, and Sanofi will vigorously defend the suit. We take this matter very seriously and will protect our company and our reputation," Sanofi said.

Ponte's suit, filed in New Jersey Superior Court in Newark, names as defendants Sanofi, Viehbacher, Sanofi General Counsel Robert DeBerardine and other executives, including Sanofi's former vice president of its U.S. diabetes business, Dennis Urbaniak, and the ex-assistant vice president of special projects, Raymond Godleski.

"It's shocking that these people got away with this for so long and then fired this woman for uncovering their wrongdoing," said Rosemarie Arnold, lawyer for the 53-year-old Ponte. "She was blatantly fired as a result of her whistleblowing activity."

Hostile work environment alleged

The suit says Sanofi and its managers created a hostile work environment for Ponte after she made her allegations of wrongdoing and created a pretext for her dismissal in September.

The suit said Ponte became aware of the alleged diabetes drug scheme in March 2013, when she received electronic requests for her approval of nine Sanofi contracts worth a total of $34 million—seven contracts with the consulting firm Accenture, and two with the professional services firm Deloitte. Ponte, a 13-year Sanofi veteran, at the time was working in the company's U.S.headquarters in Bridgewater, New Jersey, in the contracts group, where she was responsible for reviewing contracts.

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Ponte's suit said her review of the nine contracts, which had actually already been fully executed four months before, "determined that they involved illegal incentives and/or kickbacks from" Sanofi to the two firms for their referral or sale of the diabetes drugs in violation of federal law.

A Sanofi lab worker packages vaccines.
Charly Triballeau | AFP | Getty Images
A Sanofi lab worker packages vaccines.

Ponte "determined that the ultimate repercussions of the said contracts involved illegal incentives and/or kickbacks from Defendant Sanofi, Accenture and/or Deloitte to induce 'customers,' including physicians, hospitals and/or retail pharmacy programs such as Walgreens and Rite Aid to [among other things] influence the prescribing of drugs, and/or improperly 'switch' from selling other manufacturers' drugs (ex: Novo drugs) to selling Sanofi drugs, in violation of the aforesaid Federal healthcare laws," her suit claims. The reference to "Novo" drugs is to diabetes medication made by a Sanofi competitor, Novo Nordisk.

None of the other companies—Accenture, Deloitte, Walgreens or RiteAid—was named as a defendant in the suit.

Ponte's suit claims that Viehbacher, Urbaniak, Godleski, as well as others, "conspired and/or caused" Sanofi employees to sign off on such contracts without first obtaining approval from the company's financing, purchasing and legal departments.

It also claims those men and others instructed employees to fraudulently code the spending in the contracts in Sanofi's software system so that they would appear to be for things such as "communication agency technical costs" and "printed materials," instead of their true intentions: "illegal kickbacks."

According to the lawsuit, when Ponte raised concerns about the nine contracts, she was told by the company's contract coordinator that Godleski wanted the coordinator and Ponte "to approve the contracts and to authorize the payment of $34 million from Defendant Sanofi to ... Accenture and Deloitte without the contracts being screened or denied for the illegality."

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On around March 21, 2013, the suit says, Godleski, the special projects vice president, "personally commanded" Ponte to approve the contracts, telling her Viehbacher and Urbaniak knew she had them in her queue, and that "'Viehbacher [was] extremely unhappy' with the fact that she had not yet approved them and wanted [the contracts] moving."

The suit also says that after Ponte reported the allegedly illegal activity to her superiors, Sanofi launched "an alleged internal 'investigation'" that ran into late 2013. She claims the investigation supported her findings, and that it revealed that Viehbacher, Urbaniak, Godleski and Sanofi were in violation of the company's corporate integrity agreement with HHS that it had signed on the heels of the prior kickback case, and that the three men "unlawfully 'covered up' the aforesaid fraudulent activity."

As the probe was going on, Urbaniak and Godleski in the summer of 2013 "retired" from Sanofi "with millions of dollars in severance packages ... and Defendant Urbaniak became a high-level and highly paid employee of nonparty Accenuture," the suit says.

Urbaniak did not respond to a request for comment and an Accenture spokesman said he also would relay CNBC's inquiry to Urbaniak. Information on where to reach Viehbacher and Godleski was not immediately available.

[This story has been updated to include Sanofi's latest response to the suit, which was issued Thursday]