A United States subsidiary of the pharmaceuticals giant, Novartis, is facing legal action in the US over an alleged breach of trade rules. If the class action suits go against Geneva Pharmaceuticals, it could cost the company hundreds of millions of dollars.
The controversy centres on the development of generic drug treatments in the US. It's alleged that Geneva Pharmaceuticals stifled competition in the drugs industry by failing to develop a generic treatment for high blood pressure.
Geneva Pharmaceuticals was the first company given approval by the US authorities to copy Hytrin, which generates annual sales of around SFr850 million ($500 million) for Abbot Laboratories. But the Federal Trade Commission claims that instead of producing the drug, the firm struck a deal with its rival.
In return for not developing the generic treatment, the commission says Abbot Laboratories paid Geneva Pharmaceuticals $4.5 million a month. Since Geneva Pharmaceuticals has sole rights to copy Hytrin, competition was halted for 16 months until the authorities intervened, according to the commission.
The Novartis subsidiary now faces official investigations in Florida and New York. Civil action is also pending from sales companies, pharmacists, insurers and patients' groups. The eventual cost could run into hundreds of million of dollars.
Analysts say it's unlikely that Novartis would be completely covered by insurance.
The Federal Trade Commission has indicated concern that the deal struck between Geneva Pharmaceuticals and Abbot Laboratories may be just the tip of an iceberg.
According to investigators, the probe has widened to other firms throughout the industry, and dozens of pharmaceutical companies are being questioned.