Bad medicine for Novo Nordisk
One of Denmark's most trusted companies has taken some hard shots to its corporate image over the past few weeks.
Novo Nordisk, the country's most valuable company, has consistently been at the top of consumer confidence studies since the 1990s, but according to new revelations the drug maker is avoiding taxes in its home country.
According to public broadcaster DR, tax authority Skat is demanding that Novo Nordisk pay 5.5 billion kroner in back taxes, claiming that Novo Nordisk dodged taxes by funnelling billions of kroner into tax havens in Switzerland.
Although the case is complicated, the allegations boil down to Novo Nordisk, between 2002 and 2007, registering patents and other rights for several of its products to subsidiaries in Switzerland, thus avoiding higher Danish tax rates.
"It is a classic example of aggressive tax avoidance," Swiss tax expert Andreas Missbach from the Berne Declaration, a think tank, told DR News.
Skat has declined to comment, but according to DR News, they believe Novo Nordisk under-reported the value of the products and rights it assigned in Switzerland to the tune of 22 billion kroner.
"I find it hard to see how their image can escape unscathed,” Anders Drejer, a management professor from Aalborg University, told DR News.
Although Skat recently went after US software giant Microsoft for 5.8 billion kroner, the case against Novo Nordisk is thought to be the largest ever filed against a Danish company.
"It is a huge case,” Lars Kiertzner, a professor from the Copenhagen Business School, told DR News.
Some business experts have pointed out that Novo Nordisk is simply following standard business procedure, and Drejer added that Skat’s poor reputation could play in Novo Nordisk’s favour. Even so, he said the company was still likely to slip a notch in the public’s eye.
“They have always been such a leader when it comes to ethics that it looks extra bad when it appears they cannot live up to them. Danes have a tendency to gloat a little in cases like this,” he said.
The Tax Ministry has vowed to track down corporate tax cheats to collect what it said were hundreds of billions of kroner in unpaid taxes.
Novo Nordisk contended that it had done nothing wrong.
"I would like to make it clear: Novo Nordisk does not cheat on its taxes either in Denmark or in any other country. We pay the taxes that we owe," finance director Jesper Brandgaard told DR News. "We pay more coporate taxes than anyone else in Denmark."
Brandgaard said that Novo Nordisk had registered part of its businesses in Zurich because of the strong pharma environment and becuase "it is a fantastic place to do business."
Accusations of tax fraud however, are just the first of Novo Nordisk's worries at the moment.
Reports surfaced that its successful diabetes drug Victoza may increase the chance of users developing pancreatic cancer.
Authorities in both Europe and the US have found evidence of the increased risk.
A report in the British Medical Journal said that incidences of pancreatic cancers were “over-represented” in patients who used glucose-lowering medications like Victoza.
The European Medicines Agency stressed that incidences of cancer being over-represented in the statistics of reported side effects is not the same as saying that there is a direct relationship between the drug and the development of cancer.
"This is especially true for signs of malignant cancers that are extremely difficult to confirm solely on the basis of spontaneous reports,” an EMA representative wrote to Berlingske newspaper.
Novo Nordisk head of research Mads Krogsgaard Thomsen told Berlingske that the company's own experiments on animals and humans and subsequent monitoring of data has found no evidence that Victoza increased the risk of pancreatic cancer.