HEALTH INDUSTRY  JULY 14, 2010, 5:55 P.M. ET

Novartis Unit Settles Gender Suit for About $175 Million

By CHAD BRAY

NEW YORK—Novartis AG's U.S. unit has agreed to settle a closely watched gender discrimination lawsuit involving its female sales force for as much as $175 million, the drug maker said Wednesday.

The settlement, which is subject to court approval, resolves a long-running case that a lawyer for a group of women suing Novartis Pharmaceuticals Corp. said could have cost the company as much as $1 billion in damages.

Under the agreement, the U.S. unit would pay $152.5 million to a group of current and former female employees. The class could include as many as 5,600 women.

Novartis Pharmaceuticals also agreed to implement a series of improvements over a three-year period, including revising its sexual harassment policies and training and hiring an external specialist to identify and remedy gender disparities at the company. The program is estimated to be valued at $22.5 million.

"Novartis has agreed to a momentous settlement," said David Sanford, a lawyer for the women who sued the U.S. unit. "The terms of this agreement allow for full compensation of both former and current female field force employees, ensuring that every woman who worked at Novartis over the past eight years has been compensated fairly."

In May, a jury in federal court in Manhattan found Novartis Pharmaceuticals discriminated against its female employees by giving them lower salaries and fewer chances for promotion.

The jury awarded $250 million in punitive damages to a class of current and former female sales representatives, as well as $3.37 million in compensatory damages to 12 women who had sued the company in 2004. A federal judge was expected to establish a process later this year for determining compensatory damages for the other women in the class.

On Wednesday, Novartis, which had been expected to challenge the damage award, announced it had settled the case for a much lower amount.

U.S. District Judge Colleen McMahon, who is presiding, gave preliminary approval to the settlement Wednesday and scheduled a fairness hearing for late November. If the settlement receives final approval, the unit is expected to begin implementing changes early next year.

"In this settlement, Novartis establishes itself as a leader on issues for women in the workplace," said Katherine Kimpel, co-lead counsel for the plaintiffs. "In particular, NPC is committed to substantially revising its human resources policies, revamping its personnel management systems, and strengthening its commitment to ensuring gender equality in the workplace."