Friday , 30 October 2020

What is the Danish Pharmaceutical Company hiding in Iran?

Radiozamaneh – The Danish pharmaceutical giant, Novo Nordisk, says that it has been operating in Iran since 2005 based on its “responsibility and commitment to patients with chronic diseases”. ‌But business experts and former employees say that Novo’s close collaboration with a company controlled by Khamenei’s office cracks the image of a responsible and committed pharmaceutical giant. Zamaneh went searching for the pieces of the puzzle to highlight the darker side of Novo’s business in Iran, about which the company prefers to stay silent.

👉🏽 Why Should You Read This Article?
The US sanctions against Iran have exacerbated poverty and inflation within the country and have deprived Iranians from unrestricted economic interaction with the world. However, the sanctions have not stopped a giant Danish pharmaceutical company from entering Iran’s lucrative market and collaborating closely with the Iranian leadership. Zamaneh and the Danish media Danwatch have investigated Novo’s dealings in Iran to see whether ethical standards are being challenged.

A long rectangular table covered with water bottles and muffins was placed in the middle of a milky bright hall. Around this table big names were seated, including the now deceased Ayatollah Rafsanjani, previously one of the most powerful men in Iran, and several high-profile Iranian politicians, as well as renowned international policymakers and businessmen working in health and medicine.

Akbar Hashemi Rafsanjani in Novo Nordisk’s Seminar, 2015, Tehran

Among those men, you could see the middle and top managers of Novo Nordisk, the Danish pharmaceutical company.

According to Iranian media, “the foreign guests” of Iran’s International Leadership Forum were invited to the meeting, which took place in the hall of Islamic Azad University. They were there to discuss how to defeat “silent cholera,” the term by which Rafsanjani described diabetes.

Novo Nordisk organized the Forum in November 2015 in Tehran, in partnership with Iran’s Ministry of Health, Endocrine Research Institute, Food and Drug Organization, Welfare Ministry, Foreign Ministry, Ministry of Education, Research Center of Iran’s Parliament, Foundation for Special Diseases, Social Security Administration of Iran (Tamin Ejtemaei), and Health Insurance Administration (Bime Salamat).

The Forum also took place around the same time that Novo officially announced it was going to build a factory in Iran. At the time of the Forum, however, Novo had not yet announced where it would build the factory and who would be their future partners.

However, by partnering with a range of Iranian governmental institutions to hold the Forum, and by meeting with Rafsanjani the night before the Forum began, it was clear that Novo had already established a connection with many Iranian officials and powerful men.

Surrounded by these friends, Novo soon picked the best among them, and decided to work more closely with Barkat Pharmed Group, a company related to Ayatollah Khamenei, the leader of Iran, and the man who is responsible for many abuses and violation of human rights.

By doing this, the company could have crossed several moral and ethical lines that it claims to be respecting, as believed by former employees, human rights defenders, and experts on corporate social responsibility.

About this investigation 
For months Danwatch and the Iranian exile media Zamaneh have conducted a joint investigation into Novo’s business in Iran.
This report is based on an extensive research into thousands of Persian, English and Danish language media reports, annual reports, local and international business registries, statistics, research reports, social media sites, satellite imagery as well as interviews with dozens of experts inside and outside Iran, present and former employees at Novo Nordisk, local diabetes organisations, international NGO’s, diabetes patients in Iran and of course Novo Nordisk.
If you have additional information that could help qualify this report please do not hesitate to contact us at [email protected], [email protected] or through Danwatch’s secure tip service

A fast take-off

Novo Nordisk, the well-known Danish pharmaceutical company and a leading producer of medicines for the treatment of diabetes and endocrine disorders, started doing business in the oil-rich country of Iran in 2005, by setting up the company Novo Nordisk Pars (NN Pars) in Iran’s capital Tehran.

Novo, like its competitor, the French company Sanofi, planned to invest in approximately 4-5 million Iranian diabetes patients at that time; a large enough population in a country doing well enough financially to provide golden opportunities to every seller in the market.

“Novo started with just five people [in Iran| but expanded quickly. They hired all the brightest heads. All of their employees were doctors or PhDs ready to work for Novo for 600-800 dollars a month,” said a source familiar with Novo’s early operations in Iran.

The trajectory shows that Novo knew from the beginning where the money lay and how to proceed.

Jørn Fredsgaard, senior analyst at Danish Export Credit Institution (EKF) offering loans and guarantees to Danish export companies, explains why Novo was and could still be keen to do business in Iran.

“Iran is a giant market for Novo. Iranians have a sweet tooth, the country has a rather high BNP and a large middle class demanding western quality products”, said Jørn Fredsgaard. 

According to a Novo briefing, accessed through a freedom of information request into the correspondence between Novo and the Danish Embassy in Tehran, Novo expects 9,2 million Iranians to have diabetes in 2040.

Who is Novo?
●      Novo Nordisk is a multinational pharmaceutical company.
●      Novo is one of the largest suppliers of insulin in the world.
●      The company was founded in 1923 and is headquartered in Kalundborg, Denmark.
●      Novo currently employs more than 43,100 people in 80 countries.
●      Novo products are marketed in approximately 170 countries.
●      In 2019 Novo had a turnover of 122 billion Danish kroner (19,5 billion dollars).
●      The CEO of Novo Nordisk is Lars Fruergaard Jørgensen.
●      Novo activities in Iran are carried out by NN Pars, a subsidiary fully owned by Novo Nordisk.
Source: https://www.novonordisk.com/

This is a very promising number for the world’s largest producer of insulin.

In 2014, less than ten years after Novo’s official entrance into the Iranian market, that the net value of imported modern or advanced analog insulins (mostly produced by Novo Nordisk and Sanofi) exceeded the sale value of old fashioned and basic human insulin produced by Iranian companies.

15 years after the launch of Novo’s direct venture in Iran, the company is now the biggest seller of insulin products in the country, earning more than 50% of sales in the insulin market.

Iranians increasingly appreciate the effectiveness and precision of analog insulin pens, while the country itself does not yet have the technology to produce analog insulin pens independently. (link: Iran backed by china moves for Insulin independency)

According to the company, around half a million Iranians are currently using one of Novo’s products.

For the Danish pharmaceutical company, this is not yet the happy ending of its Iranian dream.

Meanwhile, Iran’s diabetic population has grown to an estimated eight million.

Novo estimated in its 20-F report for 2017 that its profit in Iran had not yet exceeded the minimal percentage of the company’s global total net profit.

Nevertheless, from the Iranian perspective, it is a lot of money dripping out of the country.

According to the latest statistics released by the Central Bank of Iran (CBI) in May 2020, NN Pars is among the top six recipients of state-subsidized foreign currencies.

Iran’s official exchange rate (Dollar to Rial) is at least five times less than the market exchange rate. The official exchange rate is kept low to avoid a price increase on essential imported commodities needed by the sanctioned Iranian public who are gripped by price inflation and a deflation of the currency’s value.

Novo therefore enjoys the economic subsidies that the government provides to the importers.

Besides Novo, among the top in the list of medicine importers and recipients of cheap foreign currency, are companies such as Behestan Darou and Kobel Darou, both of which have been accused by the Iranian public and media of being part of the so-called Big Drug Mafia in Iran.

How could Novo, a foreign company, achieve a top position so quickly in a country where state-owned and state-affiliated vendors and corporations have a major influence on economic activities?

For more than two months, Zamaneh and the Danish media Danwatch have been investigating Novo’s entry into the profitable Iranian insulin market to highlight a part of the company’s operations that the otherwise transparent pharmaceutical giant is very hesitant to talk about.

NN Pars is:
●      The third biggest Pharmaceutical importer in Iran in terms of turnover
○      Based on 2018 data released by Iran’s Drug and Food Administration (IFDA), the sale value of Novo Nordisk had become around 99,5 million dollars within eight months, third among importer companies. Based on that it is estimated that Novo’s annual turnover is 149,25 million dollars.
○      Novo had a turnover of no more than 160 million dollars in Iran in 2019, according to Novo’s F-20.
●      One of the six Pharma companies that receive the highest amount of subsidized foreign currency from Iranian government.
○  The company received around 84 million dollars of subsidized foreign currency from Iran’s national reserves over about 11 months from 27.06.2019-02.06.2020 (estimated number: 91.6 million for a year), according to the Central Bank of Iran (CBI).
○  Novo probably demands even more from the government as its import value is 1.76 times more.
○  According to CBI data, Novo received 4 million euros of subsidized foreign currency monthly in the second half of 2019. The monthly payment increased in the first half of 2020 to 9 million euros a month.
○      Novo’s products are now in shortage in Iran’s pharmaceutical market. Experts say it might be because of the Government’s debt.
Sources: Data released separately by The Central Bank of Iran and Iran’s Food and Drug Administration

Money defeats morale 

In order to gain access to the promising Iranian market, Novo allied itself with companies funded and financed by land and property that was confiscated from dissidents, pro-democracy activists, persecuted religious minorities, exiled Iranians, and many other ordinary citizens who have fallen out of favour of the repressive religious system of Iran. 

For fifteen years Novo has worked hard to enter the emerging Iranian market and, in the process, lost sight of the moral standards in which the illustrious Danish company usually takes such pride. These are, at least, the allegations from former employees, human rights defenders, and experts on corporate social responsibility.

Detractors claim that money has beaten out ethics, causing the Danish pharmaceutical company to turn a blind eye to human rights abuses committed right under its nose.

“Novo is doing a lot of good in Iran but it is a company that has lost its integrity,” says a source with knowledge of Novo’s business in Iran, echoing the concerns of several high ranking former Novo employees who spoke to Danwatch and Zamaneh on condition of anonymity. 

“[Novo] had it all, but they wanted more. And then they entered into business with the wrong guys,” the source says, referring to Novo’s purchase of land from a company belonging to the Iranian business conglomerate Setad. 

The Opening of Diabetes Town, Outskirt of Tehran

According to an extensive Reuters investigation, Setad’s massive financial empire is built on the seizure of property belonging to Iranians who oppose the repressive Islamic government. Since 1989, the Setad economic network has been under the control of Ayatollah Ali Khamenei, the supreme leader of the Iranian republic, who is responsible for massive human rights abuses according to Amnesty International, Human Rights Watch, and the UN Human Rights Council, among others. 

“Novo does not adhere to their own company values in Iran,” a source says in reference to Novo’s commitment to respect human rights. On the company website, Novo Nordisk commits to following the UN Guiding Principles on Business and Human Rights  (UNGP) – a set of rules that oblige companies to uphold respect for human rights throughout the entire production chain.

Two former senior employees at Novo echo the same concerns but none are willing to talk on the record about company dealings with the Iranian authorities. They fear for their safety.

Human Rights Watch confirms that Setad, which is also known as EIKO, an abbreviation for  the Execution of Imam Khomeini’s Order, has systematically violated the rights of dissidents by confiscating land and property from regime opponents, including political prisoners, religious minorities, and exiled Iranians.

What is Setad
Setad is short for Setad Ejraiye Farmane Hazrate Emam (Headquarter for Executing the Order of the Iman) also known as EIKO, another abbreviation.
Setad was founded by Iran’s Supreme Leader Ayatollah Khomeini just before his death in 1989.
The original purpose of the organisation was to manage and sell property abandoned after the Islamic Revolution in 1979. The income was to be used for charitable purposes.
Setad is fully controlled by Iran’s Supreme Leader Ayatollah Ali Khamenei, who also controls the Iranian Revolutionary Guard Corps, an elite military unit involved in massive human rights abuses in Iran, Syria and Iraq and a business conglomerate as well.
Under Khamenei’s leadership, Setad has morphed into a business juggernaut that has a stake in nearly every sector of Iranian economy.
Setad’s crown jewel in the pharmaceutical field is Barakat Pharmaceutical Group.
Novo Nordisk cooperates closely with Barakat. In 2016 Novo bought 39,000 m2 of land in Barakat Pharmaceutical Town owned by Barakat Pharmaceutical Group.
Since then, Novos has built a factory on the site and is now paying rent to Barakat in order to maintain its right to use the land.
Sources: Reuters, websites of Barakat Foundation, Barakat Pharmed Investment Corp, and Tadbir, among others. 
How Setad operates
Setad uses a number of means to take over property belonging to dissident, religious minorities, refugees and others who have fallen out with the regime. Among these means are:
●      Legal proceedings
●      False court orders
●      Threats and intimidation
●      Bribes and fees
●      Fines and extortion
Once Setad has taken over the property it is either sold at large auctions or resold/hired out to its original owners and the profits are used to sustain the Setad business empire as well as the 500+ employees of the Supreme Leader.
Source: Assets of the Ayatollah /Reuters

Novo Nordisk does not deny working with Setad, but disagrees with its critics and claims that the company has conducted multiple due diligence assessments to ensure that its business in Iran is lawful and in line with Novo’s ethical standards.

“Any Novo Nordisk financial transaction or business interaction with companies controlled or affiliated to governmental/state bodies is in compliance with applicable local and international laws and regulations, as well as Novo Nordisk’s corporate rules and business ethics standards,” says Charlotte Zarp-Andersson, Novo’s Head of Communication, in a written response. 

A “responsible” business

In 2012, Novo launched a major charm offensive.

Several welfare initiatives were launched in line with the two-pronged approach that Novo usually takes to enter a new market, offering the cure as well as the remedy, as Lars Thøger Christensen, a branding expert at Copenhagen Business School, explained.

The message for the Iranian public and politicians was shown clearly in a Novo presentation that Danwatch and Zamaneh accessed through a freedom of information request at the Danish Embassy in Tehran.

In the presentation, Novo explained that Iran will probably have 9,2 million diabetics by 2040. It offered to assist the Iranian people in achieving a healthier lifestyle to curb the explosion of new diabetes cases among the younger generations, while also providing access to Novo’s high-quality medicines. 

“Our response to defeat diabetes in Iran… [is to] raise awareness of diabetes, support people with diabetes by improving access to information, and support and unite stakeholders for action,” the presentation read. 

One of the popular initiatives is the Novo-coloured diabetes buses launched in Tehran in five other cities, that teaches ordinary Iranians about the danger of diabetes and how to manage it. 

“Novo’s commitment to people living with chronic diseases goes beyond providing lifesaving medicines,” Novo’s Head of Communication, Charlotte Zarp-Andersson, explains in an email. 

Novo sponsors special programs run by municipalities on International Diabetes Day and the so-called Diabetes Village in Laleh Park in Tehran. A call center for diabetes patient education was also launched, as well as free educational programs for nurses and doctors, including the first diabetes nursery education program that occurred this summer.

These programs were implemented in close cooperation with the Iranian Ministry of Health, the Municipality of Tehran, the Iranian Diabetes Society, the International Diabetes Federation, and the University of Tehran.

Significant spending on social welfare programs by a pharmaceutical giant like Novo is not unusual in the business world. Companies tend to talk about social responsibility and sometimes act on it. Novo is, however, a special case since it has integrated social responsibility into its business approach.

As professor Lars Thøger Christensen from Copenhagen Business School explains, Novo’s strategy is a carefully crafted and well-rehearsed recipe designed to support the image of a responsible business partner in the fight against a common enemy. 

“Novo always engages in these kinds of activities; raising awareness about obesity, diabetes, and so on. It is part of a long-term strategy making the company appear more sympathetic when engaging in awareness, education, and research,” says Thøger Christensen, a specialist in corporate branding.

Thøgersen also explained that these activities help the company to protect itself from criticism. “For decades, Novo has achieved a Teflon-like image, where everything that may come from criticism tends to bounce off.”

It seems that for Novo, public-driven activities are not only for deflecting criticism, but also to strengthen market intelligence and access.

According to a company presentation on corporate strategy and investment opportunities, Novo does invest in infrastructure and awareness-raising programs to build growth markets, and Iran is a country with high growth potential for Novo.

“As a modern company, Novo knows that it is important to show responsibility. It is part of the company DNA,” Thøger Christensen says, underlining that this approach to branding and sales efforts go hand in hand. 

“Of course, Novo will be promoting its products to patients, health care professionals, and politicians at the same time. It is part of the package,” he says.

Click to enlarge the picture

Making friends 

And all along the way, Novo made friends with Iranian patients, medical professionals, and politicians.

Hundreds of thousands of Iranian patients are eager to access high-quality products like Novo’s modern insulin pens, which offer safe, precise and long-lasting blood sugar stabilizers, as well as rapidly working insulin injected with easy to use pens just minutes before a meal.

“Novo’s goal is to introduce expensive products to the Iranian market. The new insulin types or modern insulin types are much more expensive than the old types, and the profit is higher,” a source with knowledge of Novo’s products and the Iranian market says. The source explained that demand for high-quality western products is high in Iran.

“They are a lot safer, have a better effect, and are much easier to use than the old types, so many Iranians prefer using Novo pens once they have tried them,” he says.

According to information from Novo, more than half a million Iranians currently depend on Novo medicines. 

Among professionals, Novo came to represent a gateway to the West, to doctors and researchers longing to meet western colleagues after decades of isolation due to sanctions, explain sources familiar with Novo’s business in Iran. 

Jørg Fredsgaard from Danish Export Credits explains the attraction of Novo:

“Iranians have been cut off from European and American products for many years and they have a penchant for quality which may not be what they usually get from China. Iran has a large middle class who are educated in the West and demand Western products, so in this respect, Novo was a perfect fit.”

Novo not only benefited from its friendship of patients and professionals, but also from close ties to politicians.

To put Novo firmly on the national horizon, large scale conferences were held, bringing top representatives from the internationally isolated country in contact with the outside world.

Among these prestigious initiatives was the 2015 International Diabetes Leadership Forum in Tehran, which gathered international organizations, patient organizations, healthcare professionals, people with diabetes, NGOs, media, and crucially also Iranian policymakers and government officials. 

The aim of the event was “to discuss solutions to the burden of diabetes in Iran and worldwide,” as Novo writes in an email to Danwatch and Zamaneh. 

Novo also entered into a strategic partnership with the Endocrinology and Metabolism Research Institute at Tehran University, headed by professor Bagher Larijani. Larijani is one of five very influential brothers who belong to the highest echelon of public and political life in Iran.

According to a source familiar with the cooperation, Novo donated one million dollars to the Endocrinology and Metabolism Research Institute at Tehran University. The exact figure is not publicly available and Novo refused to share the number, citing contract confidentiality.

Reaching-out to the top

The alliance, however, brought Novo into close contact with some of Iran’s most powerful people. Bagher Larijani used to be a Deputy Minister in the Ministry of Health. One of Bagher’s brothers is a former Head of Parliament and now an adviser to the Supreme Leader Ali Khamenei, another brother is a former Vice Minister of Foreign Affairs. 

A third brother, Sadeq Amoli Larijani, was then Head of the Judiciary and directly responsible for human rights violations, including “arbitrary arrests of political prisoners, human rights defenders and minorities” that “increased markedly” after he took office, according to a EU decision sanctioning him. 

The EU decision states that, as Head of the Judiciary, Larijani “personally signed off [on] numerous death penalty sentences, contravening international standards, including stoning… and public executions such as those where prisoners have been hung from bridges… He has also permitted corporal punishment sentences such as amputations and the dripping of acid into the eyes of the convicted.” 

In late 2018, Sadeq Larijani became Head of Iran’s Expediency Council, the top ruling body directly under the control of Ayatollah Ali Khamenei, and has been mentioned as a possible successor to the 81-year old Ayatollah. 

Despite US and EU sanctions against Sadeq Larijani, Novo entered into a partnership, thereby associating itself with the Larijani family. 

Neither the CEO of Novo Nordisk, Lars Fruergaard Jørgensen, or Corporate Vice President of NN Pars, Ali Mostofi, was willing to answer questions about Novo’s business partners in Iran. 

In a written statement, Head of Communication Charlotte Zarp-Andersson does not answer questions about Novo Nordisk’s connection to the Larijanis. She does, however, defend the company’s cooperation with Bagher Larijani’s institute, stressing the legality of the partnership. 

“Before entering any agreement with external partners, including donations, we conduct a thorough due diligence on the organisations. In addition, throughout the partnership we continuously monitor and follow up to ensure that all rules and legislation are followed,” she says, referring to “non-disclosure obligations” as the reason for not disclosing the amount donated to the institute.

Danwatch and Zamaneh also requested that Novo Nordisk release financial information on Novo’s partnerships with all Iranian institutions, but the company declined the request, stating:

As we have non-disclosure obligations with the partner organisations, we are not able to disclose the amount donated to each of them, unless otherwise made public.

Having business relations with state-affiliated entities might be a blessing for a company, but if this behaviour took place in Europe it could have legal consequences, explains Mahdi Ghodsi, an economist at The Vienna Institute for International Economic Studies.

“Having business relations with someone like him (Bagher Larijani), whose family was chairing the parliament and the judiciary at the same time in Iran should be quite beneficial. Such a practice is, however, fully blocked by the EU competition law for inward investments into the EU, meaning that when a foreign company is investing in the EU, this law prohibits a bad rent-seeking behaviour.”

“However, such a law cannot stop outward foreign direct investment that will deal with state-owned companies abroad,” Ghodsi says.

The big leap

Right from the beginning, Novo’s aim was to begin production in Iran. The successful multinational pharmaceutical company did not want to be just an exporter.

The logo of Danish pharmaceutical company Novo Nordisk is pictured at their headquarters in Bagsvaerd outside of Copenhagen, Denmark on February 1, 2017, the day before they release their yearly financial results – Photo: Liselotte Sabroe / Scanpix Denmark / AFP

Novo’s big step towards realizing its Iranian dream happened in 2015, when the nuclear deal was signed. In September 2015, two months after the nuclear deal and shortly before Iran’s Diabetes Leadership Forum, Novo signed a Memorandum of Understanding with the Ministry of Health.

At the time, several such agreements were signed between Iran and foreign companies who were looking forward to investing in the country. With the prospect of Iran without sanctions and with oil money starting to pump into the economy, foreign companies planned to catch big fish on their hooks.

Zamaneh and Danwatch asked Novo Nordisk to reveal the details of its agreement with Iran, but the company declined.

However, according to a Novo presentation accessed through a Freedom of Information Request to the Danish Embassy in Tehran, Novo promised to invest 70 million euro, provide at least 160 jobs for well-educated Iranians, and begin in-house insulin production. 

It was a golden moment of common interests.

“Everyone wanted to show that surely foreign investment was coming. In that way Novo’s factory was a showcase,” said a source with knowledge of the deal.  

Professor Akbar Abdollahiasl from Tehran University’s Department of Pharmacoeconomics confirms the common interests involved. 

“One of the main objectives of the Iranian Ministry of Health is the protection of domestic production of medicine. In this case, Novo has sustained its policy by establishing a manufacturing plant in Iran,” he says.  

The idea of setting up a factory was already presented to the Iranian government in 2012 and they liked it, said a source with knowledge of the negotiations. 

Three years later, Novo’s lobbying had paved the way for it to be the first international pharmaceutical company to establish its own production facilities in Iran. 

“It is a political priority of the government that production should be local. Since the Iranian Revolution, it’s been the policy and international sanctions against Iran have made it an even higher priority,” explains another source involved in the deal. 

So it was all smiles when then CEO Lars Sørensen and the Iranian Food and Drug Administration signed a Memorandum of Understanding (MOU) at a widely reported ceremony. The MOU gave Novo Nordisk permission to build a new factory to produce insulin pens for the Iranian market, an important step in making Iran less dependent on imports.

An Ideal Suit

It was only a few months after the agreement with the Ministry of Health that Novo announced it had chosen a location to build its factory.

Barkat pharmaceutical town, a new industrial zone under construction, is situated on the northern side of Tehran-Qazvin highway, close to the small town of Kordan and just an hour drive west of Tehran.

Here Novo bought four hectares of land at an undisclosed price.

It all would have been fine had Barkat not been part of the controversial Setad organisation, which is controlled by Ayatollah Khamenei and accused of systematic land grabbing from ordinary Iranians who oppose Iran’s religious system. 

According to a thorough investigation carried out by the reputable British news agency Reuters, Setad-e Ejrây-ye Farmân-e Emâm, also known as the Executive Headquarters of Imam’s Directive or EIKO, was and still is an Iranian multibillion dollar business conglomerate built with money from land confiscations. 

Since its establishment in 1989, Setad has systematically confiscated land and property belonging to dissidents, religious minorities, political prisoners, and Iranians who have fled the country, citing a special decree that gives the organization exclusive rights to manage so-called “abandoned” land and property.

The Reuters investigation estimated that in 2013 the Setad business empire held assets worth at least 95 billion dollars. At the time of the investigation, this amount was 40% more than the total oil exports of Iran. 

No estimate has been done since, and as the Setad business empire is directly under the control of Ayatollah Khamenei, it is by law exempted from independent or parliamentary oversight. Thus no independent information on the organisation’s assets is publicly available. 

As the Reuters investigation showed by translating the original decree, Setad was established with the sole purpose of confiscating land and property belonging to people or entities not recognized by the Islamic government of Iran.

Since Ayatollah Ali Khamenei took over as Supreme Leader in 1989, the organisation has slowly evolved into a massive network of interlinked companies of which Barkat Pharmaceutical Town is just one small piece.

One recent case shows, however, that the confiscation of land and property continues. In mid May 2020, the Iranian Human Rights Activists News Agency (HRANA) reported that Setad had confiscated a house and shop belonging to a couple who are political prisoners.

According to a report by the US-funded exiled media Radio Farda, Fatemeh Mothanna and Hassan Sadeghi had their property confiscated in connection to a joint prison sentence of 30 years on a charge of  “waging war against the state by working with an opposition group,” reported HRANA.

In another recent case, property belonging to an entire village was confiscated by Setad.

According to the international organisation of the Baha’i religious minority, an Iranian court ordered the confiscation of all properties belonging to Baha’is in the village of Ivel in Mazandaran Province.

The Baha’i is an unrecognized religious minority in Iran that teaches the essential worth of all religions and the unity of all people. The Baha’i are considered heretics by the Islamic Republic and with their spiritual headquarters situated in Haifa, Israel, Baha’is have been subjected to continued persecution by the Iranian government since the Islamic revolution in 1979. 

According to a November 2019 court order, the justification for confiscating the properties is that Baha’is have “a perverse ideology” and therefore the court finds “no legal merit” for leaving the properties in the possession of the “perverse sect of Baha’ism in the village of Ivel.” 

Tara Sepehri Far, Iran researcher at Human Rights Watch, confirmed that religious groups like the Baha’i are being discriminated against and feel targeted by Setad.

“Setad has the mandate to take over property and, in many cases, it happens without due process” she said.

 “One of the groups that face bureaucratic obstacles that result in losing land, property or businesses are the Baha’i. The official reason given is often a missing permit or another kind of bureaucratic problem, but the Baha’i definitely feel discriminated against by Setad,” she said.

Click to enlarge the picture

Under sanctions or not?

Apart from being involved in land grabbing, Setad has also been under US sanctions since 2013 because of its close links to the Supreme Leader and for allegedly transferring its profits to the Iranian government.

In the press release that accompanied the US decision to sanction Setad, confiscation of property is mentioned and 37 specific companies belonging to the Setad network were designated. 

One of them was the holding company Tadbir, the major shareholder of Barkat Pharmaceutical Group when Novo bought its plot of land. 

The US Treasury described the Tadbir Group as “one of the main holdings companies” belonging to Setad and published a chart showing the connection between Setad and the Tadbir Group.

As pharmaceutical products are exempted from US sanctions for humanitarian reasons, the purchase of land from a Setad-controlled company might not pose legal problems for Novo.

Or at least that was the view of Novo. 

“A thorough investigation and legal compliance and technical due diligence was conducted by external lawyers and Novo Nordisk’s in-house team which led to the decision of purchase,”  Novo’s head of communication Charlotte Zarp-Andersson states in an email to Danwatch and Zamaneh. 

Whether the US-imposed rules on foreign companies’ activities in Iran allow for the purchasing of land from a Setad-controlled company is not clear.

“Barkat Pharmaceutical Industrial City (Park) is not on any international sanctions list, nor was it at the time of land purchase and contract signing,” Novo says on the deal with Barkat, in response to our inquiry.

The US sanctions list confirms this, but it may not be that simple.

Danwatch and Zamaneh asked the US Treasury whether Novo has a license to conduct business with a Setad-controlled company. The Treasury declined to comment on specific companies or licenses.

According to Mahdi Ghodsi, an expert on Iran’s economy, although some Setad-affiliated pharma companies might be exempted from sanctions, sanctions might still extend to Novo because of their financial connections to the sanctioned companies.

“Politically-motivated sanctions may be extended to these companies, even operating in these humanitarian sectors,” he says.

As close to power as you can get 

Working with a Setad company could help Novo to climb the ladder faster and more effectively, according to sources familiar with the deal and independent experts.

Barekat Foundation Building. On its walls, it is written: “part of Setad Ejrayi Farman-e-Emam”

“The cooperation with Barkat is definitely beneficial to Novo. Setad represents the highest power in Iran. It belongs to the Supreme Leader who is the most powerful person in Iran, his power exceeds even the power of the government,” said a source familiar with the land deal.

The cooperation with a Setad-company means that Novo will get a lot of benefits and advantages when they do business in Iran, he explained. 

“It is a lot easier to get a share of the Iranian insulin market if you have these kinds of connections. Working with Setad means getting everything you need. Leverages, market access, the best distribution, the best price, support for any kind of business you want to enter. It is heaven for any pharmaceutical company to have these kinds of connections.”

Mahdi Ghodsi, an expert on Iran’s economy, believes that rent-seeking motives are usually behind foreign co-operations with entities like Setad.

“It is easier to bend down the rules and regulations as Iran has no good record of Rule of Law as indicated in the World Governance Indicator of the World Bank. Moreover, for the firms affiliated with the establishment it is easier to propose and legislate regulations through the legislative body when there is a need.”

A business expert with knowledge of foreign investments in Iran was not surprised by Barkat-Novo ties. He says, “If someone wants to grow in this country should have a collaboration with Setad.” He did not want his name to be revealed for safety reasons.

Too much for some 

Not everyone at Novo agreed about the benefits and risks involved in working with Barkat.

In fact, some were unhappy about the alliance and argued vehemently against the land deal with Barkat, according to several sources familiar with the deal.

The critics argued that aligning the company with an organisation built on the confiscation of land and property belonging to Iranian dissidents was not in line with Novo’s ethical standards.

“Novo has been doing a lot of fantastic things in Iran, but the land deal with Barkat was a mistake,” states a former Novo employee.

“The deal brought Novo into close relations with the Supreme Leader of Iran. It was like getting engaged to a criminal. Everyone knows the brutality of the Supreme Leader, how he is anti-democratic and how Setad is involved in human rights violations. The Supreme Leader is the source of everything Setad has done. If you enter into any relationship with an organisation like this you are condoning these actions,” he says. 

“Novo has taken a great risk working with Barkat,” concedes another former Novo employee.

“At the time I was asked by a journalist if working with Barkat was the right thing to do. Did I think it was right to pay money to the Supreme Leader [thereby] indirectly supporting the Revolutionary Guards Corps that he also controls? Did I think it was right to pay money risking that it would be invested in warfare in Yemen or Syria? I responded that Novo focuses on saving patients’ lives. This was the official company line, but it did not feel right. Taking risks is not a bad thing. But this was too much. Money is not everything.” 

Nice words from Novo

Apart from a general pledge to respect human rights, Novo specifically points out on its  website that companies cooperating with Novo are expected to uphold the same standards. 

“We expect our business partners and other parties directly linked to our operations, products or services to meet their responsibility to respect human rights as described by the UN Guiding Principles on Business and Human Rights; including committing to respect all human rights, carrying out human rights due diligence and providing access to remedy when needed,” it reads.

Novos pledge
Novo Nordisk is committed to meeting its responsibility to respect human rights as defined by the UN Guiding Principles on Business and Human Rights.  As -such we will:
●     Identify potential and actual adverse human rights impacts that our operations may cause, contribute to or be directly linked to;
●     Use or establish processes to prevent or mitigate potential adverse impacts on human rights, where identified;
●     Seek to best remediate or participate in the remediation of any actual adverse human rights impacts that our business causes or contributes to;
●     Account for how we address our potential and actual impacts on human rights, where it will not put the people concerned at risk or damage legitimate requirements of commercial confidentiality;
●     Expect our business partners and other parties directly linked to our operations, products or services to meet their responsibility to respect human rights as described by the UN Guiding Principles on Business and Human Rights; including committing to respect all human rights, carrying out human rights due diligence and providing access to remedy when needed;
●     Use leverage to make other parties directly linked to our operations, products or services cease actions or omissions that lead to adverse impacts on human rights once we become aware of such impact.
Source: novonordisk.com 

Danwatch and Zamaneh asked Novo numerous times how the company defends working with a company belonging to an organisation involved in possible human rights violations.

Novo, however, has not responded to the questions or commented on Setad being involved in land grabbing and the persecution of religious minorities and others at odds with the Iranian government.

In a written statement, the Head of Communication only responded that Novo did not see anything wrong in its dealings with Barkat. 

“Based on our due diligence, we concluded that there were no salient adverse human rights impacts. We investigated land rights and obtained documentation that the land was government-owned and there have not been residents on the land,” writes Charlotte Zarp-Andersson.

“We investigated the integrity of our business partners and concluded that our chosen partners met all the requirements regarding compliance with legislation and international standards.” 

Sworn to secrecy 

In connection with this investigation, Danwatch and Zamaneh asked to see the assessments conducted in connection with the land deal. As Novo is a private company and no public money is involved, however, the company is not obliged to make its due diligence assessments public. 

And in Iran, Freedom of Information requests are only considered if you are an Iranian citizen.

Danwatch and Zamaneh repeatedly requested an interview with either CEO Lars Fruergaard Jørgensen, Corporate Vice President of NN Pars Ali Mostofi, or any other representative that the company would allow, but all interview requests were denied or remain unanswered.  

Neither of the Iranian companies involved in the land deal with Novo have any information about the agreement available on their websites or in their annual reports. 

Novo only gave a short statement in their annual report to the US Stock Exchange, confirming that they have dealings with companies, banks and organisations that belong to or may belong to the Government of Iran (GOI).

“In 2016 NN Pars purchased land from a GOI-controlled holding company in order to construct a manufacturing facility in Iran,” Novo wrote in the so-called F-20 statement published in February 2020.

“Novo Nordisk expects to invest approximately DKK 520 million over the course of five years, which started in 2015, to build the manufacturing facility, which will be used for the assembly and packaging of insulin pens for use in Iran.”  

No mention is made of Novo’s contribution to the Larijani-run institute at Tehran University.

  • Other articles in this investigation series will be published gradually.
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