Feds Want Novartis AG to Fork Over $3.35 Billion for Kickback Schemes

Published: Jul 01, 2015

Feds Want Novartis AG to Fork Over $3.35 Billion for Kickback Schemes
July 1, 2015
By Mark Terry, BioSpace.com Breaking News Staff

The U.S. government filed a lawsuit in Manhattan federal court yesterday against Swiss company Novartis AG . The U.S. is demanding up to $3.35 billion in damages and civil fines over alleged violations of the federal False Claims Act.

The case alleges that Novartis filed improper reimbursement claims for Exjade, which is used to treat patients receiving blood transfusions, and Myfortic, for kidney transplant patients. Between 2004 and 2013, the government alleges Novartis submitted 166,031 false claims.

The case seeks $1.52 billion in damages, which is approximately three times the amount reimbursed. The government is also seeking $1.83 billion in fines, equivalent to $5,500 to $11,000 per alleged false claim.

According to Novartis spokeswoman Julie Masow, speaking to Reuters, the company “continues to dispute the allegations and is continuing to defend itself in this litigation. We look forward to a full presentation of all of the evidence during the trial.”

A jury trial is schedule to start Nov. 2, 2015 unless the accusations are settled before then. The lawsuit is being brought by the federal government, 11 U.S. states, and David Kester, a former Novartis respiratory account manager and whistleblower acting on behalf of 17 other states.

According to case documents, plaintiffs allege that Novartis referred patients taking Exjade to three specialty pharmacies, Accredo, BioScrip and U.S. Bioservices, “and offered and paid so-called rebates to those pharmacies with a purpose of inducing the pharmacies to recommend to patients that they order Exjade refills.”

In terms of Myfortic, the case alleges that Novartis “offered and paid five specialty pharmacies (Kilgore’s, Bryant’s, Baylor, Twenty Ten, and Transcript) kickbacks in the form of so-called performance rebates with a purpose of inducing those pharmacies to recommend Myfortic over a competitor drug called CellCept and over generic versions of CellCept.” CellCept is manufactured by Genentech .

In January of last year, BioScrip Inc., which was tangled up in the original lawsuits with Novartis, agreed to pay $15 million to exist the False Claims Act whistleblower lawsuit. It also agreed to pay $3.3 million with interest to the states involved.

Express Scripts also agreed to pay $60 million to settle the allegations. Accredo Health Group is a specialty pharmacy run by Express Scripts Inc..

According to Novartis documents, about 40 percent of Exjade sales were reimbursed by Medicaid, Medicare or other government-run health programs.

The U.S. federal government also filed a suit against Novartis in April 2013 for alleged kickbacks and violations of the False Claims Act. This case involved Novartis paying physicians to talk about cardiovascular drugs Lotrel and Valturna, and its diabetes drug Starlix, in exchange for payments, dinners and other financial incentives. The suit alleged that “Novartis simply wined and dined the doctors at high-end restaurants with astronomical costs, as well as in sports bars, on fishing trips, and at other venues not conducive to an educational program.”

Writing in The Wall Street Journal Ed Silverman notes that, because Novartis signed a Corporate Integrity Agreement in 2010, which typically run five years, and “require a company to establish an internal compliance program and report violations.” In theory, if Novartis loses the current case and it is proven that these incidents occurred after the signing of the agreement, one penalty could be exclusion from contracts with federal health care programs.

Silverman points out, however, that the government tends to approach exclusion carefully because it doesn’t want to prevent patients from receiving important medications. The fact that the court records only mention fines and charges is probably an indication that exclusion is not on the table.

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