Novartis AG Fesses Up to Valeant-Like Pharmacy Scheme in $390 Million Settlement

Published: Nov 24, 2015

Novartis AG Fesses Up to Valeant-Like Pharmacy Scheme in $390 Million Settlement
November 23, 2015
By Alex Keown, BioSpace.com Breaking News Staff

BASEL, Switzerland – Novartis AG will pay $390 million to settle a civil lawsuit related to the kickback payments to specialty pharmacy companies that distributed the drugs Exjade and Myfortic, Novartis announced Friday.

The settlement, which is between Novartis Pharmaceutical Corporation , a U.S. subsidiary of Novartis AG, will be paid to both the U.S. government and to state Medicaid programs. The governments of more than 40 U.S. states raised concerns over payments Novartis made to the specialty pharmacy companies it contracts with to entice them to recommend prescriptions to Medicaid and Medicare patients, Reuters reported this morning.

According to FBI Assistant Director-in-Charge Diego Rodriguez, Novartis was providing incentives to push their medications on patients through the specialty pharmacy companies. According to the government, Novartis created a “closed distribution network” involving three specialty pharmacies, BioScrip , Accredo, and US Bioservices in order to give Novartis control over how many Exjade patients would be assigned to each pharmacy. The government said in early 2007, Novartis saw sales of Exjade, which lowers iron levels, fall, primarily due to side effects of the drug, which prompted Novartis to pressure the specialty pharmacy companies to “hire or assign nurses to call Exjade patients and, under the guise of education or clinical counseling, encourage patients to order more refills.” The government contended the company downplayed the side effects related to Exjade.

With regard to the immunosuppressant Myfortic, the government said Novartis offered “lucrative rebate offers to five specialty pharmacies in return for the pharmacies’ promise to recommend to doctors that they switch patients to Myfortic from competitor drugs.” Specialty pharmacies focus primarily on distributing medications associated with severe illnesses, including cancer or treatments for HIV and AIDS.

Novartis also ran a contest and kept "score cards" on which pharmacy kept patients on certain drugs for the longest period of time, Reuters reported.

In 2013, the U.S. Attorney for Manhattan filed the healthcare fraud lawsuit against Novartis alleging that as a result of Novartis’s “kickback scheme, Medicare and Medicaid have issued tens of millions of dollars in reimbursements based on false, kickback-tainted claims.”

“As alleged, using the lure of kickbacks disguised as rebates, Novartis co-opted the independence of certain pharmacists and turned them into salespeople for one of its drugs. And by allegedly hiding this illegal quid pro quo from physicians, patients, and federal healthcare programs, Novartis caused the public to pay tens of millions of dollars for kickback-tainted drugs that were dispensed by pharmacists who were in cahoots with the company,” U.S. Attorney Preet Bahara said when the lawsuit was filed.

As part of its settlement, Novartis said it will implement a number of controls “to ensure appropriate support for patients, and compliance with all Federal Healthcare program requirements related to its interactions with specialty pharmacies,” Novartis said in a statement.

The $370 million deal is the third settlement attached to this lawsuit, USA Today reported. In 2014 and 2015, two specialty pharmacies, Bioscrip and Accredo, agreed to pay a total of $75 million to resolve federal and state claims based on the same allegations, USA Today said.

Specialty pharmacy companies have been facing intense scrutiny in recent weeks following the revelation of the relationship between Canada-based Valeant Pharmaceuticals International Inc. and Pennsylvania-based Philidor Rx Services over accounting questions. Valeant’s severed ties with Philidor in October, saying they had lost “confidence in Philidor's ability to continue to operate in a manner that is acceptable to Valeant and the patients and doctors we serve.” Philidor accounted for 6.8 percent of Valeant’s revenue during the third-quarter, J. Michael Pearson, Valeant’s chief executive officer, said in a statement.

In addition to Valeant, Horizon Pharma has also had trouble with specialty pharmacies, particularly after Express Scripts Inc. terminated its relationship with a specialty pharmacy company called Linden Care, which Horizon uses to distribute some of its medications to patients. Earlier this month Express Scripts accused Linden Care of being a “captive” pharmacy that only distributes medication for Horizon Pharma. Express Scripts also filed a lawsuit against Horizon, seeking $140 million in damages.

Novartis’s stock ended trading Friday down slightly to $88.35 per share.

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