Subsidiary of Global Healthcare Company Agrees to Pay $390 Million in Whistleblower's False Claims Act Suit

Tuesday, November 3, 2015
By George F. Indest III, J.D., M.P.A., LL.M., Board Certified by The Florida Bar in Health Law

Novartis Pharmaceuticals Corp. (Novartis), a subsidiary of Novartis AG, an international pharmaceutical company headquartered in Switzerland, agreed to pay a whopping $390 million as a "settlement in principle" to resolve a False Claims Act (FCA) suit.  The lawsuit, brought by whistleblower David Kester, former Novartis sales manager, alleged improper kickbacks to pharmacies to boost the sales of several prescription drugs.  More specifically, Novartis is charged with allegations of corrupting pharmacists' judgment by offering improper financial incentives for dispensing Novartis drugs that are often more costly and less effective than alternative rival drugs.  

The trial, which was scheduled for November 2, 2015, sought to resolve damages and penalties estimated at $3.4 billion.  

Co-defendants, Accredo Health Group, Inc. (Accredo) and BioScrip, Inc. (BioScrip) previously agreed to settlements of $60 million and $15 million, respectively.  The companies also agreed to assist the Department of Justice (DOJ) in its case against Novartis.  

To read the press release by the DOJ on its settlement with BioScrip from January 8, 2014, click here.  To read the press release by the Federal Bureau of Investigation (FBI) on United States Attorney's Office's settlement with Accredo from May 1, 2015, click here


The Alleged "Kickback" Scheme.


The allegations revolve around Novartis's reported attempts to induce pharmacies, including BioScrip and Accredo, to recommend Novartis's specialty medications to patients in exchange for various kickbacks such as "rebate" payments and promises of future patient referrals.  

The egregious nature of these allegations lies in a patient's reliance upon the assumed objectivity and specialized expertise of a pharmacist to offer reputable advice regarding medication orders, refills, discontinuations or a change in prescription.  Patients are unaware of any financial inducements that may corrupt the pharmacist's judgment in preserving the patient's best interests.  

To read the Second Amended Complaint filed against Novartis in the U.S. District Court for the Southern District of New York, click here


"Not the First Time at the Rodeo" for Novartis.


Novartis was previously in the hot seat in 2010 regarding allegations of FCA violations and further criminal misdemeanor allegations involving off-label promotion and kickbacks to doctors.  That lawsuit was resolved with a $420 million settlement and a five-year corporate integrity agreement (CIA).  It is unclear how the most recent action will impact the earlier CIA.  

To read the full press release by the DOJ regarding the previous settlement, click here


An Alleged History of Kickbacks.


Upon intervening in another qui tam suit against Novartis fresh on the heels of the $420 million settlement, U.S. Attorney Preet Bharara referred to the company as a "repeat offender."

To read the Second Amended Complaint against Novartis resulting from whistleblower and former Novartis sales representative, Oswald Bilotta, click here

In that case, the government alleged that Novartis violated the False Claims Act by way of the Anti-Kickback Statute (AKS) by reportedly paying kickbacks to physicians to entice them to prescribe pharmaceutical products of Novartis's that were reimbursed by federal health care programs.  The AKS explicitly prohibits the payment of remuneration to induce referrals of items or services reimbursed in full or in part by a federal health care program.

For more information on what constitutes illegal remunerations, click here

It was reported that Novartis spent nearly $65 million on its speaker programs from January 2002 through November 2011, organizing and carrying out more than 38,000 engagements for just three drugs.  Novartis's internal analyses showed a high return on investment (ROI) regarding the increased number of prescriptions written by the doctors paid by Novartis for these speaking engagements that were reported to be little more than social gatherings, if the events occurred at all.

To read one of our previous blog posts about speaking fees from drug makers coincidentally going to top Medicare prescribers, click here

To read the full press release by the DOJ regarding its complaint filed against Novartis, click here


Will the DOJ Impose More Than Fines?


This case warrants a high profile due to the extent of the allegations and their repetitious nature.  The DOJ has the authority to impose punishments beyond fines in cases found to be more grievous in form, including exclusion remedies barring any future reimbursements from government health care programs.  

Jeff Overlay, reporting for Law360, quoted a spokeswoman for Novartis as saying, "...although negotiations are ongoing, we expect any final settlement to resolve relevant exclusion remedies."

More severe punishments could include criminal charges resulting from individual liability.

At this time, Novartis has neither admitted nor denied the current allegations. 


Comments?


Do you suspect you or your employer may be involved in a financial relationship that constitutes a violation of the Anti-Kickback Statute or False Claims Act? 


Contact Health Law Attorneys Experienced in Representing Pharmacists and Pharmaceutical Companies.


The Health Law Firm represents pharmacists and pharmacies in DEA, DOH and FDA investigations, qui tam and whistleblower cases, regulatory matters, licensing issues, litigation, administrative hearings, inspections and audits. The firm’s attorneys include those who are board certified by The Florida Bar in Health Law as well as licensed health professionals who are also attorneys.

To contact The Health Law Firm please call (407) 331-6620 or (850) 439-1001 and visit our website at www.TheHealthLawFirm.com.


Sources:


Department of Justice, Office of Public Affairs.  "United States Files Complaint Against Novartis Pharmaceuticals Corp. for Allegedly Paying Kickbacks to Doctors in Exchange for Prescribing its Drugs."  Press release.  Justice News: 26 Apr. 2013.  Web.  30 Oct. 2015.

Overley, Jeff.  "Novartis Inks $390M FCA Deal Over Pharmacy Discounts."  Law360.  Portfolio Media, Inc.: 27 Oct. 2015.  Web.  28 Oct. 2015.

Second Amended Complaint 2-3: ¶ 1&3, Jan. 30, 2014.


About the Author: George F. Indest III, J.D., M.P.A., LL.M., is Board Certified by The Florida Bar in Health Law. He is the President and Managing Partner of The Health Law Firm, which has a national practice. Its main office is in the Orlando, Florida area. www.TheHealthLawFirm.com The Health Law Firm, 1101 Douglas Ave., Altamonte Springs, FL 32714, Phone: (407) 331-6620.


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11/3/2015

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