The United States Department of Justice announced on July 1, 2020 that New Jersey-based Novartis Pharmaceuticals Corporation (“Novartis”) has agreed to pay over $642 million in separate settlements resolving claims that it violated the False Claims Act (FCA).
The first settlement pertains to Novartis’ alleged illegal use of three foundations as conduits to pay the copayments of Medicare patients taking Novartis’s drugs Gilenya and Afinitor. The second settlement resolves claims arising from its alleged payments of kickbacks to doctors.
In the first settlement, Novartis has agreed to pay $51.25 million to resolve allegations that it illegally paid the copay obligations for patients taking its drugs. When a Medicare beneficiary obtains a prescription drug covered by Medicare, the beneficiary may be required to make a partial payment, which may take the form of a copayment, coinsurance, or a deductible. Congress included copay requirements in the Medicare program, in part, to serve as a check on health care costs, including the prices that pharmaceutical manufacturers can demand for their drugs.
How The Alleged Copay Payment Scheme Worked
Novartis sells Gilenya, which is approved for treatment of relapsing forms of multiple sclerosis (“MS”). The government alleged that in October 2012, Novartis learned from the contractor managing Novartis’ free drug program for Gilenya that over 300 patients who were receiving free drugs would be eligible for Medicare in 2013. Novartis and the contractor transitioned those patients to Medicare Part D so that, in the future, Novartis would obtain revenue from Medicare when those patients filled prescriptions for Gilenya. Knowing those patients could not afford the copay for Gilenya, Novartis developed a plan with a foundation so that Novartis could cover the copays for those patients. Specifically, at the same time Novartis made a payment to the foundation, Novartis arranged for the foundation to open its MS fund at 6:00 pm on a Friday and for the contractor to have personnel working overtime to submit applications for those patients who had been receiving free Gilenya. Novartis knew that this coordination would result in a disproportionate share of its funding going to Gilenya patients for 2013.
Novartis also sells Afinitor, which is a second-line treatment for advanced renal cell carcinoma (“RCC”) and a treatment for progressive neuroendocrine tumors of pancreatic origin (“PNET”). The government alleged that Novartis learned that, for the 2010 donation year, it would be the only donor to an RCC copay assistance fund operated by a charitable foundation. The government alleged that Novartis told the foundation that it would be willing to donate to the fund only if the eligibility definition was narrowed in a way that ensured that a greater amount of the copay assistance would support patients taking Afinitor. The government alleged that, as a result of narrowing the fund definition, the fund disproportionately assisted patients taking Afinitor compared to its overall usage rate among RCC drugs.
The government further alleged that, in 2012, Novartis asked another foundation to open a copay assistance fund to pay copays for PNET patients, which Novartis knew would be used only to pay the copays of Afinitor patients.
The Alleged Kickback Scheme
Novartis will pay $591,442,008 to resolve False Claims Act claims that it paid kickbacks to doctors to induce them to prescribe the Novartis drugs Lotrel, Valturna, Starlix, Tekturna, Tekturna HCT, Tekamlo, Diovan, Diovan HCT, Exforge, and Exforge HCT. In addition, Novartis will forfeit $38.4 million under the Civil Asset Forfeiture Statute. Novartis reportedly also made extensive factual admissions in the settlement and agreed to strict limitations on any future speaker programs, including reductions to the amount it may spend on such programs.
In a case pending in the United States District Court for the Southern District of New York, the United States (“government”) alleged that Novartis hosted tens of thousands of speaker programs and related events under the guise of providing educational content, when in fact the events served as nothing more than a means to provide bribes to doctors. Novartis paid physicians honoraria, purportedly as compensation for delivering a lecture regarding a Novartis medication, but, as Novartis knew, many of these programs were nothing more than social events held at expensive restaurants, with little or no discussion about the Novartis drugs. Indeed, some of the so-called speaker events never even took place; the speaker was simply paid a fee in order to induce the speaker to prescribe Novartis drugs.
The government’s complaint further alleged that Novartis sales representatives, on the instruction of their managers, selected high-volume prescribers to serve as the paid “speakers” at these events with the intent to induce them to write more — or keep writing many — Novartis prescriptions. The sales representatives then pressured the speakers to increase their prescriptions of Novartis drugs, and often dropped doctors from the speaker program if they failed to do so. Further, the government alleged that this widespread kickback scheme was the result of decisions made by top management at Novartis’s North American headquarters in New Jersey.
Contemporaneous with the settlement of the FCA claims in these matters, Novartis entered into a corporate integrity agreement (“CIA”) with the Department of Health and Human Services Office of Inspector General (“HHS-OIG”). The five-year CIA addresses the conduct at issue in both matters. Among other things, the CIA requires Novartis to significantly reduce the number of paid speaker programs and the amounts spent on such programs. Under the CIA, Novartis speaker programs may only occur under limited circumstances and in a virtual format. In addition, the CIA requires Novartis to implement measures designed to promote independence from any patient assistance programs to which it contributes. The CIA also requires multi-faceted monitoring of Novartis’s operations and obligates company executives and Board members to certify about compliance.
The settlement resolves a lawsuit captioned United States ex rel. Bilotta v. Novartis Pharmaceuticals Corp., No. 11-Civ.-0071-PGG (S.D.N.Y.) initially filed under the whistleblower provision of the FCA, which permits private parties to file suit on behalf of the United States for false claims and share in a portion of the government’s recovery. The FCA permits the United States to intervene in such a lawsuit, as it did in the whistleblower case filed against Novartis. The amount to be recovered by the private whistleblower has not yet been determined. As part of the settlement, Novartis will also pay an additional $48,151,273 to resolve state Medicaid claims.
If you have information regarding false claims having been submitted to Medicare, Medicaid, TRICARE, other federal health care programs, or to other federal agencies/programs, and the information is not publically known and no actions have been taken by the government with regard to recovering the false claims, you should promptly consult with a False Claims Act attorney (also known as qui tam attorneys) in your U.S. state who may investigate the basis of your False Claims Act allegations and who may also assist you in bringing a qui tam lawsuit on behalf of the United States, if appropriate, for which you may be entitled to receive a portion of the recovery received by the U.S. government.
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