Novartis to Pay $642M to Resolve Healthcare Fraud Allegations

July 09, 2020 - The Justice Department announced that pharmaceutical company Novartis agreed to pay $642 million in two separate settlements to resolve healthcare fraud allegations involving False Claims Act (FCA) violations and paying kickbacks to doctors.

In the first settlement, the company will pay $51.25 million to resolve allegations that it illegally used three foundations as conduits to pay the copayments of Medicare patients taking Novartis’s drugs , including Gilenya.

Gilenya is approved for treatment of relapsing forms of multiple sclerosis (MS).

One of the claims made against the company stated that in 2012, Novartis transitioned patients who were receiving free drugs and would be eligible for Medicare in 2013 to Medicare Part D, so that it would be able to obtain revenue from Medicare when those patients filled prescriptions for Gilenya.

But patients couldn’t afford the copay for Gilenya, so Novartis developed a plan with a foundation so that it could cover the copays for those patients. 

Novartis made a payment to the foundation and then arranged for the foundation to open its MS fund at a specific time on a specific day, and for the contractor to have personnel working overtime to submit applications for those patients who had been receiving free Gilenya. 

According to the Justice Department, Novartis knew that this coordination would result in a disproportionate share of its funding going to patients taking Gilenya.

“According to the allegations in today’s settlement, Novartis coordinated with three co-pay foundations to funnel money through the foundations to patients taking Novartis’ own drugs,” US Attorney Andrew E. Lelling for the District of Massachusetts, said in the announcement.

“As a result, the Novartis’ conduct was not ‘charitable,’ but rather functioned as a kickback scheme that undermined the structure of the Medicare program and illegally subsidized the high costs of Novartis’s drugs at the expense of American taxpayers.  At the same time, we recognize that Novartis’ current management has taken constructive steps to address the government’s concerns with the company’s prior relationships with co-pay foundations.”

In the second settlement, Novartis will pay $591,442,008 to resolve FCA claims that it paid kickback to doctors to induce them to prescribe multiple Novartis drugs.

For example, a case pending in New York alleged that Novartis paid physicians compensation for delivering a lecture regarding a Novartis medication at a company event. But many of these programs were nothing more than social events held at expensive restaurants, with no discussion about the Novartis drugs. 

The government alleged that Novartis selected high-volume prescribers to serve as the paid “speakers” at the company’s events with the intent to persuade them to write more Novartis prescriptions.

“For more than a decade, Novartis spent hundreds of millions of dollars on so-called speaker programs, including speaking fees, exorbitant meals, and top-shelf alcohol that were nothing more than bribes to get doctors across the country to prescribe Novartis’s drugs,” said Acting US Attorney Audrey Strauss for the Southern District of New York. 

“Giving these cash payments and other lavish goodies interferes with the duty of doctors to choose the best treatment for their patients and increase drug costs for everyone.  This office will continue to be vigilant in cracking down on kickbacks, however they may be dressed up, throughout the pharmaceutical industry.”

Under the FCA settlement agreement, Novartis will forfeit $38.4 million and enter into a five-year corporate integrity agreement with the Department of Health and Human Services Office of Inspector General to addresses the conduct at issue in both matters. 

Novartis must significantly reduce the number of paid speaker programs and the amounts spent on programs and speaker programs may only occur under limited circumstances and in a virtual format, among various other requirements.