April was a rough month for the pharmaceutical giant Novartis. In a span of just four days, the United States government filed two civil fraud lawsuits against the corporation. Novartis Pharmaceuticals is now charged with orchestrating a multi-million dollar illegal kickback scheme, securing the company tens of millions in fraudulent reimbursement payments from the government-sponsored healthcare programs, Medicare and Medicaid.
The most recent lawsuit accused the Swiss pharmaceutical company of handing out illegal kickbacks to physicians in exchange for the exclusive prescribing of Novartis medications such as hypertension drugs Lotrel and Valturna and the diabetes drug Starlix. The corporation allegedly spent an enormous amount of money to entice, bribe and reward doctors in a scheme that lasted nearly a decade. This activity led to Medicare and Medicaid reimbursing Novartis with millions of dollars that were based on kickback-influenced claims.
Twenty-seven states have also chosen to join in the False Claims Act suit. Additionally, the District of Columbia and the cities of New York and Chicago joined as plaintiffs in the lawsuit. Each are seeking to recover treble damages under the federal False Claims Act.
“Novartis corrupted the prescription drug dispensing process,” U.S. Attorney Preet Bharara in Manhattan said in a statement. “For its investment, Novartis reaped dramatically increased profits on these drugs, and Medicare, Medicaid, and other federal healthcare programs were left holding the bag.”
Details of the Opulent Illegal Kickback Scheme
According to official court documents, Novartis showered physicians with lavish illegal kickbacks from January 2002 to November 2011. Some of the more extravagant kickbacks used to induce doctors to prescribe Novartis drugs were:
- A $10,000 dinner for three people at Dallas’ trendy Japanese restaurant, Nobu
- Expensive dinners at high-end Chicago restaurants such as Japonais and L20
- A $2,016 dinner for three at Smith & Wollensky in Washington, D.C.
In addition to eating exceptionally overpriced food, Novartis provided physicians with illegal kickbacks in the form of cash in exchange for bogus speaking engagements. Novartis often paid doctors to publically speak about their medications and patient programs. These speaking engagements were touted as “educational.” In reality, they were nothing more than social gatherings or were never held at all.
According to the complaint, when looking at the drugs Lotrel, Valturna and Starlix alone, Novartis spent approximately $65 million and conducted more than 38,000 speaking programs over a decade.
In classic response, a Novartis spokeswoman denied the allegations, claiming the company’s speaker programs are “promotional programs” designed to inform physicians how to use the company’s medicines.
The complaint goes on to describe additional Novartis programs that reek of impropriety. For example, the pharmaceutical company hosted seven different “educational meetings” for sales representatives at area Hooter’s restaurants.
Details of the First False Claims Act Lawsuit
Just days earlier, the Department of Justice filed their first lawsuit accusing Novartis of healthcare fraud, accusing the company of providing illegal kickbacks to at least 20 pharmacies around the United States. This illegal kickback scheme allegedly revolved around the Novartis medication, Myofortic.
Novartis is accused of enticing pharmacies to switch thousands of kidney transplant patients from a competitor’s medication to their immunosuppressant Myfortic. For the pharmacies who cooperated, illegal kickbacks were provided in the form of rebates and discounts.
This scheme was extremely lucrative for Novartis, resulting in “rapid, sometimes exponential growth in Myfortic sales.” For example, one pharmacy located in Arkansas increased their annual Myfortic sales from an average $100,000 to a staggering $1 million in just four years. Another example within the complaint focuses on a Los Angeles pharmacist who was offered a “bonus rebate” of 5 percent cash for the pharmacy’s annual Myfortic sales. This illegal kickback netted the pharmacist several hundred thousand dollars and resulted in thousands of patients being changed to Myfortic.
“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,” Preet Bharara, U.S. Attorney for the Southern District, said in a statement. “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.”
Pharmaceutical fraud and illegal kickbacks like these “are one of the highest priorities of the FBI’s healthcare fraud program,” FBI Assistant Director Ronald Hosko said in a statement.