Novartis to pay $370 million to settle claims it paid kickbacks for drug referrals

Screenshot via Novartis.

Pharmaceutical company Novartis will pay $370 million to settle claims that it gave kickbacks to specialty pharmacies in exchange for recommending two of its drugs, the U.S. Justice Department Southern District of New York announced this week.

Novartis, based in Switzerland, will also forfeit $20 million in proceeds from the scheme, authorities said.

As part of the settlement, the pharmaceutical manufacturer made extensive admissions about its relationship with the specialty pharmacies, authorities said.

Novartis gave patient referrals and rebates to pharmacies Bioscrip and Accredo to recommend refills for Exjade, its iron chelation drug, authorities said. To increase sales, Novartis gave incentives to emphasize Exjade's benefits while understating its potentially life-threatening, side effects, according to the Justice Department.

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Exjade patient referrals were very valuable for pharmacies, according to the lawsuit originally brought by whistleblower David Kester. The government intervened in April 2013.

Novartis allocated more patient referrals and gave higher rebates to pharmacies that obtained higher refill rates, authorities said. 

When it launched Exjade in 2005, Novartis created a "closed distribution network" involving just three specialty pharmacies, BioScrip, Accredo, and US Bioservices, giving it control over how many Exjade patients would be assigned to the pharmacies, the lawsuit stated.

However, starting in early 2007, Novartis saw Exjade sales slide  because of low refill rates. To hit sales targets, Novartis pressured BioScrip, Accredo and US Bioservices to hire or assign nurses to call Exjade patients and, under the guise of education or clinical counseling, encourage patients to order more refills, authorities said.

Refill rates were low in large part to side effects of the drug that were more frequent and more severe than initially expected, authorities said.

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Novartis knew the pharmacies were emphasizing the benefits of taking Exjade – for example, by telling patients that not taking the drug would cause damage to their organs or lead to infertility – while understating the potentially life-threatening side effects such as kidney and liver failure, the government said. 

The FDA characterized claims about Exjade preventing organ damage as "unsubstantiated," authorities said.

For Myfortic, an anti-rejection drug for kidney transplant recipients, Novartis gave rebate contracts to specialty pharmacies that recommended doctors switch their patients from competitors' brands to Myfortic, according to authorities. 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, authorities said.

This is the third settlement in the lawsuit. In January 2014 and April 2015, the two specialty pharmacies, Bioscrip, Inc. and Accredo Health Group, agreed to pay a total of $75 million to resolve federal and state claims. 

With Novartis's settlement, the federal and state governments will recover $465 million from the kickback allegations.

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Of the $370 million it owes, Novartis will pay $286 million to the government, and $83 million to the settling states, the Justice Department said.

Novartis's specialty pharmacy relationships are subject to independent review, in a Health and Human Services Office of the Inspector General corporate integrity agreement.

"Novartis turned pharmacies that should have been disinterested healthcare providers into a biased salesforce for the drug-maker," Manhattan U.S. Attorney Preet Bharara said.

Twitter: @SusanJMorse