Novartis in the News: Blockbuster Heart Failure Drug Entresto Approved, Pricing Questions Remain; $3.4 Billion Kickback Allegations Loom

Novartis has been in the news a fair amount recently—both for good and bad reasons. Starting with the good, the company’s heart failure drug Entresto has been hailed as a breakthrough that could help millions. The treatment is the first of a new class of drugs for heart failure, called angiotensin receptor neprilysin inhibitors. In a large clinical trial of over 8,000 people, patients who were treated with Entresto had a 20 percent reduction in risk of death or hospitalization compared to ACE inhibitors, the current gold standard of care. (View the company’s announcement here).

Pricing

In addition to bringing an innovative therapy to market, manufacturers of breakthrough treatments also have to answer the question: “what does it cost?” Novartis has announced that Entresto could cost about $4,500 per year, or $12.50 a day for two tablets a day. Despite the low daily price point compared to other high profile cures, the cost has drawn some criticism as the medicine would be taken daily throughout a patient’s life.

Part of this price scrutiny has to do with the fact that while existing drugs are less effective, ACE inhibitors are generics, and much cheaper than Entresto. Interestingly, leading up to the approval, Novartis announced that they would be considering a unique payment model for the new drug. Reuters reported that David Epstein, the Division Head of Novartis Pharmaceuticals, stated the company plans to offer payers an outcomes-based plan. Insurers would initially pay a discounted price for Entresto, and then pay additional bonuses if the drug succeeded in keeping patients out of the hospital and reducing associated healthcare costs.

Pay-for-performance would reduce the cost strain at the outset of treatment, but the proposal is still in need of tweaking, argues Steven Miller, chief medical officer of Express Scripts Holding Co., which helps companies and insurance plans manage their prescription benefits (Bloomberg). Miller notes that performance-linked prices are difficult to manage because patient outcomes can be affected by a large range of things besides simply the medication. “If the patient isn’t adherent with taking the drug, is it the drug’s fault or the patient’s fault?” he asks, noting there is insufficient infrastructure for data collection on patients.

Innovation should certainly be rewarded, and Entresto is expected to be a game changer in extending the life of heart failure patients. it will be interesting to see how Novartis moves forward with its pricing. 

Kickback Allegations

Balancing out the positive press around Entresto, Novartis has been dealing with kickback allegations related to two drugs–Exjade, an “iron chelator” indicated for treatment of chronic iron overload due to blood transfusions, and Myfortic, a medication to prevent organ rejection in patients who have received kidney transplants. A recent pre-trial order filed in the Southern District of New York outlined the government’s case against Novartis, as well as the company’s defenses. Most notably, the order revealed that the Department of Justice is seeking potentially $3.35 billion in damages and fines. The largest pharmaceutical fraud settlement to date was GlaxoSmithKline’s $3 billion settlement in 2012.

Specifically, Novartis faces two charges:

• Exjade: Novartis violated the Anti-Kickback Statute by giving kickbacks to BioScrip, Accredo, and US Bio as incentive to encourage patients to refill Exjade. The government alleges that Novartis used its control of how patient referrals flowed to the three specialty pharmacies as leverage, and formed a competition that rewarded pharmacies based on their success in getting patients to refill their medication and threatened to reduce patient referrals for low refill-rates. The government also alleged that nurses at the pharmacies overstated the long-term benefits and understated adverse effects of Exjade to get patients to refill their prescriptions.
  

Novartis stated that the pharmacies served vital roles in patient outreach and encouraging adherence, and that the agreements were outlined in contracts. “Novartis used adherence-based metrics because adherence was considered a fair proxy for successful patient health outcomes,” the company stated regarding its referral system. Furthermore, the company denied misrepresenting any of Exjade’s risks. 

• Myfortic: The government notes that when Novartis introduced Myfortic in 2004, a product called CellCept had already been on the market for almost ten years. “Thus, one of Novartis’s main marketing strategy for Myfortic was to have transplant centers or private practice nephrologists (“PPNs”) switch or “convert” patients who were already using CellCept to Myfortic,” alleges the government. “In furtherance of that marketing strategy, sales and account managers at Novartis’s transplant franchise worked to identify specialty pharmacies that could influence whether transplant centers or PPNs used Myfortic or CellCept. When it identified pharmacies that had influence over the choice of Myfortic vs. CellCept, Novartis offered those pharmacies “performance rebate” contracts in return for their unwritten agreements to recommend Myfortic over CellCept or generic medications.” The Dept. of Justice stated that none of the rebate contracts between Novartis and the various pharmacies disclosed their agreements concerning switching patients to Myfortic or keeping patients on Myfortic.

Novartis noted that highly educated physicians often had very legitimate reasons for prescribing Myfortic over generic brands (see page 70). Further, Novartis stated that it is “common in the healthcare industry for pharmaceutical manufacturers, such as Novartis, to enter into discount contracts with pharmacies, including specialty pharmacies.” Such discounts and market share rebates fell within the safe harbor to the Anti-Kickback Statute, argued the company.

The allegations against Novartis concerning their relationship with specialty pharmacies have been around for a while now–we wrote about the DOJ’s settlement with Bioscrip over their part in the alleged kickback arrangement a year and a half ago. However, it seems as though the government has used that settlement to bolster its case against Novartis. Back in January 2014, DOJ announced: “BioScrip Agrees to Pay $15 Million and Makes Extensive Factual Admissions to Resolve Claims.”  The government is alleging well over $15 million here.  

The government writes in the “Relief Sought” section:

In connection with the alleged Exjade scheme the pharmacies submitted 126,802 claims to Medicare and Medicaid and obtained $492,905,758 in reimbursement. In connection with the alleged Myfortic scheme, the pharmacies submitted 39,209 claims to Medicare and Medicaid, and obtained $14,589,787 in reimbursement. Under the FCA, Plaintiffs are entitled to treble damages and a civil penalty of $5,500 to $11,000 for each false claim.

Tripling the amount the government reimbursed adds up to approximately to $1.52 billion. Furthermore, the high end penalties for each “kickback tainted” false claim–which the government alleges happened 166,011 times–would add about $1.83 billion. 

This case has already been an interesting one to watch as two pharmacies, BioScrip and Accredo, have settled multi-million dollar cases with the government and admitted to conduct that implicates Novartis. The government’s allegations have further weight due to the fact that Novartis is currently under a Corporate Integrity Agreement.