Novartis Pharmaceuticals has been accused by the U.S. government and 26 states of a kickback scheme related to its iron-reduction drug Exjade.
On January 8, 2014, U.S. District Judge Colleen McMahon in Manhattan unsealed a complaint alleging the Swiss drug maker kicked referrals and rebates to a specialty pharmacy, BioScrip Inc., to encourage patients to refill prescriptions. The complaint accuses Novartis of inducing BioScrip “to set aside its independent clinical judgment and promote Exjade refills for Novartis” by emphasizing the drug’s benefits, and concealing its potentially life-threatening side effects.
Novartis maintains that its interactions with BioScrip were part of its efforts to assure patients were properly managing serious health conditions through the use of Exjade.
The federal anti-kickback statute (AKS) prohibits entities from offering or receiving any “remuneration,” including “kickback, bribe, or rebate” in order to seduce another to purchase or recommend a drug or service that is covered by Medicare or Medicaid. According to the government’s complaint, Novartis’ actions embody the actions the AKS seeks to prevent: the complaint alleges Novartis created an “Exjade scorecard” that measured how long patients took Exjade. Novartis allegedly used this scorecard to refer more new patients to the pharmacy that kept patients on the drug the longest.
Background
Exjade was approved by the FDA in 2005 for the treatment of chronic iron overload due to blood transfusions. Novartis selected three pharmacies as part of a closed distribution network to fill Exjade prescriptions. BioScrip, which shipped prescription drugs to Medicaid patients around the country, was one of three specialty pharmacies chosen to operate in the network.
The complaint states that during the early run of Exjade, Novartis implemented a “Performance Improvement Plan” to increase the refills of the drug because a significant percentage of physicians and patients were opting to discontinue Exjade therapy because of side effect. Novartis advised the pharmacies to promote Exjade directly to patients under the pretext of a “patient education” program, whereby Novartis would give generous patient referrals and rebates to the pharmacy that filled the most prescriptions.
BioScrip employees reportedly made thousands of calls to Medicaid recipients in New York and other states from a call center in Ohio, encouraging them to refill Exjade prescriptions or resume taking Exjade. A former BioScrip supervisor stated under oath that the kickbacks provided by Novartis “caused [BioScrip] to be focused exclusively on the number of orders and refill rates, rather than on patient care.”
From 2010-2012, sales of Exjade continued rising, despite the January 2010 requirement that the drug feature a “black box” warning highlighting the potential for kidney failure, liver failure, and gastrointestinal hemorrhage that in some cases were fatal, according to the complaint.
| Fiscal Year | Exjade Sales | YOY Growth (USD) |
| 2010 | $762 million | 17% |
| 2011 | $850 million | 12% |
| 2012 | $870 million | 2% |
Source: Novartis annual reports.
Litigation
Federal law enforcement first learned of the potential fraud through a whistle-blower, who filed a lawsuit under the False Claims Act (FCA). The FCA permits the Government to recover treble damages—up to three times the amount of damages incurred by the United States—plus civil penalties ranging from $5,500 to $11,000 per violation. Private parties, often disgruntled employees, who have knowledge of fraud committed against the Government, may file suit on behalf of the Government and also share in any recovery. In this case, the complaint seeks treble damages and penalties from Novartis under the FCA for the “tens of millions of dollars in reimbursements” that Medicare and Medicaid paid for Exjade shipments that resulted from the kickback scheme.
The government based their complaint on the federal anti-kickback statute (AKS), which as stated above, prohibits companies from offering or receiving any “remuneration,” including “kickback, bribe, or rebate” in order to seduce another to recommend a drug or service that is covered by Medicare or Medicaid. Manhattan U.S. Attorney Preet Bharara stated that “[b]y hiding this illegal quid pro quo from federal healthcare programs, Novartis caused the public to pay tens of millions of dollars for kickback-tainted drugs” (Justive.gov).
Simultaneous with the filing of the complaint against Novartis, the government approved a $15 million settlement with BioScrip to cover costs to Medicaid and Medicare nationally for excessive Exjade prescriptions. In addition to New York, which BioScrip will pay $895,000 to resolve claims, many states have reported that they will see some of the settlement. Ohio Attorney General Mike DeWine, for example announced that Ohio will receive $240,845 from the BioScrip settlement.
As part of the agreement, BioScrip also admitted several facts that implicate Novartis. BioScrip admitted to launching an intensive effort to increase overall patient orders for Exjade refills, and “restarting” many patients who had stopped ordering Exjade. To achieve the goal, BioScrip stated that they hired a group of staff to work exclusively on Exjade.
Novartis disputes the government’s claims and says it will defend itself against the litigation. André Wyss, Novartis president, stated in an email that: “The company disputes the allegations made by the Attorney General for the State of New York related to Novartis Pharmaceutical Company’s (NPC) interactions with specialty pharmacy BioScrip and intends to defend itself in this litigation” (Thomson Reuters). “At NPC, patients are the focus of all that we do. We want to support the best possible outcome for a patient taking a Novartis medication prescribed by their physician,” said Wyss. “We believe that adherence efforts help patients manage their disease and that specialty pharmacies play a key role in these patient medication adherence efforts and in ultimately improving outcomes.”
Discussion
This case shows that the government is serious about pursuing FCA cases involving alleged kickbacks. New York Attorney General Eric Schneiderman stated: “Our lawsuit against Novartis and our agreement with BioScrip send a clear message: Drug companies cannot pay pharmacies to promote drugs directly to patients.”
FBI Assistant Director Ronald T. Hosko agreed: “Investigations such as these are a high priority for the FBI and we will aggressively pursue providers that boost their profits at the expense of Medicare and other government programs. Due to the potential impact to the nation’s health care system and to the public from these types of multifaceted schemes, we have created a centralized team to provide nationwide support to our field offices called the Major Provider Response Team. The FBI is committed to working with our partners in these types of investigations and appreciates the public’s involvement in the process.”
This increased activity stateside mirrors increased anti-bribery and kickback actions internationally as well. China in particular recently released a new set of rules aimed at publically blacklisting companies engaged in kickback schemes.
In the United States, the FCA also provides strong incentives to private plaintiffs to bring cases in the name of the United States. The FCA was amended in 1986 to include non-retaliation protections for whistleblowers, and the Act protects whistleblowers who initiate, assist with, or testify for a false claim action. Some analysts argue that safe harbors should be provided for companies with robust compliance programs and that whistleblower incentives should be reasonable, but scaled back. There is some evidence that while Congress may extend whistleblower protections, they are also interested in scaling back financial rewards. However, until potential reforms come to fruition, these private actions may continue to thrive.
It is important to note that the complaint against Novartis contains allegations of very poor conduct on the part of both the healthcare company and the pharmacy, BioScrip. If the government’s allegations are true, the kickback scheme in place for filling Exjade prescriptions demonstrates a true disregard for patient safety. The litigation will be very expensive for Novartis and reflects poorly on the pharmaceutical industry in general.
Despite the bad acts involved in the Novartis case, it is not hard to imagine the government coming after companies whose conduct does not reach the same level of contempt. With increased scrutiny into claims and a growing number of qui tam suits against pharmaceutical manufacturers, it is important for healthcare companies to understand the rules that relate to the services being billed to Medicare and Medicaid. Information contained in any Medicare and Medicaid claim must be as accurate and complete as possible. Furthermore, companies should make changes to prevent any potential FCA problem from continuing and make arrangements to repay any overpayments, which may avoid or limit liability.