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July 19, 2013

Summary of Recent Settlements Novartis, Amgen and Boehringer Ingelheim

The healthcare fraud settlements just keep rolling in. Recently, federal healthcare enforcement authorities settled several cases involving Novartis, Amgen, and Boehringer Ingelheim. Below is a summary, links and details about each of the cases and settlements.  


The U.S. Department of Justice (DOJ) in late April brought two separate suits against Novartis. First, on April 23, 2013, Preet Bharara, the United States Attorney for the Southern District of New York, and Ronald T. Hosko, the Assistant Director of the Federal Bureau of Investigation, Criminal Investigative Division ("FBI"), announced that the United States has filed a civil healthcare fraud lawsuit against Novartis. Twenty-seven states, the District of Columbia and Chicago and New York are also plaintiffs in the lawsuit, which seeks triple damages under the federal False Claims Act.

The Government's Complaint seeks treble damages and civil penalties under the False Claims Act against Novartis for giving kickbacks, in the form of rebates and discounts, to 20 or more pharmacies in exchange for their switching transplant patients from competitor drugs to Novartis's drug, Myfortic. The lawsuit alleges that, as a result of Novartis's kickback scheme, Medicare and Medicaid have issued tens of millions of dollars in reimbursements based on false, kickback-tainted claims.

Manhattan U.S. Attorney Preet Bharara said: "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. 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. Novartis, as we allege, is a repeat offender, having settled healthcare fraud charges based on kickbacks less than three years ago."

FBI Assistant Director Ronald T. Hosko said: "The FBI takes these allegations very seriously because of the potential impact to the nation's healthcare system and to the public. These cases are one of the highest priorities of the FBI's health care fraud program. We have established a centralized unit called the Major Provider Response Team to provide nationwide investigative assistance given the complexity of such investigations."

Only three days later, Bharara and Stuart F. Delery, the Acting Assistant Attorney General for the U.S. Department of Justice's Civil Division, announced the filing of a civil false claims lawsuit against Novartis. The Government's Complaint seeks damages and civil penalties under the False Claims Act and under the common law for paying kickbacks to doctors to induce them to prescribe Novartis pharmaceutical products that were reimbursed by federal health care programs. The lawsuit alleges that the payments violated the Anti-Kickback Statute ("AKS") and, as a result of Novartis's unlawful conduct, the Government paid false claims for reimbursement for Novartis pharmaceutical products. The Government intervened in part in an action before Judge Paul G. Gardephe filed by a whistleblower on January 5, 2011, under the qui tam provisions of the False Claims Act.

Manhattan U.S. Attorney Preet Bharara said: "As alleged, Novartis corrupted the prescription drug dispensing process with multi-million dollar 'incentive programs' that targeted doctors who, in exchange for illegal kickbacks, steered patients toward its drugs. And for its investment, Novartis reaped dramatically increased profits on these drugs, and Medicare, Medicaid, and other federal healthcare programs were left holding the bag, doling out millions of dollars in kickback-tainted claims. Healthcare fraud imposes tremendous costs and causes great harm to an already burdened healthcare system, and the government will not tolerate it. The widespread kickback fraud alleged in our two lawsuits against Novartis – which only a few years ago settled a False Claims Act case involving violations of the Anti-Kickback Statute based on illegal payments to doctors – makes us question whether Novartis is getting the message."

"As a leading healthcare company, NPC is committed to high standards of ethical business conduct and regulatory compliance in the sale and marketing of our products," Julie Masow, a Novartis spokeswoman, said in an e-mail to Bloomberg. The physician speaker programs targeted in yesterday's lawsuit are an accepted practice in the industry. The rebates and discounts cited by the government in the Myfortic case are "a customary, appropriate and legal practice" and the kickback lawsuit is "inconsistent with law and policy in this area," Masow said.

The Complaint alleges that Novartis violated its own internal policies concerning speaker programs, which require that the programs have an educational purpose and that slides about the company's drugs be presented. Novartis violated the AKS by paying doctors to speak about certain drugs, including its hypertension drugs Lotrel and Valturna and its diabetes drug Starlix, at events that were often little or nothing more than social occasions for the doctors.

The payments and lavish dinners given to the doctors were, in reality, kickbacks to the speakers and attendees to induce them to write prescriptions for Novartis drugs. In many instances Novartis made payments to doctors for purported speaker programs that either did not occur at all or that had few or no attendees, and thousands of programs were held all over the country at which few or no slides were shown and the doctors who participated spent little or no time discussing the drug at issue.  

Many speaker programs were also held in circumstances in which it would have been virtually impossible for any presentation to be made, such as on fishing trips off the Florida coast. No slides were shown on the boat. Other Novartis events were held at Hooters restaurants and a $10,000 dinner at Manhattan's boutique seafood spot Nobu.

In addition, a July 5 dinner for three, including the speaker, at a Washington, D.C. restaurant cost $2,016, or $672 per person. Novartis also paid a $1,000 honorarium to the speaker for this program. One of the two attendees had attended the same program a short time earlier. At another program held on Valentine's Day in 2006, Novartis paid $3,127, for a meal for three people at a West Des Moines, Iowa restaurant, or $1,042 per person.

Novartis's internal analyses show that speaker programs had a high return on investment in terms of the additional prescriptions for its drugs written by the doctors who participated in the programs, both as speakers and attendees, with the highest return arising from payments to doctors as "honoraria" for speaking. In short, doctors increased the number of prescriptions they wrote when they were being paid by Novartis to speak about a drug.

As a result, Novartis spent millions on speaker programs yearly. According to Novartis's data, during the period from January 2002 through November 2011 it spent nearly $65 million and conducted more than 38,000 speaker programs for just three drugs: the hypertension drugs, Lotrel and Valturna, and the diabetes drug, Starlix.

"In the absence of a legitimate purpose for many of the programs, the payments were nothing more than kickbacks to the doctors that induced them to write prescriptions in violation of the AKS. Novartis was well aware that its speaker programs created opportunities to provide kickbacks to doctors," DOJ wrote.

In September 2010, Novartis entered into a settlement with the U.S. Department of Justice to settle False Claims Act lawsuits based in part on violations of the AKS due to illegal remuneration paid to doctors through such mechanisms as speaker programs, and signed a Corporate Integrity Agreement ("CIA") with the U.S. Department of Health and Human Services Office of Inspector General agreeing to implement a rigorous compliance program.

Even after entering into the CIA, "Novartis's compliance program was inadequate to prevent kickbacks from being paid in conjunction with Novartis's speaker programs. Novartis did not adequately review its speaker program to determine whether the programs were being used for an illegitimate purpose." Furthermore, although many instances of speaker program abuse were reported to Novartis, sanctions were generally mere slaps on the wrist. In some cases, sales representatives who violated Novartis's own speaker program policies were nevertheless promoted. Even after September 2010 Novartis continued to conduct bogus speaker programs that were simply vehicles for paying kickbacks to doctors in the form of honoraria and expensive meals."

If it is determined that Novartis violated its CIA, there are several potential outcomes. OIG is unlikely to exclude the company due the impact it would have on innocent third parties such as employees and patients. However, as OIG has recently emphasized, the agency may pursue exclusion of individual executives and high-level officials who were responsible for implementing and overseeing the CIA and preventing these recent allegations from occurring.

It is also possible that OIG will require a new CIA for Novartis—which it has done in the past for repeat offenders—which would contain new, enhanced provisions, particularly in light of the "repeated offender" status. The enhanced CIA might also include forfeiture or compulsory licensing issues as enhanced penalties, which OIG has also done in the past. Of course, OIG may also impose CIA-mandated penalties for these violations as well. For example, the Novartis CIA says that the company would have to pay "$1,000 for each day Novartis fails to comply fully and adequately with any obligation of the CIA." OIG, however, told Pharmalot that it would not comment on any actions it might take in the future because the case because it is an "open matter."  

In addition to these recent probes, the Wall Street Journal reported back in January of this year that Novartis disclosed in a U.S. Securities and Exchange Commission (SEC) filing that it had received a subpoena from the U.S. attorney for the Western District of Kentucky "requesting the production of documents relating to marketing practices, including remuneration of healthcare providers, in connection with certain NPC products (including Tekturna and its combination products)." The company said it is "cooperating with the investigation, which is civil and criminal in nature," reported FiercePharma.

Also, FiercePharma reported that Novartis filed a special Iran Notice with the SEC indicating that its Alcon eye care unit, which is based in Texas, is being investigated. The feds are looking at whether it violated sanctions against sales to Iran and other pariah nations. The company said a "grand-jury subpoena" asked for documents dating back to 2005. The company told the WSJ that it is cooperating but had nothing more to say.  


On April 16, 2013, Amgen inc agreed to pay the United States $24.9 million to settle allegations that it violated the False Claims Act, the Justice Department announced. Amgen develops, manufactures, and sells pharmaceutical products, including products sold under the trade name Aranesp.

FiercePharma reported that Omnicare, made its own deal with the Department of Justice in 2009, in a kickbacks case involving drugs from Johnson & Johnson and Teva Pharmaceutical Industries. And last year, J&J disclosed that it's close to its own settlement with the DoJ, including allegations of kickbacks to Omnicare.

Back in February of this year, Amgen, agreed to pay $762 million—the single largest criminal and civil False Claims Act settlement involving a biotechnology company in U.S. history. That settlement also involved Aranesp and was related to its off-label promotion.     

Boehringer Ingelheim

As reported by Pharmalot, "Boehringer Ingelheim last fall commissioned a survey that went to physicians in the UK and asked them to compare the medicine with warfarin and Xarelto, another new bloodthinner. To complete the survey, which sought to contrast the use of treatments in patients new to all of the medicines and those who had been switched from one to another, the doctors were offered 70 pounds, or roughly $105."

One problem, however, was that the survey focused heavily on the honorarium and another 5 pound payment was offered to doctors who completed forms indicating a patient had been switched between medicines." As a result, "three physicians complained to the Prescription Medicines Code of Practice Authority, a voluntary industry group that ruled a breach occurred."

Why? "A reader glancing at the e-mail (that was sent to physicians) might get the impression a 5 pound honorarium was payable in relation to each patient switched to Pradaxa or Xarelto," the PMCPA panel ruled, as reported by the Pharmalot. "Such an impression was unacceptable." The panel was also concerned about the lack of control over the contents of the invitation, which was sent by a third party hired by Boehringer, and that 'high standards' were not maintained.

According to Pharmalot, "Boehringer argued that if an effort was under way to switch patients to Pradaxa, then the additional honorarium for switching prescriptions would not have been extended to Xarelto, which is marketed by Bayer and Johnson & Johnson (JNJ)." The "drugmaker also maintained the survey was not disguised as  a promotional vehicle and was unaware of the survey, since it was just one piece of a larger market research project that took place last year."


In light of these cases, and in particular, the Novartis kickback case, Jose Sierra, a white collar lawyer who writes for the blog pharmarisc, proposed several factors for companies to consider.

  1. Companies must ensure close monitoring of speaker programs to ensure compliance with internal policies and CIA requirements
  2. For "front-end" controls, he recommends that companies should adopt a system in which no speaker program is scheduled without 6-10 "RSVPs" from invited doctors.  "You need this many RSVPs because half the doctors never show up and 3-5 attendees are needed to pass the laugh test.  If a company doesn't have the requisite number of RSVPs, the program should either not be scheduled, or if it has been scheduled, it should be cancelled before the company is contractually obligated to pay the speaker his or her honorarium." 
  3. Sierra explains that a good example of back end control "is reconciling the RSVP list with an actual program attendance sheet in order to both accurately capture the number of attendees — an important exercise under the Sunshine provisions of the Affordable Care Act, which will require allocation of dinner costs to physicians — and to ensure that the speaker's friends aren't the same attendees showing up time after time."

Ultimately, the Novartis case demonstrates the importance of having internal controls and a culture of corporate compliance necessary to prevent such actions from happening, particularly while the company was already under a CIA.


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I am not sure if you reviewed the Novartis case in detail, but Novartis signed a CIA in 2010 and paid lots of money for it. By my quick flip through, I noticed that almost all the "kickbacks" predated that CIA. In fact, most examples of the "misbehavior" were from 2005-2007, like the fishing trips, meals at Hooters, etc. I really hope that Novartis fights this all the way. I am getting sick of these dishonest and corrupt government attorneys filing these bogus, double-jeopardy type, extortionist type complaints just to get their name in the paper and to squeeze money out of companies. These guys don't play fair, and it's screams out for a good fight. Enough is enough!

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