We have previously written about the proposed Novartis AG settlement relating its False Claims Act suit. The suit alleged Novartis participated in improper kickbacks to pharmacies to boost sales of several prescription drugs. Novartis Chief Executive Joe Jimenez claimed that Novartis had made the disputed payments, but did so to ensure patients took the drugs.
In October, Novartis announced a $390 million tentative agreement to settle that claim against them. That tentative agreement did not assign liability for the resolved allegations of improper discounts and rebates to specialty pharmacies in conjunction with the immunosuppressant Myofortic and the iron overload drug Exjade.
Allegedly, sales of Exjade were not meeting expectations primarily due to the side effects of the drug, when Novartis pressured a set of three hand-selected specialty pharmacies, including Bioscrip, Inc. and Accredo Health Group, to "hire or assign nurses to call Exjade patients and under the guise of education or clinical counseling, encourage patients to order more refills."
With regard to Myofortic, Novartis allegedly offered "lucrative rebate offers to five specialty pharmacies in return for the pharmacies' promise to recommend to doctors that they switch patients to Myofortic from competitor drugs."
Settlement and Admissions
The final settlement, approved November 20, 2015, settled the claims against Novartis for $370 million. That $370 million goes towards paying the fines to settle the claims against it, while an additional $20 million in profits will be forfeited, bringing the total settlement to $390 million. This is much less than the $3.35 billion the government was seeking. Of the $270 million, $286,870,245.98 will be paid to the federal government and $83,129,754.02 will be paid to settling states.
This settlement is the third settlement of this lawsuit – in January 2014 and April 2015, two specialty pharmacies (Bioscrip and Accredo) agreed to pay a total of $75 million to resolve federal and state claims against them based on the same allegations. Taken with this recent Novartis settlement, the federal and state governments' recovery will total $465 million.
In addition to the settlement, Novartis made a lengthy list of admissions relating to the Exjade and Myofortic claims. Novartis admitted to pressuring at least one of the specialty pharmacies into filling more Exjade prescriptions, even if it meant skirting the law a bit. Novartis also admitted to offering discounts and market share rebates to certain specialty pharmacies that dispensed Myofortic, though the agreements did not refer to any action that the pharmacies contemplated taking to increase Myofortic's market share.
Corporate Integrity Agreement Amendment
Part of this settlement requires Novartis to add provisions relating to specialty pharmacies as part of an addendum to its existing corporate integrity agreement, which will be extended for five years from November 19, 2015. These new CIA obligations will provide greater clarity on working with specialty pharmacies in support of patient care.
Novartis will "implement the agreed upon controls to ensure appropriate support for patients, and compliance with all Federal Healthcare program requirements related to its interactions with specialty pharmacies." These controls include a variety of things, such as "enhancing policies and procedures at [Novartis] for specialty pharmacy service arrangements and contracts, training for [Novartis] associates, as well as strengthened monitoring and tracking processes to ensure that services are provided in a compliance manner."
Part of those controls require an annual certification from Novartis officers and employees that the applicable Novartis business unit is compliant with applicable Federal health care program and FDA requirements.
In addition, Novartis will design policies and procedures to ensure that Novartis' arrangements with specialty pharmacies are "used for legitimate and lawful purposes in accordance with the federal anti-kickback statute ... and other applicable Federal health care program and FDA requirements." All arrangements will be subject to a written review and approval process. The policies and procedures shall include requirements about the business need for the arrangements, the services provided under the arrangements, and the amount of compensation provided under the arrangements – including that the amount of compensation is fair market value for the service.
Within 120 days of the effective date of the addendum, Novartis is required to create procedures reasonably designed to ensure that each existing and new or renewed arrangement does not violate the anti-kickback statute or the regulations, directives, and guidance related to the statute. Each new or renewed arrangement must be set forth in writing and comply with the arrangements procedures. Each party to the arrangement must have a copy of its Code of Conduct and relevant policies and procedures relating to the anti-kickback statute. A certification must be signed that the parties shall not violate the anti-kickback statute with respect to the performance of the arrangement, and that certification must remain on file.
Novartis has stated that they will provide its contracted specialty pharmacies with a "clear understanding of the Novartis Code of Conduct and training on the policies that guide our activities to help ensure compliance with Federal Healthcare program requirements." Novartis has agreed to provide a comprehensive annual report to the government of on its compliance with the aforementioned, and other, CIA obligations.
Novartis insists that it is "committed to high standards of ethical business conduct" and now has a comprehensive compliance program in place to ensure its future responsible behavior.
Preet Bharara, the U.S. Attorney for Manhattan made a warning statement to all pharmaceutical companies, stating, "Novartis turned pharmacies that should have been disinterested healthcare providers into a biased sales force for the drug maker. Drug makers and their relationships with healthcare providers ... must comply with the Anti-Kickback Statute. If they don't we will bring all appropriate law enforcement tools to bear to ensure that they do."