Novartis to Pay Government $390 Million for Allegedly Paying Kickbacks to Pharmacies

According to recent SEC filings, Novartis AG has agreed to pay the federal government $390 million to settle an intervened False Claims Act (FCA) qui tam action, alleging that the drugmaker paid kickbacks to twenty or more specialty pharmacies to boost sales of its Myfortic and Exjade drugs. This supposed settlement comes on the eve of trial, in which the government was seeking over $3.3 billion. If true, this recovery will be one of the largest pharmaceutical FCA settlements predicated only on Anti-Kickback Statute violations, and the relator will receive at least $58.5 million.

Historically, most large pharmaceutical FCA settlements have included both off-label and Anti-kickback Statute violations. However, as the off-label landscape has become more nuanced in recent years, the Justice Department has increasingly focused its efforts in the kickback arena.

As more and more patients receive drugs from specialty pharmacies, the Justice Department has especially stepped up its scrutiny of payments flowing from drugmakers to specialty pharmacies. Oftentimes, dishonest manufacturers will disguise kickback payments to pharmacies as so-called “performance” rebates or discounts.

In the case against Novartis, the government alleged that Novartis paid such kickbacks to numerous pharmacies in exchange for the pharmacies switching patients to it drugs or continuing to recommend its drugs over cheaper, generic competitor drugs. According to the government’s complaint, the alleged kickback scheme worked, as evidence by internal return-on-investment analysis. For example, the government maintained that a 2011 internal analysis showed that Novartis realized a $7:$1 return on investment from its alleged Exjade kickback scheme.

Kickback cases can be difficult cases for the government and the relators’ bar. However, these cases are substantially easier when the relator supplies the government with internal documents showing that the manufacturer tracked its financial return on payments to pharmacies.

More information for whistleblowers is located at the Nolan Auerbach & White website.