10:53 am ET
Oct 1, 2014
Litigation
‘Sham’ Programs? Novartis Must Face a Kickback Lawsuit Filed by the Feds
By Ed Silverman WSJ
A federal judge has ruled that Novartis must face a lawsuit in which the U.S. Department of Justice charged the drug maker with paying millions of dollars in kickbacks to physicians – including numerous lavish dinners and social events – in order to persuade them to prescribe its medicines.
The lawsuit, which was filed last year, alleges that Novartis caused Medicare and Medicaid to unnecessarily pay millions of dollars in reimbursements between 2002 and 2011 based on false insurance claims submitted for various drugs, including the Lotrel blood pressure treatment. Novartis, which denies the allegations, had filed a motion to have the lawsuit dismissed.
In the lawsuit, the feds maintain that Novartis boosted prescriptions by orchestrating “sham” speaker events, some of which were held at expensive restaurants, sports bars and fishing venues, where little or no direct connection to its drugs were discussed, according to court documents. And the drug maker allegedly paid various doctors to make the same presentation to the same group of doctors over a short period of time.
As an example, the lawsuit cites a July 2005 dinner at Smith & Wollensky in Washington, D.C., for $2,016 for three people, or $672 per person. There was also a May 2006 dinner at Nobu in New York, where a doctor was paid to speak, but only the physician, two of his friends – one of whom brought a girlfriend who was not a health care professional – and a Novartis sales reps had attended.
The lawsuit explains “in detail why the speaker events were shams and how they served as a vehicle for kickbacks,” U.S. District Court Judge Paul Gardephe wrote in a 90-page ruling. “Novartis has cited no case demonstrating that the government entities’ pleading of particular false claims is deficient.”
The decision means that Novartis business practices will be placed under a microscope. The lawsuit notes the drug maker three years ago paid $422.5 million in penalties and pleaded guilty to a misdemeanor to resolve criminal allegations for improperly promoting several medicines.
As part of the settlement, Novartis signed a five-year Corporate Integrity Agreement, which required establishing an internal compliance program and reporting violations, among other things. The lawsuit, however, suggests the drug maker may have violated the agreement.
The case is far from over, but there is a theoretical possibility that Novartis may face exclusion, which means the drug maker could be excluded from having contracts with federal health care programs. Of course, this can cause collateral damage if patients are unable to obtain certain medicines, making such a move highly unlikely.
Nonetheless, the feds may feel they have more leverage if any settlement talks take place while the case proceeds. It is also worth noting that the allegations undermine an argument offered by the pharmaceutical industry that recent settlements reflect older practices that have been ended.
A Novartis spokeswoman writes that the drug maker “disputes the allegations and will continue to vigorously defend itself in this litigation… Novartis is committed to high standards of ethical business conduct and has a comprehensive compliance program in place to help ensure we consistently act in a responsible manner.”
The government lawsuit stemmed from a whistleblower lawsuit filed three years ago by a former Novartis sales rep named Oswald Bilotta. The judge also ruled that Bilotta can pursue his own claims.
His attorney, Eric Young, wrote us to say that he is “pleased” with the ruling. “We think the decision is a great example of why the Sunshine Physician Payments Act is necessary.” He was referring to the Open Payments database launched yesterday that displays payments made by drug and device makers to physicians