Novartis settles for $5.4 million

Michigan has reached an agreement in principle to settle kickback claims against Novartis Pharmaceuticals Corporation.  The settlement resolves allegations that Novartis provided kickbacks to certain pharmacies in exchange for recommending the drug Exjade to Medicaid/Medicare patients. Under the settlement, Novartis agrees to pay $390 million to the U.S. and over forty states; Michigan will receive  over $5.4 million. Exjade is an FDA-approved medication for treatment of chronic iron overload due to blood transfusions.

“Deceptive medical marketing practices threaten the health and well-being of Michigan families,” said Attorney General Bill Schuette. “Michigan consumers shouldn't have to wonder whether financial incentives are negatively influencing their medical care.”

The settlement stems from a whistleblower lawsuit, U.S. ex rel. Kester, et al v. Novartis Pharmaceuticals Corporation, et al filed in the U.S. District Court Southern District of New York.  Two of the specialty pharmacies named as defendants, BioScrip, Inc. and Accredo Health Group, Inc., already agreed to pay $15 million and $60 million respectively to resolve claims they accepted kickbacks from Novartis to promote Exjade. Under those settlements, Michigan received $1,264,817.36 in July.

The settlement resolves allegations that between 2007 and 2012 Novartis paid kickbacks to three specialty pharmacies, BioScrip, Accredo, and US Bioservices, selected by Novartis to be part of a closed distribution network through which most Exjade prescriptions in the U.S. were filled.  Novartis created the network, called EPASS, and therefore had significant control over how many patient referrals each received.  The pharmacies shipped most Exjade prescriptions to patients by mail and were supposed to call patients to set up shipments and obtain consent for refills. The pharmacies billed themselves as specialty pharmacies that could arrange for the shipments and run patient educational programs.

The government plaintiffs alleged that Novartis paid kickbacks to the pharmacies to corrupt the pharmacies’ interactions with patients by inducing them to exaggerate dangers of not taking Exjade, emphasize Exjade's benefits, and downplay the severity of side effects. The scheme began after Exjade failed to meet Novartis' sales goals and refill rates for Exjade were lower than anticipated.

Novartis pressured the specialty pharmacies by threatening to exclude them from the EPASS network or reduce the number of patient referrals they received. In addition, Novartis set up a contest in which the pharmacy that kept patients on Exjade the longest would receive additional patient referrals, and paid rebates to the specialty pharmacies. The contest allegedly went forward even after lawyers for Novartis raised concerns.

To appease Novartis, the pharmacies put together plans to increase refill rates.

Novartis admitted many aspects of the scheme in a stipulation filed  in connection with the settlement.