Novartis, the Swiss drugmaker already under a strict corporate-integrity agreement because of a past settlement, has been targeted by two lawsuits in the past week by the U.S. attorney's office for New York City that allege widespread payments of illegal kickbacks.
One expert said the cases are so severe they may cause regulators at the HHS to try to force the removal of company executives by excluding them from working for any company that does business with Medicare.
Federal prosecutors on Friday announced the filing of a lawsuit (PDF) alleging a widespread pattern of paying physicians in the form of lavish meals and trips and bogus speaking engagements to promote drugs. The company spent $65 million to promote hypertension drugs Lotrel and Valturna and 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,” or anti-kickback statute, a press release from the U.S. attorney's office says.
The whistle-blower lawsuit was originally filed by a former Novartis employee, Oswald Bilotta, and joined by the Justice Department, 27 states and the cities of Chicago and New York.
The announcement came just three days after the U.S. attorney's office in New York sued Novartis (PDF) for allegedly offering kickbacks disguised as rebates to pharmacists as an inducement to switch patients to its branded immunosuppressant Myofortic instead of cheaper generic drugs.
In both cases, the company said its practices were well within accepted business practices, and it intends to argue its case in court. “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,” a Novartis written statement says. “It is our firm conviction that responsible business results in better business.”
On Friday, Preet Bharara, the U.S. attorney for the Southern District of New York, said Novartis' alleged conduct was especially egregious in light of the prior corporate integrity agreement Novartis reached with the HHS inspector general's office in September 2010, an 80-page document (PDF) that stipulates strict ethics programs and requires dozens of company executives to certify the effectiveness of those efforts.
“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,” Bharara said in a news release.
The integrity agreement says that a “repeated or flagrant violation” of the terms gives the HHS inspector general's office the power to exclude the company from selling drugs to Medicare.
However, former federal prosecutor Michael Clark, who now works as an attorney with the firm Duane Morris, said government officials were more likely to try to exclude Novartis executives rather than the company itself because Medicare patients likely rely on Novartis' drugs.
“You have to balance the public policy of what happens if you exclude a company, and what happens to the drug … There are some pretty knotty issues there,” Clark said. But “people who are in a position of control at Novartis who didn't stop this from happening could be at risk of exclusion from Medicare.”
Clark said he wasn't aware of any drug company that had ever been excluded from Medicare. However, OIG officials have made repeated statements about going after executives at pharmaceutical companies using the “responsible corporate officer doctrine,” which holds executives accountable for corporate wrong-doing, even when it can't be proven they directly oversaw it or even knew it was happening.
In the past few years, officials at the HHS inspector general's office have excluded executives at drugmaker Purdue Pharma and devicemaker Synthes, which is today owned by Johnson & Johnson. The OIG also announced plans to exclude an executive at Forest Laboratories in 2011, but later dropped that effort without explaining why.
Novartis, however, maintains that it did nothing wrong.
Rebutting the case announced Friday, the company said that physician-speaker programs are a customary practice in the industry intended to inform doctors about appropriate uses of its drugs. Novartis “invests significant time and resources to help ensure these programs are conducted in an ethical and responsible manner,” the company statement said. “We are dedicated to doing it right.”
And regarding the case filed Tuesday, the company said its rebates to pharmacies were “customary, appropriate and legal,” and that the government's legal theory was not only wrong, but could undermine discounts that government healthcare programs receive for some drugs.
Novartis “disputes the USAO's claims in both cases and will defend itself in these litigations. We look forward to presenting the facts in these cases to the court,” the statement said.
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