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Novartis Pays Over $642 Million to Settle FCA Allegations

On July 1, 2020, the Department of Justice (“DOJ”) announced that Novartis Pharmaceutical Corporation (“Novartis”), a New Jersey-based pharmaceutical company, agreed to pay over $642 million in separate to resolve alleged violation of the False Claims Act (“FCA”), 31 U.S.C. §§ 3729–3733. The settlement resolves allegations that Novartis made improperly payments to Medicare patients and prescribing physicians to promote Novartis’s drugs, Gilenya and Afinitor.

The FCA allows private citizens (known as whistleblowers or relators) to bring lawsuits on behalf of the Government against entities suspected of misusing Government funds. The Anti-Kickback Statute (“AKS”), 42 U.S.C. § 1320a–7b(b), is a criminal law that prohibits anyone from offering or paying, directly or indirectly, kickbacks (“anything of value”) to induce referrals of items or services covered by Medicare, Medicaid, and other federally funded programs. This prohibition covers both improper payments to providers and prescribing physicians and the improper payment of patients’ copay obligations.

Together, the FCA and AKS serve as cornerstones in safeguarding integrity within government programs, particularly in healthcare. The FCA acts as a broad net, while the AKS targets specific practices within healthcare. Violations of the AKS often trigger the FCA, creating a powerful dual enforcement mechanism. This underscores the importance of ethical conduct in government programs, particularly healthcare programs, where financial incentives can have far-reaching consequences.

Novartis, a giant in the pharmaceutical industry, tackles serious diseases with treatments fueled by hefty research and development spending. This translates to a wide range of drugs reaching millions worldwide, but also raises concerns about profit motives and potential ethical compromises. The Novartis drugs implicated in these settlements are Gilenya, used in the treatment of relapsing forms of multiple sclerosis, and Afinitor, used in the treatment of advanced renal cell carcinoma and progressive neuroendocrine tumors of pancreatic origin.

The $642 million dollar settlement encapsulates two different claims made against Novartis. The first settlement concludes accusations that the company skirted the law by using three foundations to secretly cover Medicare copays for patients taking Gilenya and Afinitor. Novartis reached a settlement of $51.25 million out of the total $642 million settlement to settle the allegations of improper copay payments for their medications.

The second settlement, initially brought by former Novartis sales representative and Plaintiff-Relator Oswald Bilotta, brings closure to an alleged scheme where Novartis offered doctors improper financial inducements known as kickbacks to prescribing the Novartis drugs Lotrel, Valturna, Starlix, Tekturna, Tekturna HCT, Tekamlo, Diovan, Diovan HCT, Exforge, and Exforge HCT. Novartis agreed to pay $591 million, plus $38.4 million in asset forfeiture, to resolve claims under the FCA and Civil Asset Forfeiture Statute related to alleged kickbacks to doctors for prescribing Novartis medications. Although the settlement does not give a true determination of liability, as is common with these types of cases, Novartis made extensive factual admissions and conceded to significant curbs on future speaker programs, including considerably lower spending allowances.

This settlement agreement concludes the litigation entitled United States ex rel. Bilotta v. Novartis Pharmaceuticals Corp., case number 11-cv-0071-PGG, brought in the U.S. District Court for the Southern District of New York.

The legal team at Miller Shah LLP has extensive experience representing whistleblower matters. If you have any questions regarding this subject or this post, please contact Bruce D. Parke (bdparke@millershah.com) or Alec Berin (ajberin@millershah.com). The firm can also be reached toll-free at (866) 540-5505.

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