US Accuses Novartis of Providing Pharmacies Illegal Kickbacks

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The U.S. government has sued Europe’s biggest drug maker Novartis for alleged healthcare fraud, accusing it of providing kickbacks to U.S. clinics to switch patients from generic drugs to the company’s brand-name product.

In a civil-fraud lawsuit filed on Tuesday, U.S. prosecutors said Novartis used a programme of rebates and discounts to boost the sales of its immunosuppressant drug, Myfortic, in a scheme that resulted in Medicare and Medicaid paying out “tens of millions of dollars” in reimbursements based on false, tainted claims.

“Using the lure of kickbacks disguised as rebates, Novartis co-opted the independence of certain pharmacists and turned them into salespeople for one of its drugs,” U.S. attorney Preet Bharara said in a statement.

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The lawsuit alleges that since 2005, Novartis offered "performance" rebates and discounts to at least 20 U.S. pharmacies if they would persuade doctors to switch patients to Myfortic from cheaper, generic drugs.

"Hundreds, possibly thousands, of patients have undergone switches in their medication as a result of the recommendations from pharmacies that were based on undisclosed financial, rather than independent critical, considerations," according to the lawsuit.

Prosecutors say Novartis intentionally chose influential pharmacies which could earn tens or thousands of dollars in rebates.

In one alleged case, Novartis offered a Los Angeles pharmacy a "bonus" rebate of 5 percent of the pharmacy’s annual Myfortic sales, or several hundred thousand dollars, to switch as many as 1,000 patients to Myfortic.

None of the pharmacies however was named as a defendant in the lawsuit.

The kickback scheme has been highly lucrative for Novartis, according to the lawsuit, resulting in "rapid, sometimes exponential growth in Myfortic sales."

Myfortic sales in the U.S. reached $239 million in 2012, up 20 percent from 2011, according to Novartis’ annual report.

On Tuesday, Bharara called Novartis a "repeat offender," referring to a settlement of healthcare fraud charges based on kickbacks less than three years ago.

In 2010, Novartis paid $423 million to settle criminal and civil allegations that it illegally marketed the epilepsy drug Trileptal and paid kickbacks to doctors to prescribe its drugs.

The Switzerland-based Novartis said in a written statement it disputes the allegations and will defend itself in this litigation. The company said it is committed to ethical business conduct and regulatory compliance in its sales and marketing practices.

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