The US subsidiary of pharmaceutical manufacturing giant Novartis has been hit with a lawsuit filed by the federal government, the second in just four days as US attorneys hone in on the company for a string of alleged infractions that now include paying kickbacks to individuals and companies in return for prescribing the company's medication in place of others'.
Novartis' week was already off to a bad start, having been accused by the US government of conducting fraud against the Medicare and Medicaid programs by paying millions to at least twenty pharmacies in return for those pharmacies switching their patients over to Novartis' immunosuppressant drug Myfortic.
Federal officials said those payments had been disguised as discounts and rebates, but were anything but, and violated the federal anti-kickback statute.
But a slew of new charged leveled on 26 April 2013 elevate both the size and scope of the company's kickbacks and malfeasance, if federal officials are to be believed.
"As alleged, Novartis corrupted the prescription drug dispensing process with multi-million dollar 'incentive programs' that targeted doctors who, in exchange for illegal kickbacks, steered patients toward its drugs," said US Attorney Preet Bhara, the same official responsible for filing suit against Novartis earlier in the week. "And for its investment, Novartis reaped dramatically increased profits on these drugs, and Medicare, Medicaid, and other federal healthcare programs were left holding the bag, doling out millions of dollars in kickback-tainted claims."
Bhara's allegations could be as damaging to the company's reputation as its bottom line. The Department of Justice's (DOJ) press statement explains that its investigation found speaker programs that paid lavish sums to treat doctors to dinners-payments like a $1,672-per-person dinner at a Washington, DC establishment.
DOJ official said their findings were relatively succinct: "In short, doctors increased the number of prescriptions they wrote when they were being paid by Novartis to speak about a drug. As a result, Novartis spent millions on speaker programs yearly." Those findings were backed up by the company's own internal analyses, officials added.
And if elite faire wasn't to the doctors' liking, Novartis apparently wasn't above taking them to Hooters, a chain of restaurants more renowned for its buxom waitresses than its cuisine.
Did Novartis Violate the Terms of its CIA?
But more than the hit to Novartis' reputation may be a potential violation of an agreement the company signed in 2010 known as a Corporate Integrity Agreement (CIA). The agreement was put into place explicitly to prevent the company from instituting the very kickbacks it is now charged with, officials said.
"In September 2010, Novartis entered into a settlement with the DOJ to settle False Claims Act lawsuits based in part on violations of the Anti-Kickback Statute (AKS) due to illegal remuneration paid to doctors through such mechanisms as speaker programs, and signed a corporate integrity agreement with the US Department of Health and Human Services (DHHS) Office of Inspector General (OIG) agreeing to implement a rigorous compliance program," DOJ recalled in its statement.
However, the program failed to stop the new programs because "No individual at the company was tasked with examining its speaker program data to determine whether the programs were used for an illegitimate purpose."
The DOJ is seeking damages of three times the expenses incurred to federal programs like Medicare, Medicaid and Tricare, though the exact amount remains unclear.
A Novartis spokeswoman said in a statement that the company disputed the characterization of its "promotional programs" and planned to defend itself against the charges in court.
Department of Justice Statement on Novartis