Feds sue 'repeat offender' Novartis in Myfortic kickback scheme
Novartis faces another round of kickback allegations. Federal prosecutors sued the Swiss drugmaker ($NVS), accusing it of offering "disguised" kickbacks to pharmacies for switching patients to one of its drugs. And switch they did, the prosecutors say: Thousands of transplant recipients stopped taking competitors' products to start using the Novartis immunosuppressant Myfortic, according to the suit.
The allegations themselves are familiar enough; the feds claim Novartis targeted at least 20 pharmacists with discounts and rebates. Aiming to capture market share from rival drugs, which include Roche's ($RHHBY) CellCept, the company granted cost cuts to pharmacies that switched patients to Myfortic. Novartis also allegedly rewarded pharmacies that kept patients from dropping Myfortic for another treatment. In one case, the company offered one Los Angeles pharmacist a "bonus" rebate of 5% of its annual Myfortic sales to switch 700 to 1,000 patients to the drug, the Justice Department says. But that pharmacist could have negotiated a higher rate; some pharmacies were allegedly paid 10% or 20% to amp up their Myfortic numbers.
"[U]sing 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. "By allegedly hiding this illegal quid pro quo ... Novartis caused the public to pay tens of millions of dollars for kickback-tainted drugs."
Bharara went on to add a less-common accusation: Novartis is a "repeat offender." The company settled another marketing investigation in 2010, agreeing to pay a $185 million criminal penalty and $237 million in civil penalties, or $422 million total. In that case, Novartis had been accused of paying kickbacks to doctors to persuade them to prescribe its blood pressure drugs Diovan, Exforge and Tekturna. The settlement deal falls slightly short of FiercePharma's top 11 ranking.
And part of that settlement was a 5-year Corporate Integrity Agreement, as usual in these cases. The company agreed to set up a variety of programs to make sure it stayed within the marketing lines, and promised to behave. That was about three years ago.
If Novartis violated that agreement, it could face higher-than-usual criminal penalties. When Pfizer ($PFE) inked its most recent settlement with the Justice Department in 2009, prosecutors spanked the company for repeating history--and levied a higher criminal penalty because of it. The $1.3 billion fine was the biggest criminal penalty in history. The company had made a $430 million deal several years previously, to settle charges that it mismarketed its epilepsy drug Neurontin. Now, Pfizer has set aside $491 million to cover allegations of kickbacks and other marketing violations related to its own transplant drug, Rapamune.