Pharmaceuticals to Resolve Kickback Allegations
Attorney General George Jepsen, Chief State’s Attorney Kevin T. Kane and state Department of Social Services (DSS) Commissioner Roderick L. Bremby announced today that Connecticut has joined a global settlement with Novartis Pharmaceuticals Corporation ("Novartis"). The settlement resolves allegations that Novartis provided kickbacks to certain specialty pharmacies in exchange for recommending the drug Exjade to Medicaid and Medicare patients. Novartis has paid the states and the federal government $390 million to resolve these allegations.
In late 2005, Exjade was approved by the U.S. Food and Drug Administration ("FDA") for the treatment of chronic iron overload due to blood transfusions. After launching the drug, Novartis marketed Exjade as a treatment for patients with a number of underlying conditions that affect blood cells or bone marrow, including beta-thalassemia, sickle cell disease, and myelodysplastic syndromes.
The states alleged that between 2007 and 2012 Novartis paid kickbacks to three specialty pharmacies – BioScrip, Accredo and US Bioservices. These pharmacies were selected by Novartis to be part of a closed distribution network through which most Exjade prescriptions in the United States were filled. Novartis created the distribution network, which it called EPASS and had significant control over how many patient referrals each pharmacy received, the states alleged.
The pharmacies shipped most Exjade prescriptions to patients by mail and were supposed to call patients to set up the shipments and obtain consent for refills. The pharmacies billed themselves as specialty pharmacies that could arrange for these shipments and run educational programs for patients.
Novartis is also alleged to have induced the pharmacies to exaggerate the dangers of not taking Exjade, emphasize Exjade's benefits, and downplay the severity of Exjade's side effects. The alleged scheme began after Exjade failed to meet Novartis' internal sales goals and Novartis discovered that refill rates for Exjade were lower than anticipated.
The portion of the settlement attributable to the state and federal shares of Connecticut’s Medicaid program from Novartis is $3,135,682.37, of which the state share is $1,621,499.47; there is also a reserve for a relator share to be deducted from the state share in the amount of $301,057.55. There will also be a state-only supplement of $195,759.54.
“Scheming to incentivize pharmacies to increase product sales by deceiving their patients will not be tolerated,” said Attorney General Jepsen. “We take allegations of kickbacks very seriously, and we will continue to work to hold accountable those who don’t put their patients first. I thank the Chief State’s Attorney and the Department of Social Services for their continued partnership in these matters.”
Chief State’s Attorney Kevin T. Kane expressed his appreciation to the Medicaid Fraud Unit in the Office of the Chief State’s Attorney, the Office of the Attorney General and the Department of Social Services for their continued collaboration to protect the integrity of the Medicaid program. “With limited resources available to help those who are truly in need, it is critical that we get the most from each tax dollar,” Kane said.
DSS Commissioner Roderick L. Bremby said, “This settlement again illustrates the need for constant vigilance in protecting the integrity of Medicaid nationwide. Just last month, we participated in another settlement announcement involving a pharmaceutical company. While we do not believe this exemplifies providers as a whole, unacceptable practices need to be rooted out and compensation obtained for taxpayers. At DSS, we are proud to partner with the Attorney General’s Office, the Chief State’s Attorney’s Office and federal agencies in combatting fraud and abuse in publicly-funded health coverage programs.”
The settlement also resolved allegations that Novartis paid kickbacks to other specialty pharmacies to promote the drug Myfortic to doctors. Myfortic is an immunosuppressant that is approved for use in kidney transplant patients.
In the course of the scheme, Novartis is alleged to have pressured the specialty pharmacies by threatening to exclude them from the EPASS network or to reduce the number of patient referrals they received from EPASS. In addition, Novartis allegedly set up a contest in which the pharmacy that kept patients on Exjade the longest would receive additional patient referrals from EPASS. The contest winner was determined by scorecards created by Novartis that were sent to each of the three pharmacies. Novartis also paid rebates to the specialty pharmacies, which made each patient referral valuable and incentivized the specialty pharmacies to encourage patients to stay on Exjade. The contest and the rebates were not disclosed to Exjade patients or their caregivers.
The settlement stems from a whistleblower lawsuit, U.S. ex rel. Kester, et al. v. Novartis Pharmaceuticals Corporation, et al., No. 11-CIV-8196, which was filed in the United States District Court for the Southern District of New York. Two of the specialty pharmacies named as defendants in the case, BioScrip, Inc. and Accredo Health Group, Inc., have already agreed to pay $15 million and $60 million, respectively, to resolve claims that they accepted kickbacks from Novartis to promote Exjade.
Novartis, which is headquartered in East Hanover, New Jersey, is a subsidiary of the Swiss pharmaceutical company Novartis AG.
Anyone with knowledge of suspected fraud or abuse in the healthcare system is asked to contact the Medicaid Fraud Control Unit in the Office of the Chief State’s Attorney at 860-258-5986 or by email at firstname.lastname@example.org; the Attorney General’s Antitrust and Government Program Fraud Department at 860-808-5040 or by email at email@example.com; or the DSS fraud reporting hotline at 1-800-842-2155 or by email at firstname.lastname@example.org.