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Preet Bharara, the United States Attorney for the Southern District of New York, and Ronald T. Hosko, the Assistant Director of the Federal Bureau of Investigation, Criminal Investigative Division (“FBI”), announced today that the United States has filed additional civil healthcare fraud claims in Manhattan federal court against NOVARTIS PHARMACEUTICALS CORP. (“NOVARTIS”) and BIOSCRIP, INC. (“BIOSCRIP”). The Government’s Amended Complaint seeks treble damages and civil penalties under the False Claims Act against NOVARTIS and BIOSCRIP for NOVARTIS providing kickbacks, in the form of patient referrals and in the guise of rebates, to BIOSCRIP in exchange for BIOSCRIP recommending refills to Exjade patients. The lawsuit alleges that, as a result of this kickback scheme, Medicare and Medicaid have paid tens of millions of dollars in reimbursements based on false, kickback-tainted claims for Exjade shipped by BIOSCRIP.
Simultaneous with the filing of the Amended Complaint, U.S. District Judge Colleen McMahon approved a settlement to resolve the United States’ claims against BIOSCRIP. Under that settlement, which takes into account BIOSCRIP’s limited financial resources, BIOSCRIP (i) agrees to pay $11,685,705.43 to the United States; (ii) admits numerous facts concerning its relationship with NOVARTIS; and (iii) agrees to cooperate with the United States in the prosecution of the claims against NOVARTIS. BIOSCRIP has also agreed in principle to pay $3.31 million to a group of States to settle the States’ claims based on the same alleged conduct.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, Novartis is caught having orchestrated yet another scheme whereby it used the lure of kickbacks to co-opt a healthcare providers’ independence and, in this case, turned pharmacy employees at BioScrip into salespeople for Exjade. By allegedly having BioScrip promote refills under the guise of purported ‘counseling’ and ‘education,’ Novartis caused patients to receive one-sided advice that did not discuss Exjade’s serious, potentially life-threatening, side effects. Further, by hiding this illegal quid pro quo from federal healthcare programs, Novartis caused the public to pay tens of millions of dollars for kickback-tainted drugs.”
FBI Assistant Director Ronald T. Hosko said: “Investigations such as these are a high priority for the FBI and we will aggressively pursue providers that boost their profits at the expense of Medicare and other government programs. Due to the potential impact to the nation’s health care system and to the public from these types of multifaceted schemes, we have created a centralized team to provide nationwide support to our field offices called the Major Provider Response Team. The FBI is committed to working with our partners in these types of investigations and appreciates the public’s involvement in the process.”
According to the allegations contained in the Amended Complaint filed today in Manhattan federal court:
NOVARTIS markets and manufactures Exjade, an iron chelation drug approved for use by patients who have iron overload resulting from blood transfusions. Between February 2007 and May 2012, NOVARTIS orchestrated a scheme whereby it offered kickbacks, in the form of patient referrals and under the guise of rebates, to BIOSCRIP, a specialty pharmacy, in exchange for BIOSCRIP increasing its Exjade refills through biased recommendations to patients.
BIOSCRIP was part of a Novartis-created exclusive distribution network for Exjade, and through this network, Novartis was able to refer Exjade patients to particular pharmacies within the network. In order to obtain greater numbers of patient referrals and rebates, BIOSCRIP, in coordination with NOVARTIS, implemented a program of calling patients to recommend Exjade refills or to get patients who stopped ordering Exjade refills to resume ordering them.
NOVARTIS and BIOSCRIP promoted these calls as part of an effort to offer clinical “counseling” or “education” to Exjade patients. In fact, however, the real purpose behind this call program was to obtain more refill orders so that Novartis could increase its Exjade sales and meet its national Exjade sales target and BIOSCRIP, in turn, could get more patient referrals and higher rebates. Thus, the BIOSCRIP employees making those calls to Exjade patients emphasized the importance of getting refills, but ignored Exjade’s serious, potentially life-threatening side effects, such as kidney failure and gastrointestinal hemorrhage. Indeed, according to a former BIOSCRIP supervisor, the incentives offered by NOVARTIS caused BIOSCRIP to focus exclusively on getting Exjade patients to order refills, rather than caring for these patients. This Exjade scheme violated the federal anti-kickback statute, which prohibits the offer or payment of remuneration to induce the purchase or recommendation of any drug or service covered by Medicare, Medicaid, or another federal healthcare program.
By orchestrating this scheme, NOVARTIS and BIOSCRIP further caused pharmacies to submit tens of thousands of claims to Medicare and Medicaid, resulting in those programs paying out tens of millions of dollars in reimbursements based on false claims tainted by kickbacks.
Further, as part of its settlement with the United States, BIOSCRIP made extensive factual admissions, including, among other things, that:
The additional claims in the Amended Complaint seek treble damages and penalties under the False Claims Act for the tens of millions of dollars in reimbursements that Medicare and Medicaid paid for Exjade shipments that resulted from the kickback scheme involving NOVARTIS and BIOSCRIP. In addition, the Government seeks compensatory damages under the common law for the tens of millions of dollars for the profits that NOVARTIS and BIOSCRIP obtained as the result of Medicare and Medicaid reimbursements for Exjade.
The allegations of fraud stated in the Complaint were first brought to the attention of federal law enforcement by a whistle-blower who filed a lawsuit under the False Claims Act. The False Claims Act permits the Government to recover up to three times the amount of damages incurred by the United States, plus civil penalties ranging from $5,500 to $11,000 per violation. Private parties who have knowledge of fraud committed against the Government may file suit on behalf of the Government and share in any recovery. The United States may then intervene and file its own lawsuit for treble damages and penalties, as it did in this case.
Mr. Bharara praised the investigative work of the FBI’s Major Provider Response Team, HHS-OIG, and the Medicaid Fraud Control Units for New York, Washington, and Ohio. He also thanked the Commercial Litigation Branch of the U.S. Department of Justice’s Civil Division in Washington D.C., for its extraordinary assistance in this case.
The case is being handled by the Office’s Civil Frauds Unit. Mr. Bharara established the Civil Frauds Unit in March 2010 to bring renewed focus and additional resources to combating healthcare and other types of frauds. Assistant U.S. Attorneys Li Yu, Rebecca C. Martin, and Ellen M. London are in charge of the case.