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Press Release

United States Sues Novartis Pharmaceuticals Corp. For Allegedly Paying Multi-Million Dollar Kickbacks To Doctors In Exchange For Prescribing Its Drugs

For Immediate Release
U.S. Attorney's Office, Southern District of New York
Suit Alleges Novartis Paid Kickbacks In The Forms Of Honoraria For Sham Speaker Programs And Expensive Entertainment, Resulting In Millions Of Dollars In Illegal Reimbursements From Federal Healthcare Programs

Preet Bharara, the United States Attorney for the Southern District of New York, and Stuart F. Delery, the Acting Assistant Attorney General for the U.S. Department of Justice’s Civil Division, announced today that the United States has filed a civil false claims lawsuit against NOVARTIS PHARMACEUTICALS CORP. (“NOVARTIS”). The Government’s Complaint seeks damages and civil penalties under the False Claims Act and under the common law for paying kickbacks to doctors to induce them to prescribe NOVARTIS pharmaceutical products that were reimbursed by federal health care programs. The lawsuit alleges that the payments violated the Anti-Kickback Statute (“AKS”) and, as a result of Novartis’s unlawful conduct, the Government paid false claims for reimbursement for Novartis pharmaceutical products. The Government intervened in part in an action before Judge Paul G. Gardephe filed by a whistleblower on January 5, 2011, under the qui tam provisions of the False Claims Act. This is the second lawsuit to be filed in the Southern District this month against NOVARTIS alleging illegal kickbacks. The U.S. Attorney’s Office sued NOVARTIS on April 23, 2013 for allegedly paying kickbacks to pharmacies that were disguised as rebates and discounts in exchange for the pharmacies switching patients on CellCept or a generic drug to NOVARTIS’s immunosuppressant drug, Myfortic. That suit is before Judge Colleen McMahon.

Manhattan U.S. Attorney Preet Bharara said: “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. 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. Healthcare fraud imposes tremendous costs and causes great harm to an already burdened healthcare system, and the government will not tolerate it. The widespread kickback fraud alleged in our two lawsuits against Novartis – which only a few years ago settled a False Claims Act case involving violations of the Anti-Kickback Statute based on illegal payments to doctors – makes us question whether Novartis is getting the message.”

Acting Assistant Attorney General Stuart F. Delery said: “Kickback schemes like those alleged in this case not only call into question the integrity of individual medical decisions, they raise the cost of health care for all of us. Patients deserve care based on a doctor’s sound medical judgment, not the doctor’s personal financial interest. The Department of Justice will continue to pursue companies that use improper incentives, like those alleged here, to promote their products.”

The following allegations are based on the Complaint filed today in Manhattan federal court:

NOVARTIS, a pharmaceutical company headquartered in East Hanover, New Jersey, is a subsidiary of NOVARTIS A.G., an international pharmaceutical company headquartered in Basel, Switzerland. From January 2001 through at least November 2011, NOVARTIS systematically violated the AKS, which prohibits the payment of remuneration to induce referrals of items or services covered by Medicare, Medicaid, and other federally-funded programs. Indeed, NOVARTIS violated its own internal policies concerning speaker programs, which require that the programs have an educational purpose and that slides about the company’s drugs be presented. NOVARTIS violated the AKS by paying doctors to speak about certain drugs, including its hypertension drugs Lotrel and Valturna and its diabetes drug Starlix, at events that were often little or nothing more than social occasions for the doctors. The payments and lavish dinners given to the doctors were, in reality, kickbacks to the speakers and attendees to induce them to write prescriptions for NOVARTIS drugs. In many instances NOVARTIS made payments to doctors for purported speaker programs that either did not occur at all or that had few or no attendees, and thousands of programs were held all over the country at which few or no slides were shown and the doctors who participated spent little or no time discussing the drug at issue.

Many speaker programs were also held in circumstances in which it would have been virtually impossible for any presentation to be made, such as on fishing trips off the Florida coast. No slides were shown on the boat. Other NOVARTIS events were held at Hooters restaurants.

In connection with these programs, NOVARTIS also frequently treated the doctors to expensive dinners that they hosted at high-end restaurants. For example, a July 5 dinner for three, including the speaker, at a Washington, D.C. restaurant cost $2,016, or $672 per person. NOVARTIS also paid a $1,000 honorarium to the speaker for this program. One of the two attendees had attended the same program a short time earlier. At another program held on Valentine’s Day in 2006, NOVARTIS paid $3,127, for a meal for three people at a West Des Moines, Iowa restaurant, or $1,042 per person.

NOVARTIS’s internal analyses show that speaker programs had a high return on investment in terms of the additional prescriptions for its drugs written by the doctors who participated in the programs, both as speakers and attendees, with the highest return arising from payments to doctors as “honoraria” for speaking. 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. According to NOVARTIS’s data, during the period from January 2002 through November 2011 it spent nearly $65 million and conducted more than 38,000 speaker programs for just three drugs: the hypertension drugs, Lotrel and Valturna, and the diabetes drug, Starlix. In the absence of a legitimate purpose for many of the programs, the payments were nothing more than kickbacks to the doctors that induced them to write prescriptions in violation of the AKS.

NOVARTIS was well aware that its speaker programs created opportunities to provide kickbacks to doctors. In September 2010, NOVARTIS entered into a settlement with the U.S. Department of Justice to settle False Claims Act lawsuits based in part on violations of the AKS due to illegal remuneration paid to doctors through such mechanisms as speaker programs, and signed a Corporate Integrity Agreement (“CIA”) with the U.S. Department of Health and Human Services Office of Inspector General agreeing to implement a rigorous compliance program.

Even after entering into the CIA, NOVARTIS’s compliance program was inadequate to prevent kickbacks from being paid in conjunction with NOVARTIS’s speaker programs. NOVARTIS did not adequately review its speaker program to determine whether the programs were being used for an illegitimate purpose. Furthermore, although many instances of speaker program abuse were reported to NOVARTIS, sanctions were generally mere slaps on the wrist. In some cases, sales representatives who violated NOVARTIS’s own speaker program policies were nevertheless promoted. Even after September 2010, NOVARTIS continued to conduct bogus speaker programs that were simply vehicles for paying kickbacks to doctors in the form of honoraria and expensive meals.

As a consequence of its violations of the AKS, NOVARTIS has caused the submission of numerous false claims for drugs to federal health care programs, including Medicare, Medicaid, TRICARE, and the Department of Veterans Affairs health care program, resulting in millions of dollars in reimbursements. Novartis’s unlawful conduct caused those false claims to be made to and paid by the federal health care programs.

The Complaint seeks treble damages and penalties under the False Claims Act for false claims for reimbursement for Lotrel, Valturna, and Stalix, as well as for other NOVARTIS cardiovascular drugs. In addition, the United States seeks damages under the common law.

Mr. Bharara thanked the Justice Department’s Civil Division and the Department of Health and Human Services, Office of Inspector General for their extraordinary assistance in this case.

The case is being handled by the United States Attorney’s Office’s Civil Frauds Unit. Mr. Bharara established the Civil Frauds Unit in March 2010 to bring renewed focus and additional resources to combating civil fraud.

Assistant U.S. Attorneys Heidi A. Wendel and Mara E. Trager are in charge of the case.

U.S. v. Novartis 2 Complaint
U.S. v. Novartis Relator 2nd Amended Complaint (11civ00071)

Updated May 15, 2015

Press Release Number: 13-153