Jefferson City, Mo. – Attorney General Chris Koster announces that the state of Missouri reached an agreement in principle to settle kickback claims against Novartis Pharmaceuticals Corporation. The settlement will resolve allegations that Novartis provided kickbacks to certain specialty pharmacies in exchange for recommending the drug Exjade to Medicaid and Medicare patients. Under the settlement, Novartis has agreed to pay $390 million to the United States and more than 40 states. Missouri will receive approximately $1.7 million under the settlement.
In addition, 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. Missouri’s share of those settlements is approximately $54,000 and $289,000, respectively.
Novartis, which is headquartered in East Hanover, New Jersey, is a subsidiary of the Swiss pharmaceutical company Novartis AG. 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 settlement resolves allegations that between 2007 and 2012 Novartis paid kickbacks to three specialty pharmacies – BioScrip, Accredo, and US Bioservices. The 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 therefore had significant control over how many patient referrals each pharmacy received. 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.
In court filings, the government alleged that Novartis paid kickbacks to the pharmacies to corrupt the pharmacies’ interactions with patients by inducing the pharmacies to exaggerate the dangers of not taking Exjade, emphasize Exjade’s benefits, and downplay the severity of Exjade’s side effects. The scheme began after Exjade failed to meet Novartis’ internal sales goals and Novartis discovered that refill rates for Exjade were lower than anticipated.
In the course of the scheme, Novartis 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 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.
“Pharmaceutical companies necessarily have strict guidelines they must follow in marketing their drugs,” Koster said. “Novartis clearly crossed the line by using incentives and threats for pharmacies to increase sales of one of its drugs.”
Koster encourages individuals to report suspected Medicaid fraud to his office. State law provides that a whistleblower may be entitled to 10 percent of any Medicaid fraud money recovered as a result of their tip. Missourians can report suspected Medicaid provider fraud and abuse through the Attorney General’s Medicaid Fraud Hotline at 800-286-3932 or online at ago.mo.gov.
