Novartis Settles False Claims Act Cases and Pays $729 Million for Domestic Bribery Schemes
We have a new poster-child for a defective corporate culture of wrongdoing. Novartis has joined the exclusive club, along with Siemens, General Motors, Wells Fargo, and others in the misconduct Hall of Fame.
Within the space of two weeks, Novartis has settled FCPA violations for foreign bribery, and just recently, Novartis settled two separate cases in the United States for anti-kickback and False Claims Act violations.
Novartis now faces a significant challenge. Is it really prepared to address its culture problems, its record of misconduct and make the changes and commitment to right the ship, meaning to bring about a culture of compliance?
In the absence of real changes from the head of the organization on down, the likely answer will be a resounding “No.” So far, we have seen little accountability – no major changes in senior management, the board or senior legal or compliance teams. Until that happens, Novartis is likely to limp along – as we always say, time will tell.
The Foundations Scheme
In the first case, Novartis agreed to pay approximately $51 million to settle its illegal use of three foundations used to pay co-payments of Medicare patients taking Novartis’ drugs Gilenya and Afinitor. Novartis funneled money through three foundations as a ”kickback” intended to increase usage of its drugs by paying patients’ co-payment obligations.
Novartis’ Gilenya is used to treat relapsing multiple sclerosis (MS). Novartis developed a plan with a contractor to transition approximately 300 patients from Novartis’ free drug program to Medicare so that Novartis would receive payments from Medicare for Gilenya prescriptions. Novartis then developed a plan with a foundation to pay for the patients’ co-payments. Novartis made sure that the contractor and foundation coordinated the applications to the foundation for the patients so that Novartis’ funds were specifically assigned to the 300 Gilenya patients.
Novartis’ scheme included its sales of Afinitor, a second-line treatment for advanced renal cell carcinoma and a treatment for progressive neuroendocrine tumors of pancreatic origin. In 2010, Novartis learned it would be the only contributor to a charitable foundation for copay assistance for Afinitor treatment. Novartis told the foundation that it would be willing to donate money to the fund only if the eligibility definition was narrowed to ensure that Novartis’ drug would receive an increased amount of the copay assistance. The foundation agreed to the change and Novartis patients received a greater proportion of assistance in comparison to the overall usage rate of its drug, Afinitor.
Bribery Payments to Physicians
In the second matter, Novartis paid $591 million and agreed to forfeit $38 million to resolve Anti-Kickback and False Claims Act charges for paying bribes to doctors to prescribe approximately eleven Novartis drugs. Novartis also agreed to pay $48 million to settle State Medicaid claims.
Novartis’ pervasive and corrupt speaker program functioned as a bribery scheme to increase physician prescription of Novartis drugs. The scheme was known to and carried out with the full support and direction of top management at Novartis’ United States headquarters in New Jersey.
Novartis hosted tens of thousands of speaker programs and related events as so-called “educational events” when, in fact, the events were conduits to pay bribes to physicians. Novartis paid physicians honoraria for alleged lectures regarding a Novartis medication, but in fact, many of these programs were social events at lavish restaurants, wineries, golf clubs and other sports venues with little or no discussion about Novartis drugs. DOJ noted that Novartis even held 75 events at Hooters. Some of the events never even took place – the physician was paid a fee to induce the physician to increase prescriptions of Novartis drugs.
To attempt to provide cover for the illegal scheme, Novartis’ occasionally included “educational material” consisting of a few slides shown at each meeting, which were repeatedly shown to the same physician audience as a means to disguise the real purpose of the event.
Novartis sales representatives selected high-volume prescribers as speakers with the intent to influence them to write more prescriptions. If a physician failed to do so, Novartis sales representatives dropped the physician from the speaker program.
Corporate Integrity Agreement
Health and Human Services’ Office of Inspector General entered into a five-year corporate integrity agreement (“CIA”). The CIA requires Novartis to reduce the number of speaker programs and restricts the amount that can be paid for such programs. Interestingly, the CIA permits only remote speaker programs in order to reduce Novartis sales interactions with physicians.
Under the CIA, Novartis has to implement measures to promote independence from any patient assistance programs to which it contributes. To ensure compliance with the CIA, Novartis is required to implement a comprehensive monitoring program. Individual Novartis executives and Board members are required to provide regular compliance certifications.