Novartis $370 Million Medicaid Fraud Settlement - Alleged Kickback Scheme on High-priced Prescription Drugs

USA Today

Novartis Pharmaceuticals has agreed to pay $370 million dollars after admitting responsibility for offering kickbacks to pharmacies that consistently recommended high-price prescription drugs Exjade and Myfortic. Novartis has simultaneously agreed to forfeit $20 million of proceeds from the scheme.

These unlawful practices were brought to light by whistleblower David Kester, a Novartis Area Sales Manager, who kickstarted the investigation by filing a lawsuit under the False Claims Act while still employed at Novartis. Kester resigned a year and a half later, right before his allegations became public.

The settlement resolves both federal and multiple state False Claims Act allegations, as well as claims under the federal civil forfeiture statute. Two previous settlements in the lawsuit ended with specialty pharmacies, Bioscrip, Inc. and Accredo Health Group agreeing to pay $75 million. 

Whistleblower Alleged Kickbacks to Pharmacies on Medicaid & Medicare Billing

According to the lawsuit, Novartis committed fraud against both Medicare and Medicaid by offering illegal kickbacks to specialty pharmacies, so that they would recommend two of Novartis’ specialty medications to both physicians and patients: The medications involved in the scheme were the oncology medication Exjade, and Myfortic, an immunosuppressant used after organ transplants.

This type of kickbacks are illegal, because they may lead to patients taking unnecessary or unsuitable medications. Needless to say, the practice is strictly prohibited when it comes to Medicaid and Medicare covered prescriptions. The kickback scheme presumably meant sizable profits for Novartis, as the price of a monthly refill for the drugs in question can go as high as $11,000.

In a statement, Mr. Kester thanked everyone “who joined this case and stood up for patients with life threatening diseases,” and expressed his sympathy for the affected parties, “These patients and their caretakers are already overwhelmed by their diseases and any advice they receive from any clinician, including a pharmacy clinician, needs to be in the patient’s best interest and not tainted by outside influence. This case took almost 4 years and was not easy, but I hope this settlement brings clarity to how the healthcare industry should interact with pharmacies.”

Prosecutors Claim Pharmacies Influenced to Manipulate Patients by Novartis

Kester has also pointed out that he does not believe that all the health professionals involved were aware of Novartis` dealings with pharmacies: "I believe many of my customers, who were the physicians and nurses treating patients with life-threatening diseases, did not fully understand the relationships between the specialty pharmacies and Novartis."

On the other hand, prosecutors said that Novartis had created a special, closed distribution network called EPASS with select pharmacies. The retailers were then allegedly required to convince patients to continue taking certain drugs, by downplaying their associated risks and side effects.

On behalf of one of over 40 states involved in the lawsuit, Manhattan U.S. Attorney Preet Bharara commented: “This is the third substantial settlement in connection with Novartis’s scheme to use kickbacks to co-opt healthcare providers’ independence...Novartis gave kickbacks to influence specialty pharmacies to provide patients one-sided advice about Exjade, without disclosing the drug’s serious side effects, and to recommend switching patients who were using other drugs to Myfortic.  Novartis turned pharmacies that should have been disinterested healthcare providers into a biased salesforce for the drug-maker.”

As per the current legislation, David Kester could receive a whistleblower reward of over $100 million. The exact amount of the reward remains undisclosed at this time but the laws call for from 15 to 30% of amounts recovered from the corporation are to be paid to the first person to report the fraud and provide information helping the government stop the fraud and recover taxpayer money.


Medicaid Fraud Hotline: 888.742.7248 or Report Online