Novartis to Resolve Texas, U.S. Eczema Drug Probe

Novartis AG (NOVN) agreed to pay $19.9 million to the U.S. and Texas in settlement of claims it unlawfully marketed Elidel, a topical cream used to treat eczema.

“Evidence uncovered by the state revealed that Novartis improperly urged physicians to prescribe Elidel to children under two years of age for purposes that had not been approved by the U.S. Food and Drug Administration,” Texas Attorney General Greg Abbott said today in a statement.

As a result, the state’s Medicaid program “overpaid” for those prescriptions, he said.

The company also failed to disclose known harmful side effects associated with the medicine, including a risk of cancer, according to the attorney general.

Julie Masow, a spokeswoman for Basel, Switzerland-based Novartis, acknowledged the accord in a statement e-mailed to Bloomberg News.

“We deny the allegations by Texas but are pleased to have this matter behind us,” Masow said. Novartis said it would sell global manufacturing and marketing rights to the medicine to Meda AB (MEDAA) for $420 million, in April of last year.

Medicaid is a joint state and federal program. Novartis’s payment will be divided among Texas, which will get $6.6 million, the U.S. and the whistle-blower who Abbott said uncovered the alleged conduct.

The U.S. Justice Department press office didn’t immediately respond to a voice-mail message seeking comment.

A copy of the settlement agreement obtained from Abbott’s office identifies the whistle-blower as Donald R. Galmines.

An attorney for Galmines, Jennifer Verkamp of Cincinnati’s Morgan Verkamp LLC, didn’t immediately respond to a telephone message seeking comment.

To contact the reporter on this story: Andrew Harris in Chicago at aharris16@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net