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Novartis Treated Doctors to Fishing, Hooters Outings, U.S. Says

Novartis AG (NOVN) was sued by the U.S., for the second time this week, for allegedly paying kickbacks to increase prescription-drug sales.

Novartis plied physicians with expensive dinners, speaker fees, fishing trips and outings at Hooters restaurants to get them to increase prescriptions of the company’s drugs, the U.S. said in a complaint filed yesterday in Manhattan federal court. Federal health care programs were forced to pay millions of dollars for kickback-tainted claims as a result, the U.S. said.

The government intervened in a private False Claims Act suit filed in 2011, alleging that the Basel, Switzerland-based drug maker violated the Anti-Kickback Statute to increase sales of two of its hypertension drugs, Lotrel and Valturna, and its diabetes drug Starlix. The suit seeks triple damages and civil penalties.

“Novartis corrupted the prescription drug dispensing process with multimillion-dollar ‘incentive programs’ that targeted doctors who, in exchange for illegal kickbacks, steered patients toward its drugs,” Manhattan U.S. Attorney Preet Bharara said in a statement yesterday. “Novartis reaped dramatically increased profits on these drugs, and Medicare, Medicaid and other federal health-care programs were left holding the bag.”

Novartis was also ordered by a jury this week to pay more than $2.1 million in a trial over its Aredia and Zometa bone-strengthening drugs.

Rebates, Discounts

On April 23, Bharara’s office sued Novartis for allegedly paying kickbacks, disguised as rebates and discounts, to at least 20 pharmacies for switching patients to its immunosuppressant drug Myfortic.

Julie Masow, a Novartis spokeswoman, said the company disputes both U.S. suits and will defend itself.

“As a leading healthcare company, NPC is committed to high standards of ethical business conduct and regulatory compliance in the sale and marketing of our products,” she said yesterday in an e-mail. The physician speaker programs targeted in yesterday’s lawsuit are an accepted practice in the industry, she said.

The rebates and discounts cited by the government in the Myfortic case are “a customary, appropriate and legal practice” and the kickback lawsuit is “inconsistent with law and policy in this area,” Masow said.

2010 Settlement

In September 2010, Novartis agreed to pay $422.5 million to resolve criminal and civil charges that it paid kickbacks and illegally promoted drugs for unapproved uses. As part of the settlement, the company signed a five-year corporate integrity agreement with the Department of Health and Human Services, which required reforms including a compliance program relating to promotional activities.

The 80-page agreement provides that Novartis may be barred from participation in federal health care programs, including Medicare and Medicaid, for a “material breach.”

On April 24, Novartis was told by a jury in federal court in Los Angeles to pay more than $2.1 million to a cancer survivor who blamed the drugmaker’s Aredia and Zometa for damaging her jaw.

Jurors found that Novartis officials failed to properly warn Adriann Georges and her doctors about the drugs’ health risks and ordered the company to pay compensatory damages, according to court filings. Georges contends the drugs ate away her jaw as she struggled through breast-cancer treatments.

“We are disappointed and disagree with the jury’s verdict, and we are reviewing our appellate options in this case,” Masow said in a phone interview yesterday.

The case filed yesterday is U.S. v. Novartis Pharmaceuticals Corp., 11-cv-00071, U.S. District Court, Southern District of New York (Manhattan).

The Los Angeles case is Georges v. Novartis, 06-cv-05207, U.S. District Court, Central District of California (Los Angeles).

To contact the reporter on this story: Bob Van Voris in New York at rvanvoris@bloomberg.net

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

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