Novartis Accused of Paying Kickbacks for Exjade Sales

A Novartis AG (NOVN) unit was accused by the U.S. and a group of states of paying kickbacks to a specialty pharmacy to boost sales of Exjade, an iron-control drug that can cause kidney and liver failure.

U.S. District Judge Colleen McMahon in Manhattan today unsealed a complaint filed against Novartis Pharmaceuticals Corp. by the U.S., 26 states and the District of Columbia alleging that the drugmaker had paid kickbacks to BioScrip Inc. (BIOS) to encourage patients to refill prescriptions.

Separately, federal and state officials announced that the Elmsford, New York-based specialty pharmacy agreed to pay $15 million to resolve the claims against it.

Federal and state officials alleged that government health programs Medicare and Medicaid paid tens of millions of dollars in reimbursements based on false claims for the drug.

“This arrangement between Novartis and BioScrip was dangerous for patients and is against the law,” New York Attorney General Eric Schneiderman said in a statement. “Our lawsuit against Novartis and our agreement with BioScrip send a clear message: Drug companies cannot pay pharmacies to promote drugs directly to patients.”

Kickbacks, Calls

According to the complaint, Novartis paid kickbacks to BioScrip from February 2007 to May 2012 in the form of patient referrals and rebates. To hold up its end of the bargain, BioScrip made tens of thousands of calls to patients to try to convince them to keep taking the drug, federal and state officials alleged.

Julie Masow, a spokeswoman for Basel, Switzerland-based Novartis, said in an e-mailed statement that the company disputes the allegations in the complaint related to its interactions with BioScrip and intends to defend itself.

The company “is dedicated to improving patient health and supports patient medication adherence programs,” including outreach by pharmacies, Masow said.

Exjade was approved by the U.S. Food and Drug Administration in November 2005 to treat chronic iron overload due to blood transfusions, according to the complaint. In January 2010, the agency required the drug to feature a “black box” warning highlighting the potential for kidney failure, liver failure and gastrointestinal hemorrhage that in some cases were fatal, according to the complaint.

Increasing Refills

Novartis wanted to increase the refills of the drug because “its own market research had shown that a significant percentage of physicians and patients were opting to discontinue Exjade therapy” because of side effects, the officials said in the complaint.

In late February 2007, Novartis told BioScrip that because it generated lower levels of refills compared with other pharmacies, it had been placed on a “performance improvement plan,” according to the complaint.

Novartis “expects that the specialty pharmacies it works with conduct vital patient outreach in a manner wholly consistent with NPC’s commitment to patient care,” Masow said. “BioScrip reached out to patients using its own protocols to provide education, counseling and information about proper administration of the medicine and to fulfill prescriptions that have been prescribed by a patient’s treating physician.”

Officials are seeking triple damages against Novartis and civil penalties under the False Claims Act.

The case is ABC v. DEF, 1:11-cv-08196, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Christie Smythe in federal court in Brooklyn, New York at

csmythe1@bloomberg.net

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

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