Arkansas will receive over $612,000, the largest Medicaid fraud settlement of 2015


Arkansas Attorney General Leslie Rutledge today announced that she has reached a settlement with Novartis Pharmaceuticals Corp. to resolve kickback claims. Novartis is accused of providing kickbacks to certain specialty pharmacies in exchange for recommending the drug Exjade to Medicaid and Medicare patients.

Under the settlement, Novartis has agreed to pay $390 million to the U.S. and more than 40 States. Arkansas is set to receive $612,961.60 as part of the settlement.

“Novartis used contests and threatening tactics to encourage select pharmacies to provide inaccurate information to patients to encourage the use of a drug they were marketing,” said Attorney General Rutledge. “Patient health and well-being should always be the top priority for pharmaceutical companies and pharmacies. This settlement, which holds Novartis accountable, is the largest Medicaid fraud settlement of the year and will be deposited into the Arkansas Medicaid Program Trust Fund.”

Novartis, which is headquartered in New Jersey, is a subsidiary of the Swiss pharmaceutical company Novartis AG. In late 2005, the drug Exjade was approved by the U.S. Food and Drug Administration for the treatment of chronic iron overload due to blood transfusions; however, after launching the drug, Novartis marketed Exjade as a treatment for patients with a number of underlying conditions that affect blood cells or bone marrow, including beta-thalassemia, sickle cell disease and myelodysplastic syndromes.

Between 2007 and 2012, Novartis allegedly paid kickbacks to three specialty pharmacies – BioScrip, Accredo and US Bioservices. The pharmacies were selected by Novartis to be part of a closed distribution network through which most Exjade prescriptions in the U.S. were filled. The scheme began after Exjade failed to meet Novartis’ internal sales goals and Novartis discovered that refill rates for Exjade were lower than anticipated. Novartis created a distribution network, which it called EPASS, that allowed them significant control over how many patient referrals each pharmacy received. The pharmacies would exaggerate the dangers of not taking Exjade, emphasize the benefits and downplay the severity of the side effects. The pharmacies billed themselves as specialty pharmacies that could arrange for these shipments and run educational programs for patients.

In the course of the scheme, Novartis pressured the specialty pharmacies by threatening to exclude them from the EPASS network or to reduce the number of patient referrals they received. Novartis also set up a contest in which the pharmacy that kept patients on Exjade the longest would receive additional patient referrals. In addition, Novartis also paid rebates to the specialty pharmacies, which made each patient referral valuable and incentivized the need to encourage patients to stay on the drug. The contest and the rebates were never disclosed to Exjade patients or their caregivers.

Despite concerns from their own legal team, Novartis went forward with the contest after it was determined that the benefits of the scheme outweighed the risk of violating the federal Anti-Kickback Statute.

To appease Novartis, all of the pharmacies put together plans to increase refill rates that included nurses placing phone calls to patients or caregivers. One pharmacy, BioScrip, told Novartis that BioScrip would make claims about Exjade preventing organ damage that the FDA had told Novartis it should not make in Novartis’ promotional materials. Another pharmacy, Accredo, showed Novartis a call protocol that directed nurses to tell patients it was “extremely important” to take Exjade and to tell patients about the common side effects of the drug but not the more severe side effects, such as kidney or liver problems.

Novartis admitted many aspects of the scheme in a stipulation filed in federal court in connection with the settlement. Among other things, Novartis admitted that it indicated to BioScrip that it might terminate its distribution agreement or reduce the number of patient referrals it received. Similarly, Novartis admitted that it told Accredo and US Bioservices that Novartis might reduce the number of patient referrals that they received and “pushed” them to implement plans in which nurses would call patients and encourage them to stay on Exjade. Novartis also admitted that it used the scorecard results to allocate EPASS patients to the specialty pharmacies.

The settlement also resolved allegations that Novartis paid kickbacks to other specialty pharmacies to promote the drug Myfortic to doctors. Myfortic is an immunosuppressant that is approved for use in kidney transplant patients.

BioScrip Inc. and Accredo Health Group Inc. have already agreed to pay $15 million and $60 million, respectively, to resolve claims that they accepted kickbacks from Novartis to promote Exjade.

The settlements were negotiated by a team of States led by representatives from the Offices of the Attorneys General for California, Indiana, New York, Oklahoma, Washington and Wisconsin.

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