$642 Million Dollar Settlement Under The False Claims Act

October 8, 2020

In a massive whistleblower settlement , New Jersey Based Pharmaceutical company, Novartis Pharmaceuticals Corporation, on June 1, 2020, agreed to pay over $642 million in two separate claims under the False Claims Act (“FCA”) for provisions related to Medicare Fraud and kickbacks in violation of the Anti-Kickback statute.[1] The payments were made in the light of the Company’s alleged illegal use of three foundations as conduits to make the co-payments of Medicare patients taking the drugs Gilenya and Afinitor as well as the Company’s payments of kickbacks to doctors. This settlement is the result of the efforts of a private whistleblower whose share in the settlement is yet to be determined, however based on the FCA provisions the whistleblower award could be as high as a $192 million whistleblower award, but more likely around $128 million dollar whistleblower award which would represent 20% of the recovery. FCA, through its whistleblower or qui tam provisions, empowers private individuals and entities to report companies that seek to enrich themselves by causing a loss to public funds. A qui tam complaint through the False Claims Act must be filed with the use of a whistleblower law firm.

When a Medicare beneficiary obtains a prescription drug covered by Medicare, patients may be required to make a part payment through co-payment, co-insurance, or a deductible. Congress had included the option of co-payment under the Medicare program as a means to check the cost of health care, including the price which pharmaceutical managers can demand for their drugs. Novartis had allegedly resorted to illegal means to pay the co-pay obligations for patients who purchased their drugs. The drug, Gilenya was approved for treatment of relapsing forms of multiple sclerosis. In 2012, the Government alleged that Novartis had obtained information from its contractor that over 300 patients availing its free drug program for Gilenya would be eligible for the Medicare program in 2013. Subsequently, Novartis, along with the contractor, transferred the patients to Medicare Part D so that when the patients would fill prescriptions for the drug in the future, Novartis would be able to obtain revenue through the Medicare provisions, knowing fully well that the patients could not fully afford the co-pay. Novartis therefore, created a foundation to co-pay for the patients while simultaneously establishing a fund through the contractor and submit applications for such patients receiving the drug free of cost.

Novartis also sold Afinitor, a drug used as a second-line treatment for advanced Renal Cell Carcinoma (RCC) and as a treatment for progressive neuroendocrine tumors of pancreatic origin (PNET). The government also alleged that Novartis knew in donation year 2010, that it would be the only donor to an RCC co-pay assistance fund, which was operated by a charitable foundation. Subsequently, Novartis allegedly told the foundation that they were willing to donate to the fund on the condition that the definition of eligibility was narrowed to ensure a greater amount of co-pay assistance to support patients taking Afinitor, thereby disproportionately assisting those who purchase that drug, in comparison to its overall usage rate when compared to the other RCC drugs.

Further, in 2012, the government alleged that Novartis had asked another foundation to open a co-pay assistance fund for PNET patients, which they knew would only benefit patients taking Afinitor. This arrangement by Novartis to channel money for patients using its own drugs through other foundations undermines the very structure of the Medicare program.

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Noted whistleblower attorney Jason T. Brown, lead attorney in one of the best whistleblower law firms commented, “Once again this is an excellent result due to the hard work of the United States Attorney’s Office, a courageous whistleblower, and other solid whistleblower law firms.  When drug companies surreptitiously pay the co-pay for the patients, it impacts patient choice and at the very minimum has an appearance of impropriety.”  Mr. Brown of the firm Brown, LLC, also commented that whistleblower lawsuits have to be handled in the right way, and that his case was clearly handled very professionally by another whistleblower law firm. 

In the second matter, Novartis has also agreed to pay $ 591,442,008 as a settlement amount in furtherance of claims under the False Claims Act that it paid kickbacks to doctors, in order to encourage them to prescribe the use of several Novartis drugs, thereby acting in violation of the Anti-Kickback statute. This was done by Novartis under the garb of hosting fancy meals at restaurants, conducting several speaker programs and treating doctors with the best available alcohol. Novartis also forfeited $38.4 million under the Civil Asset Forfeiture Statute, while agreeing to impose strict limitations on any future speaker programs, including reductions on the amount of money spent on such programs.

Novartis has subsequently entered into a five-year Corporate Integrity Agreement (CIA) with the Department of Health and Human Services Office of Inspector General (HHS-OIG). This agreement limits the circumstances and format under which the speaker programs can take place. It also requires Novartis to implement measures to promote the independence from any patient assistance program to which it contributes, with a multi-faceted monitoring of Novartis’ operations, with the requirement of a compliance certificate of the executives and Board members.

It is critical for individuals aware of Medicare or Medicaid Fraud to speak with a whistleblower law firm. Whistleblower law firms who dedicate a portion of their practice to litigating whistleblower claims, like Brown, LLC, offer free consultations for whistleblower matters and are only paid if they win your case. If you know about system Medicare Fraud or Medicaid Fraud you should speak with a whistleblower lawyer right away to learn your rights.

[1]United States ex rel. Bilotta v. Novartis Pharmaceuticals Corp., No. 11-Civ.-0071-PGG (S.D.N.Y.).