Novartis Accused Of Providing Kickbacks To Pharmacies (NYSE:NVS)

novartisIn New York, federal prosecutors filed a lawsuit accusing Novartis of providing illegal kickbacks to pharmacies. The kickbacks took the form of discounts and rebates and were intended to cause the pharmacies to promote use of one of the company’s drugs. The suit began as a whistle-blower lawsuit that remains under seal, as does the identity of the whistle-blower.

The lawsuit was filed in Federal District Court in Manhattan. The Novartis drug involved in the dispute is called Myfortic and is an immune suppressant used to help prevent the rejection of transplanted kidneys by the patient’s body. Competition for the drug includes the Roche drug CellCept and generic versions of CellCept.

The lawsuit alleges that Novartis promised rebates and discounts to 20 or more pharmacies for persuading doctors to switch patients to Myfortic from CellCept or keeping patients on Myfortic after the cheaper generic versions of the drugs reached the market. Preet Bharara, the United States attorney for the Southern District of New York, said in a statement, “Using the lure of kickbacks disguised as rebates, Novartis co-opted the independence of certain pharmacists and turned them into salespeople for one of its drugs.”

Pharmacies make a profit when the amount they are paid by patients, or their insurers, for a drug exceeds what they have paid to purchase the drug from the manufacturer. A pharmacy’s profit increases when a manufacturer gives them a discount on the drug. The lawsuit claims that Medicare and Medicaid paid tens of millions of dollars in claims for Myfortic that were “tainted” by the kickbacks.

The suit claims that Novartis targeted particularly influential pharmacies that could earn tens or hundreds of thousands of dollars in rebates. Concealing any disclosures of the financial inducement the pharmacy was receiving from Novartis, the pharmacies presented their advice to doctors to use Myfortic as solely professional recommendations. Novartis released in a statement saying that it disputed the claims made by the government and would defend itself against the allegations.