Understanding the RACs and FCAs
Knicole C. Emanuel Esq.
December 4, 2024
Let me open by saying I am so happy to be here. For those of you who watched the live version of last week’s Monitor
The dual settlements represent the Department of Justice’s continued crackdown on possible False Claims Act violations.
Novartis Pharmaceuticals Corporation reached an over $642 million-dollar agreement to resolve claims of violating the False Claims Act (FCA). The company based out of East Hanover, New Jersey was involved in two settlements. The first settlement resolves allegations that the company illegally used three foundations as channels to pay the copayments of Medicare patients who were prescribed two of their drugs, Gilenya and Afinitor. The second brings resolution to an alleged payment kickback scheme to doctors.
“Through this settlement and others, the government has demonstrated its commitment to ensuring that drug companies do not use kickbacks to influence the drugs prescribed by doctors or purchased by patients,” said Assistant Attorney General Jody Hunt of the Department of Justice’s Civil Division in a Department of Justice (DOJ) press release. “We will continue to safeguard the Medicare program from kickbacks and their pernicious effects, including the undermining of important cost-control mechanisms instituted by Congress.”
With the first settlement, the company agreed to pay $51.25 million for resolution regarding the illegal payments of copay obligations for patients taking their prescriptions. Under Medicare beneficiary policy, when using a covered prescription drug, the beneficiary could be required to make a partial payment in the form of a copayment, coinsurance, or a deductible. These requirements were established as part of a strategy to provide a check on healthcare expenditures. This includes the prices that pharmaceutical manufacturers require for their drugs.
The drug Gilenya was approved for the treatment of relapsing forms of multiple sclerosis (MS) while Afinitor is used as a second-line treatment for advanced renal cell carcinoma (RCC) and also as a treatment for progressive neuroendocrine tumors of pancreatic origin (PNET).
In the case of Gilenya, Novartis apparently was informed in 2012 by the contractor managing the free drug program for Gilenya that over 300 patients receiving free prescriptions at the time would have Medicare eligibility in 2013. According to the allegations, Novartis and the contractor schemed to transition those patients to Medicare Part D, allowing Novartis to be reimbursed through Medicare when those patients filled their Gilenya prescriptions in the future. With full knowledge that patients would be unable to afford the copay for the drug, the company created a plan with a foundation that enabled Novartis to cover patient copays.
Furthermore, the company allegedly laid specific plans for payments to be made to the foundation. The actions were coordinated with the opening of the foundation’s MS fund at 6:00 PM on a Friday, with contractor personnel working overtime allowing them to submit applications for those patients prescribed free Gilenya. This resulted in a disproportionate share of the funding being directed to Gilenya patients during 2013.
With the second settlement, the pharmaceutical company is expected to pay $591,442,008 for resolution regarding a scheme of kickback payments to doctors. The company allegedly encouraged them to prescribe the Novartis drugs Lotrel, Valturna, Starlix, Tekturna, Tekturna HCT, Tekamlo, Diovan, Diovan HCT, Exforge, and Exforge HCT. Novartis will also relinquish $38.4 million under the Civil Asset Forfeiture Statute.
Along with the payments, Novartis also provided comprehensive factual admissions in the settlement while agreeing to severe limitations on future speaker programs, such as drastic reductions to the budget spent toward these programs.
“For more than a decade, Novartis spent hundreds of millions of dollars on so-called speaker programs, including speaking fees, exorbitant meals, and top-shelf alcohol that were nothing more than bribes to get doctors across the country to prescribe Novartis’s drugs,” said Acting U.S. Attorney Audrey Strauss for the Southern District of New York in the press release. “Giving these cash payments and other lavish goodies interferes with the duty of doctors to choose the best treatment for their patients and increase drug costs for everyone. This office will continue to be vigilant in cracking down on kickbacks, however, they may be dressed up, throughout the pharmaceutical industry.”
The settlement also resolves a lawsuit entitled United States ex rel. Bilotta v. Novartis Pharmaceuticals Corp., No. 11-Civ.-0071-PGG (S.D.N.Y.). The lawsuit was first filed under the whistleblower provision of the FCA. For part of this settlement, Novartis reached an agreement to pay an additional $48,151,273 for the resolution of state Medicaid claims.
Simultaneously with the FCA settlements, Novartis agreed to enter into a corporate integrity agreement (CIA) with the Department of Health and Human Services Office of Inspector General (HHS-OIG). The CIA intends to deal with the actions in both settlements. The agreement mandates the reduction of the number of paid speaker programs and the budget of the programs while limiting the circumstances under which they may occur, including restrictions to a virtual format. Additionally, measures must be in place that show and promote independence from any patient assistance programs that Novartis contributes to. Overarching multi-faceted monitoring of the company’s operations will also occur.
As often is the case in these scenarios, the claims listed and resolved through legal settlements remain allegations only with no true determination of liability.
To read the DOJ press release in its entirety, which includes further details on each of the settlements go online to https://www.justice.gov/opa/pr/novartis-pays-over-642-million-settle-allegations-improper-payments-patients-and-physicians
Programming Note: Listen to whistleblower attorney Mary Inman report this story live during Monitor Monday, July 13, 10-10:30 a.m. EST.
Let me open by saying I am so happy to be here. For those of you who watched the live version of last week’s Monitor
Imagine the frustration you might feel if, after you negotiate a settlement, under which you are paying a departing employee a respectable sum of money,
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