A.G. Schneiderman Announces Lawsuit Against Pharmaceutical Giant Novartis And Related $15 Million National Settlement With New York Pharmacy In Alleged Kickback Scheme

Westchester-Based Bioscrip Agrees To Pay Nearly $900K To New York Medicaid Program To Settle Claims It Received Kickbacks To Push Drug To Blood Transfusion Patients; Government False Claims Charges Against Novartis Unsealed

Schneiderman: New Yorkers Must Get Unbiased Information From Their Pharmacists

NEW YORK – Attorney General Eric T. Schneiderman today announced that his office has filed a lawsuit alleging that Novartis Pharmaceuticals Corporation, headquartered in New Jersey, paid kickbacks to a New York-based pharmacy company to boost sales of the company’s iron-reduction drug, Exjade, which is often prescribed to patients who need regular blood transfusions. The Attorney General also announced an agreement in principle with BioScrip, Inc., in which the pharmacy, located in Elmsford, N.Y., will pay a total of $15 million to cover costs to Medicaid and Medicare nationally for excessive Exjade prescriptions. Under the agreement, BioScrip will pay $895,000 to resolve kickback claims relating to New York Medicaid recipients.

The Attorney General’s lawsuit against Novartis, unsealed by Manhattan U.S. District Court Judge Colleen McMahon, charges that the kickback scheme began in 2007, at a time when Novartis executives had become concerned that patients taking Exjade were discontinuing its use because of harmful side effects. The kickbacks were designed to get the pharmacy to keep patients on the drug as long as possible. The complaint alleges that as part of the scheme, BioScrip employees made thousands of calls to Medicaid recipients in New York and other states from a central call center in Ohio encouraging them to refill Exjade prescriptions or resume taking Exjade. The complaint alleges that BioScrip employees downplayed the side effects of Exjade in these calls.

“When it comes to prescription drugs, New Yorkers and, indeed, all patients have a right to expect unbiased information from their pharmacy,” Attorney General Schneiderman said. “This arrangement between Novartis and BioScrip was dangerous for patients and is against the law. Our lawsuit against Novartis and our agreement with BioScrip send a clear message: Drug companies cannot pay pharmacies to promote drugs directly to patients.” 

Exjade was approved by the Food and Drug Administration in late 2005 for the treatment of chronic iron overload due to blood transfusions. When Novartis launched the drug, it created a closed distribution network in which most Exjade prescriptions in the United States were filled by one of three pharmacies selected by Novartis. BioScrip was one of the pharmacies in this network, which Novartis promoted to doctors and patients as a way to purportedly foster patient education. Novartis controlled which pharmacy filled many of the prescriptions for Exjade dispensed through this network. During the period when the kickback scheme was in place, the New York Medicaid program paid about $15.2 million for Exjade prescriptions filled by BioScrip for New York Medicaid recipients. 

The complaint against Novartis alleges that Novartis used its control of Exjade prescriptions, as well as various rebates and discounts, to pay kickbacks to BioScrip. For instance, according to the complaint, Novartis created an Exjade Scorecard that measured how long patients took Exjade, and Novartis used this scorecard to give more new patients to the pharmacy that kept patients on the drug the longest. The complaint alleges that BioScrip often won this competition and received valuable new patient referrals as a result. The complaint cites a former BioScrip supervisor who stated under oath that this competition and the rebates provided by Novartis “caused [BioScrip] to be focused exclusively on the number of orders and refill rates, rather than on patient care.” In connection with its federal settlement agreement, BioScrip admitted many aspects of this scheme, including Novartis’ use of the Exjade Scorecard.

The complaint against Novartis was filed under the New York False Claims Act and other statutes in U.S. District Court for the Southern District of New York. New York filed a joint complaint with eight other states in the case, which was initiated by a whistleblower. The case is captioned U.S. ex rel. Kester, et al. v. Novartis Pharmaceuticals Corporation, et al., No. 11-CIV-8196 (U.S.D.C. S.D.N.Y.).

BioScrip, the Office of the Attorney General and the U.S. Department of Justice have agreed to resolve claims related to the scheme’s impact on New York’s Medicaid program. Under the settlements, BioScrip will pay $895,000 to resolve claims relating to New York’s Medicaid program. Of that, $489,000 will go to reimburse federal taxpayer dollars paid by New York’s Medicaid program and $405,000 will go to repay state Medicaid funds. A portion of the total will go to the North Carolina whistleblower who made the initial allegations. 

The settlement is the result of an investigation conducted by the Medicaid Fraud Control Units of several states, including New York, the U.S. Attorney’s Office for the Southern District of New York and other federal agencies. BioScrip has agreed to pay a total of $15 million to federal and state governments to resolve Medicaid and Medicare claims related to the scheme. BioScrip sold most of its pharmacy business in May 2012. 

The New York investigation was conducted by Special Auditor-Investigator Colin Ware, Principal Special Auditor Investigator Michael LaCasse, and Special Investigator Lisa McDonald.

The matter is being handled by Special Assistant Attorney General Christopher Y. Miller of the Attorney General’s Medicaid Fraud Control Unit under the supervision of Acting Director Amy Held, Counsel Jay Speers and Executive Deputy Attorney General of the Division of Criminal Justice Kelly Donovan. 

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