Novartis agreed to pay $678 million to settle a U.S. government lawsuit alleging the Swiss drugmaker used expensive dinners and extravagant events to encourage thousands of doctors to prescribe its medicines.
Between 2002 and 2011, Novartis sales representatives hosted tens of thousands of speaker programs and "roundtables," purportedly to share medical information about the company's products. But at many of these events, often held at fancy restaurants like Eleven Madison Park in New York City and Charlie Palmer Steak in Washington, D.C., the focus was on entertaining high-prescribing physicians rather than on clinical practice.
Sometime there was no event; just a speaking fee, or honoraria, from Novartis to a doctor for a medical presentation that was never given.
U.S. government lawyers alleged these "sham" educational events were illegal kickbacks, part of a long-running effort by Novartis to induce doctors to favor its heart and cardiovascular drugs, including Lotrel, Diovan and Tekturna.
"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 Audrey Strauss, the acting Manhattan U.S. Attorney, in a statement announcing the settlement Wednesday.
The agreement reached with Novartis resolves the federal government's charges, ending long-running litigation that stemmed from a whistleblower lawsuit brought forward in 2011. The U.S. joined the civil suit in 2013.
Novartis made extensive admissions in the settlement, acknowledging its sales representatives knowingly made payments to induce doctors to prescribe more.
In one particularly brazen example, a sales representative in Long Island arranged for a restaurant to create fraudulent receipts for dinners that hadn't actually taken place. The individual then used money Novartis had budgeted for setting up speaker programs to buy gift cards for doctors that were prescribing Novartis therapies. The doctors were also paid fees for speaking at these faked dinners.
In another instance unearthed by prosecutors, five doctors in Harrisburg, Pennslyvania attended more than 100 speaker programs over the course of five years, taking turns being the "speaker" and receiving the fee from Novartis, usually $1,000.
Swanky restaurants weren't the only venue. Novartis representatives also hosted doctors on fishing trips, to wine tastings and to sporting events.
Often these events violated Novartis' own compliance guidelines, a fact the company knew. In 2006, an internal Novartis investigation concluded a quarter of speaker events over the course of a year exceeded its spending limit of $125 per person.
The pharma did not conduct a comprehensive audit of speaker events until 2008, at which point most of the events covered by the lawsuit had already taken place.
Detailed disclosure of drugmaker payments to doctors is now available through the federal Open Payments database, which set up through the 2010 Sunshine Act.
Of the $678 million the drugmaker will pay, $591 million will be paid as False Claims Act damages, $38 million will be forfeited for violations of the Anti-Kickback Statute and the remaining $48 million will go to various states.
The settlement is part of Novartis' efforts to clear up past legal troubles and comes less than a week after the company agreed to pay nearly $347 million to the Department of Justice and the Securities and Exchange Commission over charges it bribed employees of state-owned hospitals in Greece, Vietnam and South Korea.
In a statement Wednesday, company CEO Vas Narasimhan described Novartis as a "different company today." The allegations covered by both settlements date back to the tenure of past chief executives Daniel Vasella and Joe Jimenez, Narasimhan's immediate predecessor.
As part of the settlement with the U.S. Attorney's Office in Manhattan, Novartis said it will comply with a "corporate integrity agreement" governing its speaking programs in the future.
All events must be conducted virtually, with the speaker paid by Novartis in a different location than the audience, who aren't allowed to be hosted in a restaurant. Novartis can only set up speaking programs for a drug within 18 months of that product's approval, and no more than $100,000 can be allocated to any program for a new product or indication.
In addition to settling the kickback allegations, Novartis also agreed to pay $51 million in a deal with the U.S. Attorney's Office for the District of Massachusetts related to charges over the company's support of so-called co-pay charities between 2010 and 2014.
Last month, the Department of Justice sued Regeneron over the same issue, alleging the biotech company made donations to a patient foundation to illegally cover co-pays for its eye drug Eylea.