BUSINESS
04/23/2013 06:00 pm ET Updated Jun 23, 2013

Novartis Sued By U.S. Over Alleged Pharmacy Kickbacks

AP

* Civil fraud lawsuit alleges improper payments

* U.S. says Novartis sought to boost sales of Myfortic

* Novartis had no immediate comment

By Bernard Vaughan and Jonathan Stempel

April 23 (Reuters) - The U.S. government filed a civil fraud lawsuit against Novartis AG on Tuesday, accusing a unit of the Swiss drug maker of causing the Medicare and Medicaid programs to pay tens of millions of dollars in reimbursements based on fraudulent, kickback-tainted claims.

U.S. Attorney Preet Bharara in Manhattan said Novartis Pharmaceuticals Corp had since 2005 induced at least 20 pharmacies to switch thousands of kidney transplant patients to its immunosuppressant drug Myfortic from competitors' drugs, in exchange for kickbacks disguised as rebates and discounts.

He said Novartis tried to conceal the scheme by omitting the agreements from rebate and discount contracts with pharmacies.

In one alleged case, Novartis offered a Los Angeles pharmacist a "bonus" rebate of 5 percent of that pharmacist's annual Myfortic sales, or several hundred thousand dollars, to switch as many as 1,000 patients to Myfortic.

"Novartis co-opted the independence of certain pharmacists and turned them into salespeople," Bharara said in a statement.

The lawsuit was filed in the U.S. District Court in Manhattan, and seeks civil penalties and triple damages from Novartis for violating the federal False Claims Act.

Novartis spokeswoman Julie Masow had no immediate comment.

Myfortic net sales totaled $579 million in 2012, up 12 percent from a year earlier, according to Novartis' annual report. The Novartis Pharmaceuticals unit has offices in East Hanover, New Jersey.

In his announcement, Bharara called Novartis a "repeat offender," referring to a settlement of health care fraud charges based on kickbacks less than three years ago.

Novartis in Sept. 2010 agreed to pay $422.5 million to resolve criminal and civil liability over its marketing of several drugs, including the epilepsy drug Trileptal. ()

The case is U.S. v. Novartis Pharmaceuticals Corp, U.S. District Court, Southern District of New York, No. 11-08196.

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