Novartis: Paying Doctors for Talks That Never Happened

In the Novartis kickback settlement announced July 1, 2020, the company agreed to pay $678 million over sham speaker programs that the government said bought prescriptions with speaking fees, expensive meals and entertainment. Novartis admitted paying doctors for events that never happened. It also admitted that a sales representative arranged fake restaurant receipts and used the money to buy gift cards for high-prescribing doctors. For someone inside pharmaceutical sales, the event budget, expense report and prescribing data tell a story the invitation leaves out.

A former Novartis employee brought the whistleblower case, and the government intervened in it. It sits alongside separate Novartis resolutions involving copay foundations and specialty-pharmacy referrals. These pharmaceutical fraud cases reached different parts of the same business: getting a prescription written, getting it paid for and keeping it refilled.

What Did the Novartis Speaker Programs Pay For?

Novartis admitted that some sales representatives intended speaker fees to induce doctors to prescribe more Novartis drugs. The government’s broader allegation covered tens of thousands of purported educational events between 2002 and 2011, promoting cardiovascular and diabetes drugs.

The speaker case covered Lotrel, Valturna, Starlix, Tekamlo, Diovan HCT, Tekturna HCT and Exforge HCT, along with later conduct involving Exforge, Diovan and Tekturna. Across these products, the alleged sales incentive remained the opportunity to earn speaking fees.

The government alleged that managers directed representatives to select high-volume prescribers as paid speakers. Representatives then pressed those doctors to increase their prescriptions and often dropped doctors who failed to do so. Speaking opportunities gave the sales force something valuable to offer and something it could withdraw. The government further alleged that the scheme was the result of decisions made by top management at Novartis’s North American headquarters in New Jersey.

Novartis’s admissions make the recurring-dinner arrangement especially plain. In thousands of instances, the company paid for the same groups of doctors, often colleagues or friends, to dine together repeatedly. The doctors sometimes took turns speaking and collecting the fee. Many high-prescribing doctors received tens or hundreds of thousands of dollars in honoraria.

At many programs, the representative did not require a presentation at all or let the speaker click through the slides in minutes. Most of the time went to dinner and conversation. The supposed educational audience could remain the same while the paid speaker changed.

The admitted examples included an event at Ruth’s Chris Steakhouse in Pikesville, Maryland, with only one doctor in the audience. Novartis spent $448 per person on food and alcohol and paid the speaker a $1,000 honorarium. Representatives also held events at Hooters and on fishing trips. The setting tells you how much opportunity there was for a medical presentation.

The government alleged that federal health care programs then paid hundreds of millions of dollars for prescriptions produced by the scheme. That is the connection between paying for prescriptions and a False Claims Act case: the benefit goes to the doctor, and the drug bill goes to a public program. The alleged scheme put the doctor’s fee ahead of the patient’s treatment needs, with taxpayers paying the drug bill.

The Sales Incentive Inside the Event Budget

The government’s account tied the speaker programs to sales compensation, spending targets and prescription growth. In its court-filed allegations, summarized in a September 2014 opinion, representatives’ compensation depended on the prescriptions doctors wrote, and representatives faced pressure to exhaust their event budgets.

The government also alleged that Novartis analyzed the programs’ return on investment. Doctors who received more meals, entertainment and speaking fees wrote more Novartis prescriptions, according to that analysis. Paid speakers produced the highest return.

The Meal Limit and the Expense Category

Novartis admitted that more than 12,000 speaker programs and roundtables substantially exceeded its $125-per-person meal limit. The alleged workaround explains how a written spending cap could coexist with lavish dinners.

According to the government’s account, a representative could book a restaurant with a minimum spending requirement, invite a small audience and charge the excess to the restaurant’s unmet minimum. That expense category separated part of the restaurant bill from the reported per-person meal cost. The same dinner could therefore look different on the expense report depending on where the representative put the charge.

The government further alleged that Novartis did not require signatures on attendance sheets and left representatives responsible for checking the accuracy of venue receipts. There was no system to stop them repeatedly inviting the same doctors to the same topics or rotating those doctors through paid speaking roles. The people spending the budget also checked the paperwork describing how they spent it.

Novartis Speaker Program Expense Receipt Manipulation

The receipt manipulation went further: fake restaurant receipts for dinners that never occurred. The company admitted that at least one Long Island representative arranged those receipts, redirected the budgeted money into gift cards for high-prescribing doctors and also paid doctors for supposedly speaking at the nonexistent events.

The paperwork was the only part of the dinner that existed. For an insider who knows the restaurant arrangements, attendance or gift-card purchases, that gap is concrete.

Novartis admitted that its training materials criticized emails advocating illegal kickbacks partly because the written communications put the company at risk. Its chief compliance officer used this instruction in training presentations:

The instruction focused on leaving a written trail. It belongs beside the false receipts: one part of the business created documents for events that had not occurred, while compliance training discouraged written communications about kickbacks.

The same expense-report problem appeared in Salix’s speaker-program settlement. Salix admitted reporting physicians as attendees when they had not attended, making the apparent meal cost per person lower. It also admitted paying speakers for prerecorded programs when the speaker was never called afterward. In both cases, the attendance and presentation records made the payment look like something the actual event did not support.

Why Did the Novartis Settlement Headlines Differ?

The July 2020 headlines covered different parts of the resolutions. The Justice Department’s national announcement of over $642 million covered federal False Claims Act payments in the speaker case and the separate $51.25 million copay settlement involving Gilenya and Afinitor. In the speaker case, Novartis agreed to pay $591,442,008 to resolve the federal False Claims Act claims and an additional $48,151,273 to resolve state Medicaid claims.

The speaker case also changed the program’s design. Under the five-year corporate integrity agreement announced in 2020, Novartis could conduct speaker programs only in limited circumstances and in a virtual format, such as a webinar. The agreement curtailed spending, required monitoring and required annual compliance certifications from executives and board members. It also addressed the copay conduct, requiring Novartis to implement measures designed to promote independence from any patient assistance programs to which it contributes.

How Did the Novartis Copay Foundations Work?

The government alleged that Novartis used foundation donations to pay Medicare patients’ copays for its own drugs. The copay settlement announcement describes both carefully timed applications for Gilenya assistance and narrowly designed funds for Afinitor.

Copays sit at a commercially important point in the prescription business. The patient faces an out-of-pocket bill even when Medicare covers the drug. As the Justice Department explained, copays help keep drug prices in check by leaving patients with part of the cost. In these allegations, the company financed the patient’s portion while Medicare became the source of drug revenue.

Gilenya and the Friday-Evening Fund Opening

Novartis allegedly arranged a brief opening of The Assistance Fund’s multiple sclerosis fund so that its patients would be ready to apply. Express Scripts, which managed Novartis’s free-drug program for Gilenya, told the company that patients receiving the drug free would soon become eligible for Medicare. The companies transitioned those patients to Medicare Part D, allowing Novartis to earn revenue when they filled prescriptions.

The government alleged that Novartis knew those patients could not afford the copays. After making a payment to the foundation, it arranged for the fund to open on a Friday evening in December 2012. Express Scripts had staff working overtime that night and the following morning to submit applications for Gilenya patients.

The fund closed that Saturday. Novartis then confirmed that 374 Gilenya patients had received grants for their Medicare copays the following year. The government alleged that Novartis knew the timing and prepared applications would direct a disproportionate share of the available assistance to its drug. The donation, opening time and application queue worked together.

Afinitor and the Fund Definitions

For Afinitor, the alleged steering happened through eligibility rules. Novartis told the National Organization for Rare Disorders that it would donate to a renal cell carcinoma fund if the foundation excluded first-line treatments. Afinitor was approved as a second-line treatment after certain initial treatments failed. The narrowed fund disproportionately supported Afinitor patients.

The Chronic Disease Fund arrangement was more direct. The government alleged that Novartis asked it to open a fund for patients with pancreatic neuroendocrine tumors. Although the FDA had approved a competing drug, the fund covered only Afinitor copays, with Novartis as its sole financial backer through 2014. A fund named for the disease paid for one manufacturer’s treatment.

Exjade and Myfortic Specialty-Pharmacy Referrals

The earlier Exjade and Myfortic case concerned payments and patient referrals used to influence pharmacies’ recommendations. On November 20, 2015, Novartis agreed to a $370 million civil False Claims Act settlement.

The distribution arrangement supplied the pressure. When Novartis launched Exjade, an iron chelation drug, it created a closed network of three specialty pharmacies: BioScrip, Accredo and US Bioservices. According to the government, that gave Novartis control over the allocation of patients to the pharmacies. A referral meant valuable dispensing business.

The government alleged that Exjade sales fell short of internal targets because patients were not refilling, in significant part because of side effects. Novartis pressured the pharmacies to use nurses to call patients and encourage refills, then rewarded higher refill rates with more referrals and higher rebates. In its amended complaint, the government alleged that Novartis threatened to cut BioScrip’s undesignated referrals or remove it from the network unless refill performance improved.

The government’s complaint also alleged that Novartis raised BioScrip’s per-shipment Exjade rebate from $13 to $20 in January 2008. The pharmacy could gain from both another refill and another patient assigned through the network.

The calls reached people who needed clinical advice. The government’s complaint described the gap between that need and the staff assigned to provide it:

The government alleged that pharmacy calls emphasized Exjade’s benefits while understating serious risks, including kidney and liver failure. The alleged refill incentive reached into the counseling conversation itself.

A 2021 review in Proceedings, Security Challenges During COVID-19 identifies the different interests of patients, providers, insurers and distributors as a source of vulnerability to corruption in healthcare. The Exjade allegations show that conflict in a specific business relationship: the patient needed advice about treatment, while the pharmacy’s future referrals depended on refill performance.

Myfortic, an anti-rejection drug for kidney-transplant recipients, involved a different recommendation. The government alleged that Novartis offered specialty pharmacies rebate contracts in return for recommending that doctors switch patients from competing drugs. Novartis made factual admissions about its specialty-pharmacy relationships.

The Separate Trileptal Civil Settlement

Novartis’s earlier Trileptal episode produced a $237.5 million civil settlement announced September 30, 2010. It covered allegations of promotion for noncovered uses, including psychiatric and pain uses of Trileptal, and kickbacks to health care professionals to induce them to prescribe Trileptal and five other drugs: Diovan, Zelnorm, Sandostatin, Exforge and Tekturna. The federal share of the civil settlement was $149,241,306, and the state Medicaid share was $88,258,694.

Four former-employee whistleblower cases supplied the civil allegations. The recurring issue was what the sales operation paid people to prescribe or recommend, with the product and payment arrangements changing from case to case.

The Justice Department reported a collective whistleblower reward of more than $25 million from the federal share in that earlier resolution. Novartis also signed a five-year corporate integrity agreement in that resolution. It required the board to review the compliance program each year with an outside expert and certify its effectiveness, required certain senior executives to certify their areas’ compliance annually, and required Novartis to send doctors a letter about the settlement and post its payments to doctors, such as honoraria, travel or lodging, on its website.

What Evidence Is Needed to Prove Fraud?

In these Novartis cases, the evidence connected payments to the prescriptions, refills or patient-assistance decisions they were intended to influence. A sales representative could know whether the talk happened, an expense reviewer could see how the meal was recorded, and a pharmacy employee could know what drove the refill calls. If you recognize that gap between the paperwork and the business, our whistleblower experts can work through what it means with you.

A whistleblower case under the False Claims Act can pay the whistleblower 15% to 30% of what the government recovers. Our work with pharmaceutical whistleblowers starts with the business decisions their records reveal and connects those decisions to the government payments.

You Know What the Payment Was For

If your work in sales, patient assistance or a specialty pharmacy showed how payments bought prescriptions or refills, speak with our whistleblower experts. We develop the case with you, bring in pharmaceutical kickback whistleblower lawyers who understand these arrangements, and stay beside you as we build your strongest pharmaceutical whistleblower case.