Novartis dinner-party kickback case must go on, judge says

U.S. District Judge Paul Gardephe

Note to sales reps: You might think twice about inviting the same doctors to the same speaker events over and over. Particularly when those events involve pricey dinners at Nobu and Smith & Wollensky. Even more particularly when the speakers don't do much speaking.

That's the moral of the latest story on the feds' kickback allegations against Novartis ($NVS). In an order filed Tuesday, U.S. District Judge Paul Gardephe refused to dismiss claims that the Swiss drugmaker lavished entertainment on certain physicians in return for increased prescriptions.

As usual, the judge's refusal isn't a comment on the facts of the case, just the merits of the allegations if the facts prove true. Now, Novartis and the feds will get to argue those alleged facts, brought forth by a former Novartis rep-turned-whistleblower. They'll also contend over whether the company not only violated kickback laws but also overstepped the rules under the False Claims Act.

Unfortunately for Novartis, those alleged facts are not only detailed but also rather entertaining. According to the DOJ complaint, Novartis reps put on speaker events at pricey hotspots such as the Smith & Wollensky steakhouse and Nobu seafood restaurant. They allegedly worked around the company's spending caps for those events by writing off the overages as "unmet minimums"--i.e., the amount they needed to spend to meet an eatery's minimum for group events.

Nobu at $10,000? The suit says so. It also claims that Novartis managed to spend $3,000 on three guests in a Des Moines, IA, restaurant.

Plus, some doctors attended the same educational presentation over and over. In at least one alleged instance, the same group of doctors showed up repeatedly, and they took turns playing speaker (and collecting the speaker fees, incidentally). One doctor allegedly attended the same presentation 10 times in a row over a period of 15 months.

According to the feds, the presentations were often cursory at best--no slides shown, for instance--and sometimes didn't take place at all. The DOJ calls them "sham events," essentially social occasions disguised as educational programs. Why else would the same guests be invited? Why would events be held in noisy restaurants without private dining rooms--who can show slides there? And a roundtable discussion at Hooter's? The DOJ begs to differ.

To amount to kickbacks, though, these entertainments have to trigger increased scripts. The lawsuit claims that the attendees did boost their prescribing of the drugs involved--various cardiovascular meds, including Lotrel and Valturna, plus the diabetes med Starlix. What's more, doctors knew that if they didn't hike their prescribing numbers, they wouldn't be asked back as speakers, the lawsuit claims.

Finally, the feds have some allegations about internal business that seem to back up the idea of using speaker programs--sham or otherwise--to boost scripts. According to Novartis calculations, the speaker programs had a high ROI, because attendees and speakers both increased their script numbers. The more meals, entertainment and speaking fees they collected, the more prescriptions they'd write, Novartis found (according to the lawsuit, anyway). No wonder the company allegedly spent $65 million on such events over less than a decade.

This isn't the only kickbacks case Novartis has failed to dispatch by asking for a dismissal. In August, another district judge refused to toss out kickback claims involving pharmacies rather than doctors.

- get more from Reuters

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