Israel's Teva Pharmaceutical ($TEVA) has agreed to pay $27.6 million to settle allegations that it illegally paid a Chicago doctor to prescribe the generic antipsychotic drug clozapine to Medicare and Medicaid patients. The doctor, Michael Reinstein, received $50,000 plus trips to Miami in a kickback scheme dating back to 2003, according to the U.S. Justice Department, which is splitting the settlement with the state of Illinois.
The DOJ said the payments were made under the guise of a "consulting agreement" with clozapine's developer, IVAX, which was later acquired by Teva. IVAX allegedly was trying to induce Reinstein to prescribe clozapine instead of the branded version of the drug, Novartis' ($NVS) Clozaril.
"The Department of Justice is committed to ensuring that pharmaceutical manufacturers who make payments to doctors to influence prescribing decisions are held accountable," Stuart F. Delery, assistant attorney general for the DOJ's civil division, said in a statement. "Schemes such as the one alleged in this case undermine the healthcare system and take advantage of vulnerable patients."
A Teva spokeswoman told Reuters that the company did not admit liability in the settlement agreement and "is pleased to resolve the matter."
The charges against Teva were filed under the federal Medicare and Medicaid Anti-Kickback Statute, which prohibits the giving or receiving of compensation in return for prescribing products or services that are paid for by government insurance programs. In recent years, the feds have been cracking down--investigating not just companies suspected of offering kickbacks, but also physicians who may be accepting them.
This was not IVAX's first run-in with anti-kickback statutes. In 2009, the Teva subsidiary paid $14 million to settle charges that it paid $8 million to Omnicare, a provider of pharmacy services to nursing homes. The payments were reportedly meant to induce Omnicare to buy $50 million worth of IVAX's drugs.
The settlement comes in the midst of a tough few months for Teva, which has undertaken a turnaround effort led by new CEO Erez Vigodman. The company has suffered a string of disappointments involving laquinimod, its multiple sclerosis drug, which it hoped would help replace its soon-to-go-generic MS blockbuster Copaxone. European regulators rejected laquinimod in January, and so-so Phase III study results have raised concerns about whether the drug, if approved, will be able to compete with Biogen Idec's ($BIIB) Tecfidera.
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