Hooters or Nobu, Novartis doc-dinners are kickbacks, feds say

It's not often that the U.S. Justice Department delivers a one-two punch against a Big Pharma company. And it isn't often that prosecutors get to use the word "Hooters" in a legal complaint. But that's just what happened last week, when the feds sued Novartis ($NVS), claiming it paid kickbacks to doctors and pharmacies in return for prescription growth.

The first lawsuit hit early last week. The U.S. Attorney's Office in Manhattan announced the second on Friday. The quotes in each press release were remarkably similar. Just change the word "pharmacies" in Tuesday's filing for "doctors" in Friday's. "Novartis corrupted the prescription drug dispensing process with multi-million dollar 'incentive programs' that targeted doctors who, in exchange for illegal kickbacks, steered patients toward its drugs," U.S. Attorney Preet Bharara said in a statement.

A mix of speaker fees and party-hearty entertainments jacked up use of blood pressure drugs Lotrel and Valturna, and its diabetes drug Starlix, the latest lawsuit claims. Lavish dinners at high-end restaurants were nothing but sham speaker programs, it alleges. One dinner at Manhattan's boutique seafood spot Nobu cost almost $10,000, the New York Times reports. Another three-guest restaurant dinner cost more than $3,000--in Des Moines, IA, no less. Others weren't so chichi. Did we mention Hooters?

The events violated the company's own policies, which require that speaker programs (a) have an educational purpose and (b) include a slideshow presentation about the company's drugs, the government says. In some cases, Novartis reps didn't even go through the motions of hosting an educational event. One so-called speaker program took place on a fishing boat, with no PowerPoint or slide presentation to be seen. In others, they paid scant attention to the drugs supposedly under debate. One way or another, the company spent nearly $65 million and hosted 38,000 speaker programs for the three drugs from 2002 to 2011.

Novartis "is committed to high standards of ethical business conduct and regulatory compliance in the sale and marketing of our products," spokeswoman Julie Masow told Bloomberg. The speaker programs cited by the government are common in the industry, and rebates and discounts cited in the Myfortic case are "a customary, appropriate and legal practice," Masow said.

Essentially, the government is arguing that the expensive dinners and whatnot amount to kickbacks, because they were more about entertainment than education. And Novartis should have known better, having settled kickback allegations in 2010--and promised to refrain in a corporate integrity agreement (CIA). The agreement was part of a $422.5 million settlement deal.

"Even after entering into the CIA, Novartis' compliance program was inadequate to prevent kickbacks from being paid in conjunction with [its] speaker programs," the Justice Department claims. When the company received reports that some speaker programs were out of hand, employees were merely slapped on the wrist. Some weren't punished but promoted, the feds say.

Masow disputes that; she tells The New York Times that the company "invests significant time and resources to help ensure these programs are conducted in an ethical and responsible manner." No doubt the government will be digging into those efforts as the cases wear on.

- see the Justice Department statement
- read the NYT article
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