Attorney General James Delivers $22.7 Million in Busting Pharmaceutical Company for Its Kickback Scheme

NEW YORK – Attorney General Letitia James today announced that her office reached an agreement to settle kickback claims against Novartis Pharmaceuticals Corporation (Novartis) and delivered $22.7 million to New York. The agreement resolves allegations that Novartis paid kickbacks to health care providers in the form of cash, lavish meals, entertainment, and honoraria payments to induce them to prescribe various Novartis-brand medications. Under the global agreement, Novartis agreed to pay $678 million to the United States, New York, and 25 other states, nearly $22.7 million of which is to resolve claims relating specifically to New York's Medicaid program. 

“New Yorkers trust that their health care providers are prescribing medications in the best interest of patients,” said Attorney General James. “Novartis and its team of greedy doctors betrayed that trust by duping patients into taking medication as part of a fraudulent kickback scheme and cheated the state out of millions while putting the health and safety of countless individuals at risk. My office will continue to do everything in its power to protect New Yorkers and hold accountable any bad actors who attempt to break our laws or harm our residents.”   

The agreement resolves allegations that from January 2002 to November 2011, Novartis paid kickbacks to doctors to prescribe Lotrel, Valturna, Starlix, Tekamlo, Diovan HCT, Tekturna HCT, and Exforge HCT, and that between January 2010 and November 2011, Novartis also did so for Exforge, Diovan, and Tekturna. In its court filings, the New York Attorney General’s Office (NYAG) alleged that Novartis paid doctors to speak about certain drugs at sham events, which were falsely advertised as educational, in an attempt to evade the law. Novartis then covered the costs of lavish meals and entertainment for doctor attendees to induce them into writing prescriptions for Novartis drugs in violation of the New York False Claims Act.

The NYAG also alleged that the doctors in New York spoke repeatedly at the same events, with the same attendees on exactly the same topics. They took turns being the speaker, and little, if any, educational presentation was shown at the majority of these events. According to court filings, Novartis’ compliance program did not take appropriate measures to prevent fraud with respect to its speaker programs. Novartis’ management was aware of these problems with their programs, yet failed to take meaning action to address them. The NYAG further alleged that not only were many of these speaker programs merely social events, in which Novartis wined and dined or otherwise entertained doctors to induce them into writing prescriptions for Novartis drugs, but, at times, Novartis made payments to doctors for speaker programs that did not occur or were not attended by those that Novartis's representatives claimed were present. 

Novartis admitted to aspects of the scheme in the agreement, including admissions concerning excessive meal and alcohol spending, minimal medical discussions at events, and repeat attendance. For example, Novartis admitted that in Long Island, at least one sales representative organized fraudulent speaker programs by arranging for a restaurant to create fake receipts to make it appear that a dinner had taken place, and then used the budgeted funds to purchase gift cards that were distributed to high-prescribing doctors. Doctors were then also paid honoraria for supposedly “speaking” at these sham events. Novartis also admitted, among other things, that its sales representatives conducted speaker programs and roundtables at Hooters as well as some of the most expensive restaurants in New York City, including Masa, Daniel, Gramercy Tavern, Il Mulino, Babbo, Peter Luger, Le Bernardin, and Eleven Madison Park.  

The case against Novartis was initiated by a whistleblower, Oswald Bilotta, a former employee of Novartis, who will receive a portion of the agreement. Novartis, which is headquartered in East Hanover, New Jersey, is a subsidiary of the Swiss pharmaceutical company Novartis AG. The case is captioned U.S. ex rel. Bilotta, et al. v. Novartis Pharmaceuticals Corporation, No. 11-cv-00071 and was filed in the U.S. District Court for the Southern District of New York.  

The case was handled by the OAG’s Medicaid Fraud Control Unit (MFCU), which worked closely with the U.S. Attorney's Office for the Southern District of New York. Of the $22.7 million related to New York’s Medicaid program, approximately $12.9 million will go to the state of New York and $9.8 million will go to the federal government.  

MFCU receives 75 percent of its funding from the U.S. Department of Health and Human Services under a grant award totaling $60,071,905 for federal fiscal year (FFY) 2019-20, of which $45,053,932 is federally funded. The remaining 25 percent of the approved grant, totaling $15,017,973 for FFY 2019-20, is funded by New York state. Through MFCU’s law enforcement actions and civil enforcement actions, its recoveries for New York exceed its budget expenditures. 

Special Assistant Attorney General Kathryn Heim Harris led the New York team that litigated the matter and negotiated the agreement with Novartis. Chief Auditor of the Civil Enforcement Division Stacey Millis served as a state team member, and Investigator Lawrence Williams and Computer Programmer Analyst Nicholas Furnari assisted with the investigation. MFCU is led by Director Amy Held and Assistant Deputy Attorney General Paul J. Mahoney. The Division of Criminal Justice is led by Chief Deputy Attorney General for Criminal Justice José Maldonado and overseen by First Deputy Attorney General Jennifer Levy. 

A National Association of Medicaid Fraud Control Units (NAMFCU) team conducted the negotiations with Novartis on behalf of the other states. The team included representatives from the Offices of the attorneys general for the states of New York, California, Illinois, Pennsylvania, South Carolina, Texas, Virginia, and Wisconsin.