On July 1, Novartis Pharmaceuticals Corporation agreed to pay $642 million to settle a False Claims Act case brought by a whistleblower. The federal government claims that Novartis knowingly committed two kinds of fraud: first, that they funneled money through three different foundations to pay for otherwise unaffordable Medicare copays illegally. The second claim alleges that Novartis set up a kickbacks program for doctors and medical professionals to promote their drugs. These claims fall under the purview of the Anti-Kickback Statute, which prohibits any remuneration from encouraging referrals of any item or service that may be covered by Medicare or Medicaid. Improper payment of patients’ copays is considered a kickback under the statute.
CHRISTIAN FERNSBY ▼ | July 2, 2020
The first settlement pertains to the company’s alleged illegal use of three foundations as conduits to pay the copayments of Medicare patients taking Novartis’s drugs Gilenya and Afinitor. The second settlement resolves claims arising from the company’s alleged payments of kickbacks to doctors.
The Anti-Kickback Statute prohibits anyone from offering or paying, directly or indirectly, any remuneration — which includes money or any other thing of value — to induce referrals of items or services covered by Medicare, Medicaid, and other federally funded programs. This prohibition extends not only to improper payments to providers, but also to the improper payment of patients’ copay obligations.
In the first settlement, Novartis has agreed to pay $51.25 million to resolve allegations that it illegally paid the copay obligations for patients taking its drugs.
When a Medicare beneficiary obtains a prescription drug covered by Medicare, the beneficiary may be required to make a partial payment, which may take the form of a copayment, coinsurance, or a deductible (collectively “copays”). Congress included copay requirements in the Medicare program, in part, to serve as a check on health care costs, including the prices that pharmaceutical manufacturers can demand for their drugs.
Novartis sells Gilenya, which is approved for treatment of relapsing forms of multiple sclerosis (MS). The government alleged that, in October 2012, Novartis learned from the contractor managing Novartis’s free drug program for Gilenya that over 300 patients who were receiving free drugs would be eligible for Medicare in 2013.