Novartis Agrees to $390 Million Settlement

November 20, 2015, 10:46 PM UTC
A sign of Swiss pharmaceutical giant Novartis is seen on the top of a building at the company's campus on October 27, 2015 in Basel. Novartis said that its third-quarter net profit fell by 42 percent to $1.8 billion (1.64 billion euros), partially due to provisions to settle a US corruption case. However the world's largest pharmaceutical company in terms of sales confirmed its 2015 targets, including sales growth from continuing operations in mid-single digits excluding exchange rate effects and growth in operating income in the high single digits. AFP PHOTO / FABRICE COFFRINI (Photo credit should read FABRICE COFFRINI/AFP/Getty Images)
Photograph by Fabrice Cofrini—AFP/Getty Images

Swiss pharmaceutical company Novartis paid $390 million to settle charges that it gave kickbacks to U.S. specialty pharmacies in order to increase sales of its drugs, federal prosecutors said Friday.

As part of the settlement, Novartis Pharmaceuticals (NVS) admitted to using three specialty pharmacies to drive up prescription refills, in a scheme reminiscent of Valeant Pharmaceuticals’ recently revealed relationship with a specialty pharmacy that has also raised accusations of impropriety. (Valeant (VRX) recently cut ties with the pharmacy, Philidor Rx Services, though one of its major shareholders, hedge fund manager Bill Ackman, suggested recently that it could face similar charges as Novartis.)

“Novartis gave kickbacks to influence specialty pharmacies to provide patients one-sided advice” about its iron chelation drug Exjade without informing them of “serious side effects,” Manhattan U.S. attorney Preet Bharara said in announcing the settlement. It also incentivized the pharmacists to persuade patients to switch to the company’s drugs, he said. “Novartis turned pharmacies that should have been disinterested healthcare providers into a biased salesforce for the drug-maker.”

Still, Novartis stopped short of admitting guilt in the lawsuit. “We do not admit liability,” Novartis spokesperson Elizabeth Power told Fortune. “However, we do admit, acknowledge and accept responsibility for the facts set forth in the settlement document.”

Here is an excerpt of the claims to which Novartis admitted:

In 2008, Novartis took further steps to incentivize all three pharmacies distributing Exjade to increase prescription refill levels, which included allocating a larger share of patients to the pharmacy with the highest “adherence” metric (as measured based on the number of refills) and paying additional rebates to the pharmacies for meeting quarterly shipment goals based on Novartis’s sales targets. These arrangements remained in place until in or about March 2012.

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