Health Care Fraud Tipsters May Get Bigger Reward; Novartis Kickback Complaint Prompts CIA Review

HHS proposes to increase the potential reward for information leading to recovery of Medicare funds from $1,000 to $9.9 million; OIG is reviewing Novartis corporate integrity agreement compliance after government alleges company paid Myfortic kickbacks to pharmacies.

While the Department of Justice is besieged with whistleblowers seeking government intervention in health care fraud complaints, HHS wants to encourage more tipsters to come forward.

The department is proposing to increase the potential reward that an informant can receive for information that leads to recovery of Medicare funds from $1,000 to $9.9 million. The Centers for Medicare & Medicaid Services issued a proposed rule on April 24 to revise the Medicare Incentive Reward Program to increase rewards from the current cap. CMS now pays a reward of 10 percent on the first $10,000 it collects as a result of a tip. It is proposing to increase the reward to 15% of the final amount collected up to the first $66 million recovered.

DoJ and HHS routinely investigate complaints brought by whistleblowers under the False Claims Act. The statute allows private individuals to file qui tam, or whistleblower, suits alleging false claims on behalf of the government. If the government prevails in the action, the whistleblower receives up to 30% of the recovery. HHS’s Medicare Incentive Reward Program provides another avenue for people to expose wrong-doing without filing a suit.

CMS began paying rewards to individuals who reported tips that led to the recovery of funds in 1998. The agency said that to date, it has recovered approximately $3.5 million as a result of this program and paid $16,000 for 18 rewards.

“President Obama has made the elimination of fraud, waste and abuse, particularly in health care, a top priority for the administration,” HHS Secretary Kathleen Sebelius said in an April 24 release. “Today’s announcement is a signal to Medicare beneficiaries and caregivers, who are on the frontlines of this fight, that they are critical partners in helping protect taxpayer dollars.”

Government Alleges Novartis Paid Myfortic Kickbacks

HHS announced the boost in potential payout to tipsters the day after the government filed suit against Novartis Pharmaceuticals Corp. alleging the company paid kickbacks to pharmacies to get them to switch transplant patients to its immunosuppressant drug Myfortic (mycophenolic acid). The U.S. Attorney for the Southern District of New York intervened in a False Claims Act complaint against the company. The name of the whistleblower was not identified.

The complaint claims that from 2005 to the present, Novartis offered kickbacks to 20 or more pharmacies that could influence physicians to prescribe Myfortic instead of Roche’s CellCept (mycophenolate mofetil) or generic CellCept to transplant patients, and disguised these kickbacks as “performance” rebates or discounts.

The suit alleges that Novartis managers participated in the scheme. “Novartis documents show that executives and managers in the transplant division were specifically aware that Medicaid reimbursed claims for Myfortic submitted by the pharmacies that received kickbacks from Novartis,” the complaint states.

The complaint cites examples of the extent of the alleged kickbacks. It says Novartis directed more than $650,000 in kickbacks to Bryant’s Pharmacy in Arkansas and its owner and that in exchange the owner helped Novartis obtain more than $5.5 million in Myfortic sales.

“For Novartis, it was highly profitable to pay pharmacies 10% or even 20% in kickbacks in exchange for switching transplant patients to Myfortic,” the suit states. “In the words of a Novartis manager, it was like ‘using a short term cost to gain a[] long term annuity.’ This is because, as that manager stated, each ‘maintenance conversion’ gives Novartis ‘an ongoing stream of revenue going forward as long as the patient is still living and using [Myfortic].’”

Novartis said it disputes the claims and will defend itself in the litigation.

“NPC is committed to high standards of ethical business conduct and regulatory compliance in the sale and marketing of our products,” the company said in a statement. “Our values, Code of Conduct and business conduct policies and standards guide our associates in their activities and performance.”

Amgen Inc. recently settled a similar DoJ complaint alleging it paid kickbacks to Omnicare Inc. and two other long-term care pharmacy providers for switching Medicare and Medicaid beneficiaries from a competitor drug to Aranesp (darbepoetin alfa). The government alleged the kickbacks were in the form of performance-based rebates tied to market share or volume thresholds. Earlier this month Amgen agreed to pay $24.9 billion to resolve the False Claims Act allegations.

OIG Assessing If Novartis Is In Violation Of CIA

The complaint against Novartis may make the company vulnerable to actions by HHS’ Office of Inspector General, including possible exclusion from federal health care programs, since the alleged kickbacks may be in violation of a five-year corporate integrity agreement the company entered into in 2010. The CIA was part of a $422.5 million settlement to resolve claims of off-label promotion and kickbacks. In that case the government alleged Novartis paid physicians to become high prescribers of the hypertension drugs Diovan (valsartan), Tektuma (aliskiren) and Exforge (amlodipine/valsartan) (Also see "Novartis Settlement Encompasses Whistleblower Claims Of Kickbacks For Diovan Prescribing" - Pink Sheet, 1 Oct, 2010.).

OIG issued a statement following announcement of the Novartis suit saying the CIA specifies that violation of the agreement could result in monetary penalties and/or exclusion. It noted that conduct that violates the False Claims Act may or may not violate the terms of a CIA.

“This is an open matter,” OIG stated. “We will not comment at this time on any deliberations about whether Novartis violated its CIA or what actions OIG might take in the future.”

Novartis has repeatedly been in trouble with the DoJ. In addition to the $422.5 million settlement in 2010, that year the company also reached a $72.5 million settlement with DoJ over allegations it marketed the cystic fibrosis drug TOBI (tobramycin) for unapproved uses and agreed to pay a criminal fine of $185 million for off-label marketing of its antiepileptic Trileptal (oxcarbazepine) (Also see "Novartis Inks Second Off-Label Settlement With DoJ, Paying $72.5 Million Over TOBI Marketing" - Pink Sheet, 5 May, 2010.).

No pharma company has yet been subject to the harsh penalty of exclusion from federal health care programs and it seems unlikely that Novartis would be. In 2009, when Pfizer Inc. reached a $2.3 billion settlement with DoJ for off-label marketing and kickbacks it was the fourth settlement by Pfizer and its subsidiaries within a decade. While the government decried the company’s recidivism it did not impose exclusion (Also see "Pfizer's Record-Breaking $2.3 Bil. Settlement With U.S. Attorney Imposes New Restrictions on Corporate Behavior" - Pink Sheet, 7 Sep, 2009.).