The U.S. Government Declares War on Novartis AG (NVS)
The U.S. government declared war on Novartis AG (NVS) last week, launching two civil fraud lawsuits against the Swiss drug maker in four days. The U.S. government is accusing the company of paying multimillion-dollar kickbacks and benefits for prescribing its drugs to patients. Despite the allegations, shares of Novartis, which are currently near 52-week highs, held steady throughout the week. Should investors be worried that the U.S. is about to take a big chunk out of the company's top line? Daily Chart
The U.S. government claims that over the past decade, Novartis piled on kickbacks and benefits to doctors, such as $600 per plate dinners, salmon fishing trips in Alaska and Florida, and free dinners at five star restaurants.
These kickbacks, perks and trips were allegedly given to doctors to convince them to prescribe its drugs, which include hypertension drugs Lotrel and Valturna, and diabetes drug Starlix. Speakers allegedly received $750 to $3000 for speaking at Novartis-sponsored events. In a separate suit, the U.S. government has accused Novartis of convincing thousands of pharmacies to switch its kidney transplant patients to switch to is immunosuppressant drug Myfortic in exchange for kickbacks masked as rebates and discounts. The lawsuit claims that Novartis spent nearly $65 million on these promotional activities and conducted over 38,000 speaker programs over a nine-year period ending in 2011. Most of these kickback-tainted drug purchases were made with Medicare and Medicaid programs. Novartis has denied the claims and has stated that it would defend itself against the charges. Novartis spokeswoman Julie Masow stated that the events in question were "promotional programs" designed to instruct healthcare providers in the usage of the company's products. However, the U.S. government stated that internal analyses within Novartis revealed that doctors who had participated in the sponsored programs as speakers were more likely to increase the number of Novartis drug prescriptions to patients. These charges originally surfaced in January 2011, when a former Novartis sales representative filed a whistleblower lawsuit against the company. After federal investigation of these claims, 27 states, the District of Columbia, Chicago and New York City have filed suit against Novartis, seeking triple damages for the alleged fraud. Manhattan-based United States attorney Preet Bharara had harsh words for Novartis. "Novartis corrupted the prescription drug dispensing process," he stated. "For its investment, Novartis reaped dramatically increased profits on these drugs, and Medicare, Medicaid and other federal healthcare programs were left holding the bag." This is not the first time for Novartis to tangle with the U.S. government. In 2010, the company's U.S. business segment was fined over $420 million after it pleaded guilty to a misdemeanor violation of federal drug law by prescribing the illegally marketed epilepsy drug Trileptal to patients with the aid of kickbacks to doctors. Other News About NVS U.S. Sues Novartis Again, Accusing It of Kickbacks
The U.S. government targets Novartis. Chicago Joins Kickback Suit Against Novartis
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Published on May 2, 2013
By Leo Sun