New York Co-Leads Coalition Of States In Kickback Settlement

Schneiderman: Pharmaceutical Companies Cannot Improperly Interfere with Pharmacies' Relationships with their Patients

Attorney General Eric T. Schneiderman recently announced an agreement in principle to settle kickback claims against Accredo Health Group, Inc. ("Accredo"). The settlement will resolve allegations that Accredo recommended the drug Exjade to Medicaid patients in exchange for kickbacks from Novartis Pharmaceuticals Corporation ("Novartis"), which markets the drug. Under the settlement, Accredo will pay $60 million to the federal government, New York, and several other states. About $3.4 million of the settlement will resolve claims relating to New York's Medicaid program.

"Patients have a right to unbiased information from their pharmacy about their medications,” said Attorney General Schneiderman. "Drug companies cannot pay pharmacies to promote drugs directly to patients.”

The agreement is the second settlement related to a case brought by the Office of the Attorney General against Novartis under the New York State False Claims Act, U.S. ex rel. Kester, et al. v. Novartis Pharmaceuticals Corporation, et al. In January 2014, another pharmacy, BioScrip, Inc., agreed to pay $15 million to resolve similar claims. The case against Novartis is ongoing.

Accredo, a specialty pharmacy headquartered in Memphis, Tennessee and a wholly owned subsidiary of Medco Health Solutions, Inc., ships prescription drugs to Medicaid patients in New York and around the country. Exjade was approved by the U.S. Food and Drug Administration in late 2005 for the treatment of chronic iron overload due to blood transfusions.

When Novartis launched Exjade, it created a closed distribution network, consisting of three pharmacies selected by Novartis, through which most Exjade prescriptions in the United States were filled. As a result, Novartis controlled which pharmacy filled many of the prescriptions for Exjade dispensed through the network. The settlement resolves allegations that Accredo participated in a scheme in which Novartis paid kickbacks to pharmacies by giving more prescription referrals to the pharmacy that kept patients on Exjade the longest. In its complaint against Novartis, the Office of the Attorney General has alleged that Novartis developed the scheme because Exjade patients often stopped taking the drug because of side effects.

In a stipulation filed in federal court in connection with the settlement, Accredo admitted many aspects of the scheme, including the following: In December 2005, Accredo and Novartis entered into a contract under which Accredo would be one of three pharmacies that would distribute Exjade in Novartis' network. Around June 2007, Novartis began issuing monthly "Exjade Scorecards" to the three pharmacies in the network that were designed to show how long Exjade patients continued to order refills. Accredo knew that Novartis's Exjade Scorecards did not exclude patients who stopped ordering refills due to side effects or patients who were directed to stop therapy by their doctors. In late 2007 and 2008, Novartis told Accredo that it was dissatisfied with Accredo's performance on the Exjade Scorecards and asked Accredo to implement an improvement plan that involved nurses, who made calls to Exjade patients.

In addition, a Novartis executive told Accredo that Accredo could lose certain patient referrals if it continued to lag behind the other pharmacies in the Exjade Scorecards. These referrals were valuable to Accredo because having more patients resulted in higher sales revenue, additional dispensing fees, and additional rebates from Novartis. Call protocols developed by Accredo directed nurses to tell Exjade patients that it was extremely important to comply with their Exjade therapy regimen. The call protocols also directed nurses to tell patients about Exjade's common adverse reactions, such as diarrhea, but not the less common, but more severe, adverse reactions like renal or hepatic impairment. In late 2008, Novartis informed Accredo that Novartis would give 60 percent of certain patient referrals to the pharmacy that had the top scores in the Exjade Scorecards. In early 2010, Novartis informed Accredo that it would receive certain additional patient referrals because Accredo obtained the top score in the Exjade Scorecards.

The case was initiated by a whistleblower, David Kester, who used to work for Novartis. The case is captioned, U.S. ex rel. Kester, et al. v. Novartis Pharmaceuticals Corporation, et al., No. 11-CIV-8196, and is pending in federal court in the Southern District of New York. The Medicaid Fraud Control Unit worked closely with the U.S. Attorney's Office for the Southern District of New York on the settlement. Of the $3.4 million related to the New York Medicaid program, about $1.8 million will go to New York and $1.6 million will go to the federal government.

Special Assistant Attorney General Christopher Y. Miller co-led a multi-state team that negotiated the settlement with Accredo. Special Auditor-Investigator Colin Ware and Chief Auditor Michael LaCasse also served as team members, along with representatives from California, Indiana, Oklahoma, Washington, and Wisconsin. The case was also handled by Special Assistant Attorney General Diana Elkind and Special Investigators Lisa McDonald and Kenneth Deis with support from Supervising Investigator Peter Markiewicz and Chief of Downstate Investigations Kenneth Morgan. MFCU is led by Acting Director Amy Held and is within the Division of Criminal Justice, which is led by Executive Deputy Attorney General Kelly Donovan.