Corruption: New York: Accredo to pay $60 million in kickback scheme involving prescription drug

U.S. Attorney’s Office
Southern District of New York

U.S. Also Elects to Intervene Against Novartis Pharmaceuticals Corporation in Claims that Novartis Gave Kickbacks to Accredo in Exchange for Increased Refills of Exjade Drug, and Understated Exjade’s Serious and Potentially Life-Threatening Side Effects to Patients

Accredo Admits to Conduct Regarding Its Distribution of Exjade

Preet Bharara, the United States Attorney for the Southern District of New York, Diego Rodriguez, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Scott J. Lampert, Special Agent in Charge of the U.S. Department of Health and Human Services, Office of Inspector General’s New York Regional Office (“HHS-OIG”) announced yesterday a $60 million settlement of a civil fraud lawsuit against ACCREDO HEALTH GROUP (“ACCREDO”) concerning a kickback scheme with NOVARTIS Pharmaceuticals Corp. (“NOVARTIS”) involving the prescription drug Exjade. In addition to filing a Notice of Intervention against and Stipulation and Order of Settlement and Dismissal with ACCREDO, the Government has elected to intervene against NOVARTIS over the same conduct previously filed by a whistleblower. As alleged in the lawsuit, NOVARTIS provided kickbacks, in the form of patient referrals and related benefits, to ACCREDO in exchange for ACCREDO’s recommending refills to Exjade patients. In connection with the scheme, the defendants understated the serious and potentially life-threatening side effects of Exjade when promoting the drug’s benefits to patients.

Simultaneous with the filing of the Notice of Intervention against ACCREDO, U.S. District Judge Colleen McMahon approved a settlement to resolve the United States’ claims against ACCREDO. Under that settlement, ACCREDO (i) agrees to pay $45,060,598.87 to the United States; (ii) admits numerous facts concerning its relationship with NOVARTIS; and (iii) agrees to cooperate with the United States in the prosecution of the claims against NOVARTIS. ACCREDO has also agreed in principle to pay $14,939,401.13 to a group of states to settle the states’ claims based on the same alleged conduct. In January 2014, the Government entered into a multimillion dollar settlement with another codefendant, Bioscrip Pharmacy, for similar conduct.

Manhattan U.S. Attorney Preet Bharara said: “This is the second substantial settlement with an alleged co-conspirator of Novartis in connection with a scheme that used the lure of kickbacks to co-opt a healthcare provider’s independence. As alleged in our intervention papers, Novartis used Accredo to promote refills under the guise of purported ‘counseling’ and ‘education,’ and in doing so, Novartis caused patients to receive one-sided advice that did not discuss Exjade’s serious, potentially life-threatening, side effects. This settlement with Accredo restores to the public fisc tens of millions of dollars paid out for kickback-tainted drugs.”

FBI Assistant Director-in-Charge Diego Rodriguez said: “Drug companies are required by law to provide safe and effective medications for the sole purpose of healing the ailments of their patients. Likewise, pharmaceutical companies are prohibited from employing tactics that could improperly influence a provider’s decisions. Through its relationship with Novartis, Accredo Health Group acted in its own best interest. It set aside the needs of its patients and intentionally adjusted its practices in order to conceal information from consumers. This scheme also placed a hefty price tag on our Medicare and Medicaid programs, causing more than tens of millions of dollars to be spent on Exjade shipments. Today’s settlement demonstrates the government’s commitment to protect our citizens from this type of fraud and ensure everyone receives the quality medical care they need.”

HHS-OIG Special Agent in Charge Scott J. Lampert said: “The conduct displayed by Accredo compromised patient care and undermined the integrity of our nation’s health care programs. This settlement should serve as a warning to all providers that choose to let financial inducements cloud their medical judgment.”

As alleged in the Government’s second amended Complaint and in the relator’s third amended Complaint, NOVARTIS markets and manufactures Exjade, an iron chelation drug approved for use by patients who have iron overload resulting from blood transfusions. For approximately five years until 2012, NOVARTIS orchestrated a scheme whereby it offered kickbacks, in the form of patient referrals and other benefits to certain specialty pharmacies, including ACCREDO and Bioscrip, in exchange for increasing their Exjade refills through biased recommendations to patients. ACCREDO and Bioscrip were part of a NOVARTIS-created exclusive distribution network for Exjade called the Exjade Patient Assistance and Support Services (“EPASS”), and through this network NOVARTIS was able to refer Exjade patients to particular pharmacies within the network.

In particular, the Government has elected to intervene in the relator’s third amended Complaint with respect to its allegations concerning NOVARTIS and ACCREDO’s participation in an Exjade patient referral allocation scheme through which NOVARTIS gave ACCREDO additional patient referrals and related benefits in return for ACCREDO achieving the highest refill percentage for Exjade patients as compared to the refill percentages among Exjade patients at the other two pharmacies in the closed distribution network that NOVARTIS had established for Exjade.

As part of its settlement with the United States, ACCREDO made extensive factual admissions, including that:

• ACCREDO was one of three specialty pharmacies permitted to dispense Exjade as part of EPASS, NOVARTIS’s distribution network for Exjade.
• NOVARTIS controlled how many of the patient prescriptions received by EPASS were distributed among ACCREDO and the other two EPASS pharmacies.
• In June 2007, NOVARTIS began issuing monthly “Exjade Scorecards” to the EPASS pharmacies that measured, among other things, the pharmacies’ “adherence” scores. Based on discussions with NOVARTIS, ACCREDO knew that the “adherence” scores in the Exjade Scorecards were designed to show how long ACCREDO’s Exjade patients continued to order refills. ACCREDO also knew that, in calculating the adherence scores, NOVARTIS did not exclude patients who stopped ordering refills due to side effects or patients who were directed to stop therapy by their physicians.
• In late 2007 and early 2008, NOVARTIS indicated to ACCREDO that NOVARTIS was dissatisfied with ACCREDO’s performance in terms of its “adherence” scores in the Exjade Scorecards. NOVARTIS executives asked ACCREDO executives to implement an Exjade adherence improvement plan that involved additional nurse intervention. NOVARTIS executives also told ACCREDO that ACCREDO could lose undesignated patient referrals from EPASS if it continued to lag behind other EPASS pharmacies in the Exjade Scorecards.
• At a meeting in March 2008 with ACCREDO, a NOVARTIS executive made statements emphasizing the importance to NOVARTIS of ACCREDO’s adherence performance. Later that month, NOVARTIS told ACCREDO that NOVARTIS was formulating a plan to allocate undesignated patient referrals to the EPASS pharmacies based on their rankings in the Exjade Scorecards. Specifically, the EPASS pharmacy with the top adherence score in the Exjade Scorecards would receive a larger share of the undesignated patient referrals as compared to the other EPASS pharmacies. In addition, between April and June 2008, NOVARTIS managers told ACCREDO that ACCREDO’s performance in the Exjade Scorecards was below NOVARTIS’s expectation and this affected NOVARTIS’s ability to meet its sales targets for Exjade.
• In July 2008, NOVARTIS executives reiterated in statements to ACCREDO that NOVARTIS was dissatisfied with ACCREDO’s performance in relation to Exjade. Later that month, ACCREDO hired a new nurse for Exjade and assigned that nurse to make a sequence of calls to each Exjade patient.
• In making calls to Exjade patients, the nurse at ACCREDO was supposed to follow a set of call protocols that ACCREDO had developed. ACCREDO’s 2008 call protocols directed the nurse to tell patients that compliance with Exjade therapy regimen is extremely important and that, if untreated, iron overload could result in arthritis, liver or heart problems, high blood sugar, persistent abdominal pain, severe fatigue, and skin discoloration. With regard to adverse reactions, ACCREDO’s 2008 Exjade call protocols directed the nurse to advise patients about Exjade’s common adverse reactions, including diarrhea, abdominal pain, fever, and rash, but not the less common, but more severe, adverse reactions like renal or hepatic impairment.
• In October 2008, NOVARTIS informed ACCREDO about, and ACCREDO agreed to, a new patient referral allocation plan that NOVARTIS had formulated. Under that plan, NOVARTIS would allocate 60 percent of all undesignated patient referrals to the EPASS pharmacy with the top “adherence” scores in the Exjade Scorecards and allocate 20 percent of the undesignated patient referrals to each of the other two EPASS pharmacies.
• In February 2009, an Exjade executive from NOVARTIS visited ACCREDO and met with the Exjade nurse at ACCREDO. During that meeting with the NOVARTIS executive, the Exjade nurse at ACCREDO described how she handled calls with Exjade patients.
• In January 2010, the FDA required NOVARTIS to add a “black box warning” to the Exjade label to highlight that Exjade may cause renal impairment (including renal failure), hepatic impairment (including hepatic failure), and gastrointestinal hemorrhage. The FDA-mandated warning also stated that these reactions were fatal in some reported cases.
• After January 2010, no representative of NOVARTIS asked or suggested to ACCREDO that its Exjade call protocols should be revised to require the Exjade nurses to discuss the serious risks listed in Exjade’s “black box warning” when they called patients to discuss Exjade therapy.
• In February 2010, ACCREDO updated its Exjade call protocols. In terms of the adverse reactions for Exjade, the February 2010 ACCREDO Exjade call protocols continued to direct the Exjade nurses to advise patients about the common adverse reactions, such as diarrhea and rash, but not the less common, but more severe, adverse reactions discussed in the “black box warning,” such as renal or hepatic failure. As revised, the February 2010 Exjade call protocols directed the nurses to tell Exjade patients that “compliance with Exjade is very important in order to prevent the following complications that result from untreated iron overload: arthritis, high blood sugar, persistent abdominal pain, severe fatigue, skin discoloration, stroke, or death.”
• In early 2010, NOVARTIS notified ACCREDO that, under the plan they agreed on in 2008, ACCREDO would receive additional undesignated patients because ACCREDO had obtained the top adherence score in the Exjade Scorecards in the fourth quarter of 2009. Specifically, based on communications with NOVARTIS, it was ACCREDO’s understanding that it was entitled to receive 60 percent of all undesignated patients in the second, third, and fourth quarters in 2010, and for all four quarters in 2011.
• In late March 2012, NOVARTIS notified ACCREDO that, starting in April 2012, it would stop allocating additional Exjade patient referrals to the EPASS pharmacy with the highest Exjade Scorecard ranking, as NOVARTIS and ACCREDO had agreed to in October 2008.
• One month later, in April 2012, ACCREDO stopped assigning nurses to call Exjade patients to discuss their Exjade therapy.

The Government seeks treble damages and penalties under the False Claims Act for the tens of millions of dollars in reimbursements that Medicare and Medicaid paid for Exjade shipments that resulted from the kickback scheme involving NOVARTIS and ACCREDO.

The allegations of fraud stated in the Complaint were first brought to the attention of federal law enforcement by David Kester, the whistle-blower who filed a lawsuit under the False Claims Act. The False Claims Act permits the Government to recover up to three times the amount of damages incurred by the United States, plus civil penalties ranging from $5,500 to $11,000 per violation. Private parties who have knowledge of fraud committed against the Government may file suit on behalf of the Government and share in any recovery. The United States may then intervene and file its own lawsuit for treble damages and penalties, as it did in this case.

Mr. Bharara praised the investigative work of the, HHS-OIG, and the Medicaid Fraud Control Units for New York, Washington, California, and Ohio. He also thanked the Commercial Litigation Branch of the U.S. Department of Justice’s Civil Division in Washington, D.C., for its assistance in this case.

The case is being handled by the Office’s Civil Frauds Unit. Mr. Bharara established the Civil Frauds Unit in March 2010 to bring renewed focus and additional resources to combating healthcare and other types of frauds. Assistant U.S. Attorneys Li Yu, Rebecca C. Martin, David J. Kennedy, Jeffrey K. Powell, and Peter Aronoff are in charge of the case.