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January 08, 2014
State and federal Medicaid to share $15M from BioScrip to resolve kickback allegations

Washington serves on settlement team, secures $98K for state Medicaid program

OLYMPIA — Washington state will receive a total of roughly $98,000 as part of a $15 million state-federal settlement with BioScrip, Inc., a pharmacy that provided prescription drugs to Medicaid patients.

The settlement resolves allegations that BioScrip received kickbacks from Novartis Pharmaceuticals Corporation to promote Novartis' drug Exjade directly to patients under the guise of a patient education program. Exjade was approved by the Food and Drug Administration in late 2005 for the treatment of chronic iron overload due to blood transfusions. 

Washington’s total share of the settlement is roughly $98,000 with nearly $43,000 returning directly to the state Medicaid program. Another $55,000 will be returned to the federal government for its share of Washington’s Medicaid program. The federal government matches state funds to support the Medicaid program in Washington.

Washington was one of the six states leading settlement negotiations.

“The Attorney General’s Medicaid Fraud Control Unit goes after health care fraud and abuse and recovers millions of dollars for Washington’s Medicaid program and the vulnerable patients it serves,” said Attorney General Bob Ferguson. “Defrauding Medicaid will not be tolerated, and bad actors will be held accountable.”

Kickbacks provided to promote drug, downplay side effects

The government alleges the kickback scheme began in 2007, when Novartis became concerned that patients were discontinuing use of Exjade because of side effects

The government’s investigation alleges the kickbacks were provided to induce BioScrip to try to keep patients on the drug as long as possible. The investigation revealed BioScrip employees made thousands of phone calls to Exjade patients and downplayed the side effects of the drug. 

Small network distributed drug creating intense competition

Until 2012, when it sold most of its pharmacy business, BioScrip operated a specialty pharmacy that shipped prescription drugs to Medicaid patients around the country.

When Novartis launched Exjade, it created a closed distribution network, including BioScrip and two other specialty pharmacies selected by Novartis, to fill most prescriptions of the drug in the U.S.

Novartis controlled which pharmacies filled many of the prescriptions for Exjade through this small network. The government alleged that Novartis used its control of Exjade prescriptions as well as various rebates and discounts to pay kickbacks to BioScrip. 

Novartis used Exjade Scorecard to refer additional patients to pharmacies

The state-federal investigation found Novartis created an ‘Exjade Scorecard’ to measure how long patients took Exjade. Novartis used this scorecard to refer more new patients to the pharmacy that kept patients on the drug the longest. 

BioScrip often won this competition and received valuable new patient referrals as a result. A former BioScrip supervisor stated under oath that this competition and the rebates provided by Novartis “caused [BioScrip] to be focused exclusively on the number of orders and refill rates, rather than on patient care.”

Joint state-federal investigation

The joint state-federal investigation of this matter was conducted by a team appointed by the National Association of Medicaid Fraud Control Units (NAMFCU), the U.S. Attorney’s Office for the Southern District of New York, the U.S. Department of Justice, the Federal Bureau of Investigation, and other federal agencies. 

The investigation was triggered by a whistleblower lawsuit, U.S. ex rel. Kester, et al. v. Novartis Pharmaceuticals Corporation, et al., No. 11-CIV-8196 (U.S.D.C. S.D.N.Y.), filed under the federal False Claims Act and similar state false claims statutes. 

The NAMFCU team participated in the settlement negotiations with BioScrip on behalf of the settling states. Team members included representatives from the Offices of the Attorney General for the states of Washington, Nebraska, New York, North Carolina, South Carolina and Texas. 

Fighting Medicaid fraud in Washington

The Attorney General's Medicaid Fraud Control Unit is responsible for the investigation and prosecution of healthcare provider fraud committed against the state’s Medicaid program. In addition, the unit coordinates the investigation and prosecution of abuse and neglect involving vulnerable adults residing in Medicaid-funded residential facilities with local law enforcement authorities through a statewide contact network.

• Report suspected Medicaid fraud: 1-800-562-6906 or send an email to
• You can also report provider fraud via the Attorney General’s Office Web site.

The Department of Social and Health Services Office of Fraud & Accountability investigates client fraud.  You can report Medicaid Client Fraud via the Department’s Online Complaint Form, call the Welfare Fraud Hotline at 1-800-562-6906 or send the complaint to Welfare Fraud Hotline, P.O. Box 45817, Olympia, Washington 98504-5817.


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