Washington State

Office of the Attorney General

Attorney General

Bob Ferguson

Nov 20 2015

Company pressured pharmacies to downplay risk to patients


SEATTLE — Attorney General Bob Ferguson today announced Washington has reached an agreement in principle Novartis Pharmaceuticals Corporation’s kickback scheme to promote its drug, Exjade. The final agreement is pending execution by the company, and would provide Washington with $1.2 million in Medicaid reimbursement, which will be shared with the federal government.

Between 2007 and 2012, Novartis paid kickbacks to three large national specialty pharmacies — BioScrip, Accredo, and US Bioservices.  These payments incentivized the pharmacies to exaggerate the dangers to patients of curtailing Exjade use and to downplay Exjade’s serious side effects.

The company admitted many aspects of the scheme in federal filings, including the competitive scorecards it used to track which of the three pharmacies could keep patients on the drug the longest, and the pressure it exerted on pharmacies to call patients and encourage them to stay on the drug.

“I will not tolerate schemes that put profits before patients.” Ferguson said. “My office is committed to cracking down on those who endanger patients for the sake their bottom line.”

Novartis has agreed to pay $390 million to the federal government and the states, including the 11 states that sued Novartis in January 2014. Washington was one of the 11 states that sued, and its share of the settlement is $1.2 million.

Washington was able to participate in the investigation of Novartis in large part thanks to the state’s Medicaid False Claims Act, which is set to expire in June 2016 unless renewed by the Legislature. Washington’s civil enforcement actions pursuant to the Act have returned $3 to the state’s Medicaid program for every $1 the state spent on enforcement.

Two of the specialty pharmacies named as defendants in the case, BioScrip and Accredo Health Group, have already agreed to pay $15 million and $60 million, respectively, to resolve claims that they accepted kickbacks from Novartis to promote Exjade. Washington received a total of $143,349 from those agreements.


Intense competition over patients, scorecards

In 2005, Exjade was approved by the U.S. Food and Drug Administration (FDA) for the treatment of chronic iron overload due to blood transfusions. After launching the drug, Novartis marketed Exjade as a treatment for patients with a number of underlying conditions that affect blood cells or bone marrow, including beta-thalassemia, sickle cell disease, and myelodysplastic syndromes.

Novartis selected the three national pharmacies and created an exclusive distribution network called EPASS (Exjade Patient Assistance and Support Services).

Washington alleged that Novartis had significant control over how many patients and prescriptions each pharmacy would receive.

The kickback scheme began after Exjade failed to meet the company’s internal sales goals and Novartis discovered that refill rates for Exjade were lower than anticipated.

Novartis pressured the pharmacies by threatening to exclude them from the EPASS network or to reduce the number of patient referrals they received from EPASS. It also set up a contest in which the pharmacy that kept patients on Exjade the longest would receive additional new patient referrals from EPASS.

The contest winner was determined by scorecards that Novartis sent to each pharmacy. Novartis also paid rebates, which made each patient referral valuable and incentivized the specialty pharmacies to encourage patients to stay on Exjade. The contest and the rebates were not disclosed to Exjade patients or their doctors.

Washington further alleged that Novartis lawyers had raised concerns about the contest nearly a year before it was implemented. Novartis went forward with the contest anyway after one senior executive was brought in to challenge the legal advice and another determined that the benefits of the scheme to Novartis outweighed the risk of violating anti-kickback laws.

To appease Novartis, all three pharmacies put together plans to increase refill rates that included having nurses place phone calls to patients or doctors to try and convince them to stay on Exjade.

For example, BioScrip told Novartis that it would make claims about Exjade preventing organ damage, despite the FDA instructing Novartis that it should not make such claims in Novartis' promotional materials. Accredo directed nurses to tell patients about the common side effects of the drug, but not the more severe side effects, such as kidney or liver problems.


Breakdown of Washington’s recovery

Washington’s share of the pending multistate agreement is $1.2 million, plus litigation costs of $52,000. After returning the federal share — Medicaid is jointly funded by the state and federal governments — Washington’s Medicaid program will receive $525,538.

The agreement was negotiated by a multi-state team led by representatives from the Offices of the Attorneys General for Washington, California, Indiana, New York, Oklahoma and Wisconsin. Senior Counsel Carrie Bashaw represented the State of Washington in the litigation and its resolution.


Medicaid False Claims Act

The initial investigation was triggered by a whistleblower claim, which led the United States to file suit and the 11 litigating states to intervene and file separate complaints in the U.S. District Court for the Southern District of New York: U.S. ex rel. Kester, et al. v. Novartis Pharmaceuticals Corporation, et al., No. 11-CIV-8196.

Washington was invited to join in the investigation at a critical early stage because Washington had adopted the Medicaid False Claims Act, a federal prerequisite for state participation prior to the filing of a lawsuit.

If the state’s Medicaid False Claims Act is not renewed in the coming legislative session, Washington risks a significant financial hit.  According to a joint legislative audit report, since the Medicaid False Claims Act has been in effect, the state has had a 28 percent increase in civil fraud recoveries, at least $2.8 million of which would not have come back to the state without the act.

The state would also lose its full partnership with the National Medicaid Fraud Control Unit, reducing its ability to be fully represented in other large, national Medicaid fraud cases. Whistleblower protections provided by the FCA would also disappear.

Unless the Legislature takes action, the current act will expire June 30, 2016.



The Office of the Attorney General is the chief legal office for the state of Washington with attorneys and staff in 27 divisions across the state providing legal services to roughly 200 state agencies, boards and commissions. Attorney General Bob Ferguson is working hard to protect consumers and seniors against fraud, keep our communities safe, protect our environment and stand up for our veterans. Visit www.atg.wa.gov to learn more.




Peter Lavallee, Communications Director, (360) 586-0725; PeterL@atg.wa.gov