Department of Justice seeks $3.35 billion from Novartis in alleged kickback case

The US Department of Justice has filed a law suit in federal court to hit Novartis (NOVN: VX) with $3.35 billion in damages and civil fines over alleged kickback schemes for Exjade (deferasirox) and Myfortic (mycophenolic acid), according to CNBC and other media reports.

It is alleged that Novartis paid kickbacks to three pharmacies as rebates to induce them to recommend refills of Exjade, and that similar offers were made to five other pharmacies to encourage the recommendation of Myfortic over competitors such as CellCept (mycophenolate mofetil) from Roche (SIX: ROG) and generics. The accusations arise from a whistleblower law suit filed in 2011 by David Kester, a former Novartis sales manager.

The kickbacks, which are alleged to have taken place between 2004 and 2013, could lead to Novartis being hit with $1.52 billion in damages for the kickbacks and $1.83 billion for the fines. Novartis signed a Corporate Integrity Agreement in 2010 which may factor into the case: agreements of this nature generally run for five years and require a company to establish an internal compliance program as well as to report violations. The violations within the current law suit occurred before and after the agreement was signed. Theoretically, Novartis could face exclusions as a result of losing this case, which would mean it could be barred from having contracts with federal health care programs, but the documents filed by the Department of Justice only mention damages and fines, rather than exclusion. The company lost its bid to dismiss the case last year as a federal judge said the Department of Justice was at liberty to pursue most of its civil fraud lawsuit against it.