Fishing trips to Florida. Dinner and drinks at Hooters. Layoffs at Lincoln.
The month of April can’t end fast enough for Novartis, after the Swiss pharmaceutical giant was slapped with two federal lawsuit alleging illegal kickback schemes aimed at enticing doctors into prescribing its drugs.
The company also revealed that it would scale back production at its troubled Excedrin manufacturing plant in Lincoln, Nebraska.
First, about the lawsuits.
Last week federal prosecutors in New York announced the filing of two civil lawsuits against Novartis (NYSE:NVS), alleging the company spent millions of dollars on speaking fees and “lavish” dinners for doctors to promote its hypertension drugs Lotrel and Valturna, as well as its diabetes drug Starlix.
The company was also accused of inducing pharmacies to switch kidney transplant patients to its immune-suppressant drug Myfortic in exchange for kickbacks disguised as rebates and discounts.
“Kickback schemes like those alleged in this case not only call into question the integrity of individual medical decisions, but they also raise the cost of health care for all of us,” said Stuart F. Delery, acting Assistant Attorney General. “Patients deserve care based on a doctor’s sound medical judgment, not the doctor’s personal financial interest.”
Drug makers have a long history of paying doctors for meals, travel, consulting, and speaking engagements. According to Pro Publica, in 2012 alone Novartis reported paying over $29 million to physicians.
Prosecutors say some of those payments were nothing more than kickbacks to the doctors to induce them to write prescriptions for Novartis drugs. In many cases Novartis made payments to doctors for speaker programs that either did not occur or had few or no attendees. Some were clearly social events.
“Many speaker programs were also held in circumstances in which it would have been virtually impossible for any presentation to be made, such as on fishing trips off the Florida coast. Other Novartis events were held at Hooters restaurants,” prosecutors said in a statement.
One speakers program was held on Valentine’s Day at a restaurant in West De Moines, Iowa. Novartis paid $3,127 for a meal for three — or $1,042 per person.
In a statement, Novartis described the speaker programs as “an accepted practice designed to inform physicians about appropriate use of medicines.” It also said the discounts and rebates given to pharmacies were a “customary, appropriate and legal practice.”
“We disagree with the way the government is characterizing our conduct in both of these matters,” said Andre Wyss, President of Novartis Pharmaceuticals Corporation (NPC). “NPC invests significant time and resources to help ensure we conduct our business in an ethical and responsible manner. We are committed to doing it right.”
This isn’t the first time Novartis has been accused of making kickbacks. In 2010 the company agreed to pay over $422 million in penalties and pleaded guilty to a misdemeanor for improperly promoting several drugs. As part of the settlement, the drug maker agreed to an internal compliance program and to report ethical violations.
Novartis also disclosed last week that it would eliminate 300 jobs – about 40% of the workforce – at its manufacturing plant in Lincoln, Nebraska.
In December, 2011 the plant was shut down for several months after manufacturing problems led to bottles of Excedrin containing stray tablets from other Novartis products. The shutdown led to a recall and shortages of Excedrin products around the world.
After spending millions of dollars trying to re-tool the Lincoln plant, Novartis now says it is “simplifying” production by shifting more of it to third-party manufacturers.
“The Lincoln site has made significant progress since the production suspension,” Novartis says in a statement. “However, we still have more remediation work to do. Novartis Consumer Health is working hard to deliver the quality consumers expect and deserve and to ensure the integrity and safety of the products we manufacture.”
“To speed our return to the U.S. market, we have engaged third-party manufacturers to produce Excedrin Migraine, Lamisil, Triaminic and Excedrin Extra Strength, which we resumed shipping in the fourth quarter of 2012. Benefiber will be the next re-launch (expected in the second quarter) followed by Theraflu in North America later in the year.”
Posters on the Excedrin Facebook page have a hard time understanding why it’s taking so long.
“What happened? I know the big thing with the massive recall, but did you have to rebuild from the ground up or something? Just don’t understand why it is taking so long to have all your old products back. I’m hoping you plan to bring back the green and white circular Excedrin Migraine pills sometime soon,” wrote Steve Crimmins.
Excedrin responded to that and other comments with the following:
“We understand your frustrations and appreciate your patience. We’re working on one product at a time and will post updates as we have them.”