Novartis AG has tentatively agreed in principle to pay out $390 million to settle a whistleblower’s False Claims Act (FCA) suit. It’s alleged that improper kickbacks were made to pharmacies in order to boost sales of several prescription drugs. The U.S. Department of Justice (DOJ) joined the case in 2013. The case had been set for trial this month. The “settlement in principle” is with the DOJ, various intervening states and whistleblower David Kester, a former Novartis sales manager.

If finalized, the settlement will resolve allegations of improper discounts and rebates to specialty pharmacies in connection with immunosuppressant Myfortic, iron overload drug Exjade and several other medications. The drugmaker was specifically accused of corrupting pharmacist judgment by tying financial incentives to the dispensing of Novartis drugs that were often costlier and less effective than rival products.

The settlement comes about five years after Novartis agreed to a $420 million settlement of FCA and misdemeanor criminal allegations involving off-label promotion and kickbacks to doctors. The company entered into a five-year corporate integrity agreement as part of that settlement.

Co-defendants Accredo Health Group Inc. and BioScrip Inc. had previously agreed to pay $60 million and $15 million and were dismissed from the case. They also agreed to cooperate with the DOJ’s case against Novartis. The whistleblower, Kester, is represented by William Christopher Carmody, Arun Subramanian, Steven Shepard, Elisha Barron, Shawn L. Raymond, James Hoke Peacock III, Jonathan Bridges, Kristin Malone and Matthew R. Berry of Susman Godfrey LLP and Shelley R. Slade, Robert L. Vogel, Andres C. Healy and Janet L. Goldstein of Vogel Slade & Goldstein LLP.

The government is represented in the case by David J. Kennedy, Tara Marie La Morte, Ellen Melissa London, Jeffrey Kenneth Powell, Li Yu, Peter Max Aronoff, Rebecca C. Martin and Robert William Yalen of the DOJ and the U.S. Attorney’s Office. The case is in the U.S. District Court for the Southern District of New York.


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