Novartis has agreed to pay $35 million to settle charges of illegally promoting a prescription skin cream for use with infants and toddlers. The deal marks the second time in the past year the drug maker has struck a deal with US authorities to resolve allegations of improperly marketing its medicines.
The agreement, announced on Wednesday, stems from a whistleblower lawsuit filed by a former Novartis (NVS) sales representative, who accused the company of deliberately trying to widen the market for Elidel by encouraging prescriptions for children younger than 24 months, even though the medicine was not approved for that patient population. At one point, regulators issued a warning about the risk of cancer in small children.
“We were instructed that Elidel was so safe it could be put on up to 80 percent of a baby’s body. And we were never told that it might cause cancer,” said Donald Galmines, 44, the former rep, in a statement. He added that he was trained to invite doctors and their families or staffs to dinners at expensive restaurants, even though during the course of the meal, Elidel might not even be brought up.
The illegal marketing occurred between 2002 and 2009 and, as a result, the federal government charged the drug maker caused Medicaid and Tricare, which provides civilian health benefits for US military personnel, to overpay for the treatment. Several states are also sharing in the settlement, according to court documents filed in federal court in Philadelphia, where the lawsuit was brought.
The settlement notwithstanding, Novartis denied the allegations in the settlement agreement.
The settlement comes amid a difficult stretch for Novartis. The drug maker last year paid $390 million to settle charges of paying kickbacks to boost sales of two other drugs. And the company is facing a trial stemming from yet another whistleblower lawsuit filed by a different former sales rep, who similarly alleged Novartis illegally marketed medicines.
Those cases gained considerable attention because US Attorney Preet Bharara, who is based in New York, claimed Novartis is a repeat offender when he announced the government had joined the lawsuits in 2013. He was referring to a 2010 case in which the company paid $422.5 million for allegedly marketing six drugs off-label and paying kickbacks to health care professionals.
The United States is not the only venue where Novartis has encountered such charges. Last March, the drug maker agreed to pay $25 million to settle charges that it violated the Foreign Corrupt Practices Act by making illegal payments to health care providers in China. Employees gave money, gifts, vacations, and entertainment to health care professionals between 2009 and 2011, according to US authorities.
Although these cases depict events that occurred several years ago, Novartis has recently encountered a new spate of allegations. The company faces a bribery probe in Turkey, and, two months ago, six former and current Novartis executives at its Korean unit were indicted on charges of paying more than $2 million to doctors in return for prescribing its medicines. Among them was the former chief executive in the country.
“Novartis appears to be a clown car of fraud,” said Patrick Burns of Taxpayers Against Fraud, a nonprofit that advocates for tough penalties and is partially funded by attorneys. “There have been — and still are — multiple cases involving this company and it shows how broken their corporate culture has been.”
We should note that the same sales rep, Galmines, whose litigation initiated the latest settlement, had previously filed a separate whistleblower lawsuit concerning Elidel marketing for infants. That case, which was brought in Texas, was settled in 2012 for $19 million in damages.
It is also worth pointing out that Novartis is hardly the only global drug maker that has been probed or fined by various governments for paying bribes to boost prescriptions. Over the past few years, several drug makers were enmeshed in bribery scandals. The most notorious example involved GlaxoSmithKline (GSK), which, three years ago, was found guilty by a Chinese court of bribing doctors and hospitals, and was fined more than $490 million.