Novartis Asked To Pay $3.35 Billion Fine For Drug Kickbacks

US authorities claim that the Swiss-based firm used kickbacks to boost sales of its two prescription drugs.

Novartis (NYSE:NVR) has been told by US authorities that the Swiss based firm has been using kickbacks for giving a shot to its sales of two prescription drugs. Based on documents filed in the New York Federal Court, the kickbacks were allegedly used in the shape of rebates that lead to the overpayment of federal health care programs for the medicines that are covered by Medicaid and Medicare.

According to the breakdown, the Justice Department is seeking up to more than $1.50 billion in damages, which is thrice the amount that Medicaid and Medicare spent for purchasing drugs, due to the kickbacks from 2004 till 2013. Another is a claim of more than $1.80 billion, which will go to fines for false claims that were put on by Novartis and were submitted to healthcare programs for reimbursement. This should help to cover, for each false claim, at around somewhere between $5500 and $11000, which will probably total up to $166,000.

The government says that Novartis refers it patients to three specialty pharmacies and paid kickbacks to them in return for exchanging recommendations regarding the drugs to their patients. This falls flat in violation of the Anti-Kickback Statue and the False Claims Act.

However, Novartis says that the rebates offered to the pharmacies were legitimate and denied any violation of laws related to its sales of two prescription drugs, Exjade and Myfortic.

Exjade is used for the removal of excess iron from patients’ blood, whereas Myfortic is used for the prevention of a rejection of a kidney transplants. The Swiss company says that it is looking forward to the full presentation of evidence to them, before issuing a rebuttal.

David Kester, who worked as sales manager for Novartis, knew the revelation during a whistleblowing scheme. The US federal government and 11 states also sued Novartis in 2011.

In another lawsuit filed by a different employer, the company is also alleged for paying bribes in the form of speaking engagements by medical experts, as well as in the form of royalties to the hospitals. A jury trial is due by early November this year, though in normal practice, the federal government settles the False Claims case before a trial is conducted.

Novartis stock price ended the day at $99.80, a gain of 1.30% from the previous day, despite the lawsuit and the upcoming trial on November 2. Experts and analysts are ambitiously eyeing the future endeavors of the company regarding this matter.