Vasilios J. Kalogredis, left, and Rachel E. Lusk Klebanoff, right, of Lamb McErlane.

After nearly a decade of litigation, Novartis Pharmaceuticals Corp. (Novartis) has agreed to pay over $678 million in separate settlements to resolve claims that it systematically violated the federal False Claims Act and the Anti-Kickback Statute after the company spent more than $100 million on lavish meals, fishing junkets, golf outings, wine tastings, sporting events and speaker fees to influence thousands of doctors to prescribe its medicines.

The settlement resolves the lawsuit captioned Bilotta v. Novartis Pharmaceuticals, No. 1:11-cv-0071-PCG (S.D.N.Y.) initially filed in 2011 by a former Novartis sales representative under the private whistleblower provisions of the False Claims Act, which permits private parties to file suit on behalf of the United States for false claims and share in a portion of the government's recovery. The U.S. government joined the civil suit in 2013.

According to Oswald Bilotta, the former Novartis sales representative who filed the initial lawsuit, Novartis sales representatives hosted tens of thousands of speaker programs and "roundtables" between 2002 and 2011, purportedly to share medical information about the company's products. But at many of these events, often held at high-end restaurants, country clubs and even strip clubs, the focus was on providing doctors with cash payments in the form of bogus speaking honoraria and other perks to induce them to prescribe its cardiovascular and diabetes drugs.

Sometimes, there was no event at all; just a speaking fee from Novartis to a doctor for a medical presentation that was never given with the intent to induce doctors to write more Novartis prescriptions or run the risk of being dropped from the "speaker program."

On behalf of the government and to prove his case, Bilotta secretly recorded himself making cash payments to two doctors and got confirmation from four others of having accepted prior remuneration.

Prosecutors found that five Pennsylvania doctors were paid for speaking at a total of 100 events in only five years. The physicians took turns being the purported speaker, receiving $1,000 in speaking fees each time. Meanwhile, in an unidentified location, a single doctor who prescribed Novartis drugs 8,000 times allegedly received $320,000 in fees for dubious engagements.

The U.S. government alleged that these "sham" educational events constituted illegal kickbacks, which led to fraudulent prescription claims paid by Medicare, Medicaid and the U.S. Department of Veterans Affairs.

"For more than a decade, Novartis spent hundreds of millions of dollars on so-called speaker programs, including speaking fees, exorbitant meals and top-shelf alcohol that were nothing more than bribes to get doctors across the country to prescribe Novartis's drugs," said Audrey Strauss, the acting Manhattan U.S. Attorney, in a statement announcing the settlement. "Giving these cash payments and other lavish goodies interferes with the duty of doctors to choose the best treatment for their patients and increases drug costs for everyone."

According to the complaint, physicians who participated in the alleged sham speaker programs wrote prescriptions for several drugs, including Lotrel, Diovan, Tekturna, Exforge, Valturna, Tekamlo and Starlix, that were filled at pharmacies across the country. After filling and dispensing the prescriptions, the pharmacies then submitted claims for reimbursement to Medicare and other government-funded health care programs.

The pharmacies' claims resulted in payments by the government for prescriptions that were allegedly induced through fraud, i.e., Novartis' alleged illegal payments to physicians who wrote the prescriptions. Since Novartis' actions allegedly caused the submission of false claims to the government via the dispensing pharmacies, those actions were alleged to constitute violations of the False Claims Act and the Anti-Kickback Statute, 42 U.S.C. Section 1320a-7b, which criminalizes, among other things, "knowingly or willingly" offering or paying a person "remuneration," in the form of kickbacks, bribes, or rebates, to "induce" that person to "recommend" the purchase of a drug covered by a "federal health care program."

The case settled on the eve of trial and resulted in the negotiation of an agreement requiring Novartis to engage in a number of important changes in practice with respect to its speaker programs. For example, under the terms of a corporate integrity agreement entered into with the Department of Health and Human Services Office of Inspector General, all Novartis speaking events must be conducted virtually, and the amount of money Novartis can pay doctors for making presentations has been limited.

Novartis also made extensive admissions in the settlement, acknowledging its sales representatives knowingly made payments to induce doctors to prescribe more.

Of the $678 million, Novartis will pay $591 million to the United States as False Claims Act damages, $38.4 million will be forfeited to the United States as proceeds for violations of the Anti-Kickback Statute, and the remaining $48 million will go to various states to resolve Medicaid claims.

The settlement comes less than a week after the pharmaceutical company agreed to pay nearly $347 million to the Department of Justice and the Securities and Exchange Commission over charges that it bribed doctors and state-owned hospitals in Greece, Vietnam and South Korea to prescribe its products and created false records to cover the bribes.

In addition to settling the kickback allegations, Novartis agreed to pay $51 million to resolve claims by prosecutors in Boston that it violated federal law by paying the Medicare copays for its own drugs to get patients covered by federal insurance programs to buy their drugs. In the Boston settlement, Novartis acknowledged using three charitable foundations to pay Medicare patients' co-pays in violation of federal anti-kickback statutes between 2010 and 2014.

 Vasilios (Bill) J. Kalogredis, is the chairman of Lamb McErlane's health law department. He represents many medical and dental groups and thousands of individual physicians and dentists. He can be reached at [email protected].

Rachel E. Lusk Klebanoff is a senior associate at the firm who focuses on health law and health care litigation. She represents physicians, dentists, group practices, and other health-related entities in transactional, regulatory and compliance matters. She can be reached at [email protected].