A U.S. subsidiary of Novartis AG (NVS, NOVN.VX) has agreed to pay $422.5 million to resolve criminal and civil charges that it illegally marketed the epilepsy drug Trileptal and paid kickbacks to doctors.
The Justice Department and the company announced the agreement Thursday in which Novartis Pharmaceuticals Corp. will plead guilty to a misdemeanor charge and pay $185 million in criminal penalties.
The company will pay another $237.5 million to resolve civil allegations that it promoted Trileptal for off-label uses not approved by the U.S. Food and Drug Administration. The Justice Department also alleged Novartis paid kickbacks to doctors to encourage them to prescribe Trileptal and five other drugs. Kickbacks were provided through mechanisms such as speaker programs; advisory boards; and entertainment, travel and meals, the department said.
Prosecutors alleged Novartis was disappointed in the early sales of Trileptal when it launched in 2000, so the company decided to promote the drug for unapproved uses such as the treatment of nerve pain and bipolar disease. The drug maker trained, managed and rewarded its sales staff for those off-label promotional efforts, which continued until at least June 2004, prosecutors alleged.
They alleged Novartis profited by hundreds of millions of dollars through the misbranding and off-label promotion of Trileptal.
The Justice Department also alleged the drug maker's unlawful marketing activities caused false claims to be made to government health-care programs.
Thursday's civil settlement resolves four whistle-blower lawsuits filed by former Novartis employees. Under the federal False Claims Act, private litigants can obtain financial rewards by reporting that false claims have been made to the government.
The former employees will receive a total of more than $25 million.
As part of the Thursday's agreement, Novartis Pharmaceuticals will enter into a corporate integrity agreement that imposes several requirements. Among them, the company must post on its website information about payments it makes to doctors.
"Pharmaceutical companies have a legal obligation to promote the drugs they manufacture only for uses that the Food and Drug Administration has deemed are safe and effective," U.S. Attorney Zane David Memeger said in a statement. "That legal obligation takes priority over a company's bottom line."
Novartis said in a statement that it had previously disclosed the Justice Department investigation and announced earlier this year that it had set aside monetary provisions to cover the settlement. The company said it was pleased to resolve the matter.
"NPC will continue its commitment to high standards of ethical business conduct and regulatory compliance in the sale and marketing of our products," Andy Wyss, head of Novartis Pharma North America and president of Novartis Pharmaceuticals Corp., said in a statement.
While the Novartis unit pleaded guilty in the criminal case, it denied the kickbacks allegations made by the government in the civil case, according to court documents. The civil settlement indicates the parties resolved the case to avoid the uncertainty and expense of litigation.
Patent protection for Trileptal has expired in most countries, so sales have been damped by generic competition. In 2007, the year generic versions were launched in the U.S. and certain European countries, Trileptal sales were $692 million. It is no longer one of Novartis's top selling drugs.
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