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Michael Phelan
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Is a Kickback the Reason Your Pharmacist or Physician Recommended That New Drug?

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Two federal lawsuits charge Novartis Pharmaceuticals with making fraudulent kickbacks to promote sales of its drug, Myofortic.

Less than three years ago, Novartis settled criminal and civil investigations into whether it had illegally promoted drugs to health care professionals for uses not approved by the Food and Drug Administration. The company was accused of providing illegal kickbacks to doctors through such mechanisms as entertainment, travel, and appointment to advisory boards or speaker programs. It paid $422.5 million to settle the case and signed a “corporate integrity agreement” to ensure that its promotional functions would comply with a federal anti-kickback statute.

Last week, the United States attorney for the Southern District of New York, filed a lawsuit accusing the company of providing kickbacks to pharmacies to generate sales of Myofortic. The suit charged that Novartis provided illegal rebates and discounts to 20 or more influential pharmacies based on their success in persuading institutions and doctors to switch patients from other drugs to Myfortic, an immune suppressant used to prevent rejection of kidney transplants. As the NYT points out, one wonders why the U.S. attorney is not also pursuing the corrupt pharmacies, which are suspected of pocketing tens or hundreds of thousands of dollars in illegal kickbacks.

The federal prosecutors also filed a second suit, charging that Novartis Pharmaceuticals made illegal payments to physicians in the form of honorariums and other benefits to induce them to write prescriptions for various other drugs made by the company. These sound like exactly the kinds of payments that Novartis pledged not to make in the settlement three years ago.

The system is broken-not only because patients at risk of being talked by healthcare providers on the take into switching to a drug that may not be best for them, but also because this type of kickback scheme hurts competition in a free market. It is not different than when Congress favors one company over another. Cronyism is the enemy of capitalism.

The Novartis case illustrates a much wider problem in the pharmaceutical industry. Public Citizen, an advocacy group for consumers, has tabulated the court judgments against pharmaceutical manufacturers and the major financial settlements between them and federal and state governments over the past two decades. Last year GlaxoSmithKline paid the largest health fraud settlement ever, a hefty $3 billion, and two other companies paid $1.5 billion or more.

It is clear that the mega-drug companies have factored huge fines into the cost of doing business. The fraud continues, because the current system is fines is not working. Stronger remedies against the companies could be the answer. Part of the answer should include prosecution of those accepting the illegal kickbacks. Those folks cannot afford to factor into their business plans the cost of paying huge civil penalties. The real stick would be to make pharmacists and doctors too scared to accept the drug company bribes.