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Harry Cassin
Publisher and Editor

Andy Spalding
Senior Editor

Jessica Tillipman
Senior Editor

Bill Steinman
Senior Editor

Richard L. Cassin
Editor at Large

Elizabeth K. Spahn
Editor Emeritus

Cody Worthington
Contributing Editor

Julie DiMauro
Contributing Editor

Thomas Fox
Contributing Editor

Marc Alain Bohn
Contributing Editor

Bill Waite
Contributing Editor

Russell A. Stamets
Contributing Editor

Richard Bistrong
Contributing Editor

Eric Carlson
Contributing Editor

The Novartis Speakers Bureau

Last week, Novartis agreed to pay a $185 million criminal fine for off-label marketing of the epilepsy drug Trileptal, and $237.5 million to resolve civil allegations over kickbacks paid to doctors to prescribe Trileptal and five other drugs.

A reader wondered if there’s any connection between what Novartis did and the FCPA.

To find out more, we looked at the civil complaint against the company filed by Jeremy Garrity, a former cardiovascular sales rep. His suit was brought under the False Claims Act, 31 USC §3730(b)(2). He alleged violations of the Anti-Kickback Act, 42 USC §1320a-7b(b). It outlaws paying or offering anything of value in exchange for the referral of any product (including prescription drugs) for which payment is sought from any federally funded health care program, including Medicare, Medicaid, and Tricare.

With Novartis’ settlement, Garrity will now split $25.7 million with at least three other inside whistleblowers.

According to his complaint, Novartis paid doctors “honoraria” of between $1,500 and $2,000 to speak at physician “events” about the benefits of Novartis’ drugs. Some doctors earned as much as $150,000 a year in honoraria. In 2007 alone, Novartis paid $9.5 million to doctors through its speakers bureau.

Many of the doctors selected by Novartis as speakers had no publications or teaching positions. “Several speakers,” the complaint alleged, “had difficulty with English. Other speakers were simply very poor communicators.”

Physician attendance at the “events” was sparse — often just one or two other doctors. And the venues may have been tables at restaurants, during the dinner hour, although Novartis never really checked who attended or where the events were held.

How did Novartis pick its speakers? “Most physicians were selected based upon criteria related to prescription writing  . . ,” the complaint said. The more prescriptions they wrote for Novartis’ drugs, the complaint alleged, the more speaking engagements would come their way.

Last week’s settlement covered Novartis’ practices in the U.S., with doctors working there. If the company made similar payments to doctors overseas, could it have violated the FCPA? For sure.

Physicians at government-owned or managed hospitals overseas are “foreign officials” for purposes of the FCPA. That means corrupt payments to them intended to obtain or retain business can violate the antibribery provisions.

Application of the FCPA to overseas doctors made news in 2002, when the SEC and DOJ settled civil and criminal enforcement actions against Syncor and its Taiwan subsidiary. Payments to doctors also resulted in FCPA enforcement actions in 2005 against DPC (Tianjin) Co. Ltd. — the Chinese subsidiary of Los Angeles-based Diagnostic Products Corporation — and Micrus Corporation.

On Monday, the Wall Street Journal said the DOJ and SEC asked drug companies to voluntarily report any violations of the FCPA. The report mentioned Eli Lilly, Merck, Astra Zeneca, Bristol-Myers Squibb, GlaxoSmithKline, and SciClone. They haven’t been accused of wrongdoing.

In August, SciClone disclosed an SEC subpoena and a letter from the DOJ investigating the “sale, licensing and marketing of its products in foreign countries, including China.” SciClone said the DOJ was looking at FCPA issues in the pharmaceutical industry generally, and had received information about SciClone’s practices suggesting possible violations.

The Wall Street Journal said the DOJ asked the companies about four types of possible violations: bribing government-employed doctors to purchase drugs, paying company sales agents commissions that are passed along to government doctors, paying hospital committees to approve drug purchases, and paying regulators to win drug approvals.

All that adds up to an FCPA storm swirling around the drug makers. What will happen next? Jeremy Garrity and his fellow Novartis whistleblowers are now rich. It’s easy to imagine one of them or some other drug-company insiders becoming FCPA whistleblowers under the new Dodd-Frank provisions.

As Willie Sutton might have said, that’s now where the money is.


Download a copy of the August 13, 2010 first amended false claims act complaint in ex rel. Jeremy Garrity v. Novartis Pharmaceuticals Corporation here.

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