Novartis AG, the world’s largest seller of prescription drugs, announced it will settle a whistleblower lawsuit filed under the federal False Claims Act for $390 million tentatively.

The qui tam lawsuit alleged the drugmaker paid improper and illegal kickbacks to pharmacies in exchange for their promoting certain prescription drugs.

The whistleblower lawsuit was filed by David K., a former Novartis sales manager who brought forth the lawsuit accusing the drugmaker of providing improper discounts and incentives to pharmacies connected to prescription medications including Myfortic and Exjade, among others.

Under the qui tam provisions of the False Claims Act, private citizens can file lawsuits on behalf of the U.S. government. As a reward for exposing wrongdoing, whistleblowers may be entitled to 15-30 percent of any monies recovered as a result.

According to recent news reports, Novartis had made the disputed payments to ensure patients took the drugs, including treatments to prevent rejection of transplanted organs.

The Department of Justice disagreed and intervened in the whistleblower lawsuit in 2013, claiming the company submitted over 166,000 claims to Medicare and Medicaid and received more than $500 million in reimbursements.

The whistleblower trial against Novartis was set to commence in early November, but on Oct. 27 Novartis announced it had reached a “settlement in principle” with the DOJ, various intervening states, and the whistleblower employee. As part of the whistleblower settlement agreement, Novartis neither admits nor denies liability.

If the settlement is finalized by the courts, it will resolve allegations of improper discounts and rebates to specialty pharmacies in connection with the immunosuppressant Myfortic, the iron overload drug Exjade, and three other Novartis medications.

This settlement comes approximately five years after Novartis agreed to settle a separate False Claims Act suit for $422.5 million. That whistleblower lawsuit alleged a violation of the False Claims Act and misdemeanor criminal allegations involving off-label promotion and kickbacks to doctors.

As part of that settlement, Novartis entered into a five-year corporate integrity agreement. It was not clear whether the latest fraud allegations could have been construed as violating that agreement.

What is A Whistleblower Lawsuit?

Whistleblower lawsuits
that are filed on behalf of the government for fraudulent activity are generally complex in nature and usually take a bit longer to resolve than other lawsuits due to the time it takes to sort through government contracts and regulations. While a handful of cases go to trial, most settle – and for astronomical figures.
Under the False Claims Act, the Department of Justice is authorized to reward those who report fraud against the federal government in an amount of between 15 and 30 percent of what it recovers based upon the whistleblower’s report.

The qui tam provision of the False Claims Act allows for damages of three times the amount the government lost, plus penalties of between $5,500 and $11,000 per false claim.

These provisions not only provide whistleblowers financial protection from retaliation but also create an enormous monetary incentive to come forward about fraudulent and illegal acts committed against the government.

According to the Department of Justice, whistleblower lawsuits have resulted in over $14 billion in recovery for the United States since 1986. Of those recoveries, whistleblowers have collectively recovered more than $2.2 billion for themselves, simply by speaking up.