Has Novartis Been Bribing Your Doctor?

U.S. attorneys have jumped into the fray again, joining an existing lawsuit by an ex-employee of Novartis (NYSE:NVS) in hopes of exposing Medicare and Medicaid fraud. The civil suit, which Manhattan attorneys announced Friday, accuses the Switzerland-based drug maker of bold tactics aimed to get doctors to prescribe their drugs instead of those of competitors.

At a glance, the scheme seems no different from any other bribery scandal. According to government accusations, doctors were treated to outrageously expensive dinners at Manhattan’s Nobu as well as kickbacks when patients switched over to Novartis drugs. Doctors also received large cash payments for speaking engagement and partied at Hooters on the Novartis dime while company reps pushed their drugs as the natural alternative to the ones doctors’ patients were using at the time. Their ploys extended to pharmacies as well.

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U.S. Attorney Preet Bharara revealed details of the latest fraud suit Friday, just days after the government launched its first case against Novartis. The trail of evidence goes back several years and includes schemes that tried to disguise bribes as rebates and discounts for bulk orders originating from doctors and pharmacies. This case follows news of several convictions in Medicare and Medicaid fraud cases…

The intersection of corruption and the pharmaceutical industry will not be news to most observers, yet the aggressive policy of the Obama administration could have an effect on major drug makers like Novartis, which bases its U.S. operations in East Hanover, New Jersey. The government’s interest in the prosecution of fraud in the health care sector is understandable, given its entry into the field with the Affordable Care Act.

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The following years may determine the lasting legacy of the health care initiative, which survived pitched battles in both Congress and the Supreme Court. Yet the administration’s efforts are just as important in advancing its position in the debate over entitlement spending and debt obligations. If a real need for Medicare payments is accompanied by reports of efficient administration of benefits, the days of federally funded health care are unlikely to end any time soon.

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