Office of the Attorney General
Attorney General Conway Announces Settlement with Accredo Pharmacy in Kickback Case

Press Release Date:  Thursday, May 28, 2015  
Contact Information:  Leland Hulbert
Deputy Communications Director

Attorney General Jack Conway announced an agreement in principle to settle kickback claims against Accredo Health Group, Inc. ("Accredo”).  The settlement will resolve allegations that Accredo recommended the drug Exjade to Medicaid patients in exchange for kickbacks from Novartis Pharmaceuticals Corporation (“Novartis”), which markets the drug.  Under the settlement, Accredo has agreed to pay $60 million to the United States and over forty states.  $324,034.47 of the settlement is attributable to Kentucky Medicaid.  Kentucky will receive $77,150 under the settlement after re-payment of federal funds attributable to this amount.

“Patients have a right to unbiased information from their pharmacy about their medications,” said Attorney General Conway.  “Drug companies like Novartis and pharmaceutical distributors like Accredo Health Group will not be permitted to violate anti-kickback laws.  These laws are enforced to ensure patients are only prescribed drugs which benefit the patient.”
The settlement with Accredo is the second settlement in connection with this case.  In early 2014, another pharmacy, BioScrip, Inc., agreed to pay $15 million to resolve similar claims.  Kentucky received $5,829.94 under that settlement.

Accredo, a specialty pharmacy headquartered in Memphis, Tennessee and a wholly owned subsidiary of Medco Health Solutions, Inc., ships prescription drugs to Medicaid patients around the country. Exjade was approved by the U.S. Food and Drug Administration in late 2005 for the treatment of chronic iron overload due to blood transfusions.  In complaints filed in the case, several states and the federal government have alleged that Novartis developed the scheme because Exjade patients often stopped taking the drug because of side effects.

When Novartis launched Exjade, it created a closed distribution network, consisting of three pharmacies selected by Novartis, through which most Exjade prescriptions in the United States were filled.  As a result, Novartis controlled which pharmacy filled many of the prescriptions for Exjade dispensed through the network.  The settlement resolves allegations that Accredo participated in a scheme in which Novartis paid kickbacks to pharmacies by giving more prescription referrals to the pharmacy that kept patients on Exjade the longest. 

In a stipulation filed in federal court in connection with the settlement, Accredo admitted many aspects of the scheme, including the following:  In December 2005, Accredo and Novartis entered into a contract under which Accredo would be one of three pharmacies that would distribute Exjade in Novartis' network.  Around June 2007, Novartis began issuing monthly "Exjade Scorecards" to the three pharmacies in the network that were designed to show how long Exjade patients continued to order refills.  Accredo knew that Novartis's Exjade Scorecards did not exclude patients who stopped ordering refills due to side effects or patients who were directed to stop therapy by their doctors.  In late 2007 and 2008, Novartis told Accredo that it was dissatisfied with Accredo's performance on the Exjade Scorecards and asked Accredo to implement an improvement plan that involved nurses, who made calls to Exjade patients.  In addition, a Novartis executive told Accredo that Accredo could lose certain patient referrals if it continued to lag behind the other pharmacies in the Exjade Scorecards.  These referrals were valuable to Accredo because having more patients resulted in higher sales revenue, additional dispensing fees, and additional rebates from Novartis.  Call protocols developed by Accredo directed nurses to tell Exjade patients that it was extremely important to comply with their Exajde therapy regimen.  The call protocols also directed nurses to tell patients about Exjade's common adverse reactions, such as diarrhea, but not the less common, but more severe, adverse reactions like renal or hepatic impairment.    In late 2008, Novartis informed Accredo that Novartis would give 60 percent of certain patient referrals to the pharmacy that had the top scores in the Exjade Scorecards.  In early 2010, Novartis informed Accredo that it would receive certain additional patient referrals because Accredo obtained the top score in the Exjade Scorecards.        

The settlement stems from a whistleblower lawsuit, U.S. ex rel. Kester, et al. v. Novartis Pharmaceuticals Corporation, et al., No. 11-CIV-8196, which is pending in federal court in New York.  The case was filed under the federal False Claims Act and similar state false claims acts.

Medicaid Recoveries
Attorney General Conway has investigated and prosecuted more abuse and neglect cases than any previous Kentucky Attorney General.  Since Attorney General Conway took office in January 2008, his Office of Medicaid Fraud and Abuse Control has led or participated in actions that have recovered more than $300 million for state and federal-funded Medical programs. These cases range from lawsuits and settlements against pharmaceutical companies to cases against individual providers.

In 2012, Attorney General Conway’s Medicaid Fraud Unit was named one of the most aggressive in the country by the nonprofit watchdog group Public Citizen.  The Attorney General’s tip line for reporting allegations of abuse is 1-877-228-7384.