Novartis's Secret Settlement Talks Revealed in Accidental Filing

(Bloomberg) -- Confidential settlement talks between Novartis AG and the U.S. government over allegations that the company paid doctors to market its products are not so secret anymore.

The U.S. sued the Swiss drugmaker six years ago, joining in a case filed by a former sales representative who accused the company of using its speakers programs to pay kickbacks to doctors who prescribed its drugs. The case was scheduled to go to trial before U.S. District Judge Paul Gardephe in Manhattan on May 20 when it was delayed indefinitely without a reason.

On Tuesday, a letter inadvertently made public said the parties had made "significant progress" on reaching a deal. The letter, written to Gardephe by lawyers for U.S. Attorney Geoffrey Berman, was filed in the court docket and then removed a short time later by the judge’s staff.

The letter confirmed that there is a "monetary aspect" of the settlement that has been submitted to the Justice Department for expedited approval. It also revealed that the company is negotiating a new corporate integrity agreement with the inspector general for the Health and Human Services Department that would require it to improve efforts to comply with the law.

Such agreements “require defendants to implement a specified set of compliance obligations including the establishment of a compliance officer and compliance infrastructure, training, a risk assessment program, and outside monitoring by an independent review organization,” according to the letter.

Under the proposed accord, the government would allow Novartis to continue to participate in federal health care programs.

Read More: Novartis Must Face U.S. Suit Claiming Prescription Kickbacks

While Berman said the settlement will be "substantially complete" by June 18, the parties have until August 13 to finalize and execute it. Berman had asked that the letter not be made public in order to preserve confidentiality while talks continue.

The company is accused of paying thousands of doctors with speaking fees, fishing trips and even outings at Hooters restaurants to boost sales of hypertension drugs Lotrel and Valturna, along with diabetes medication Starlix. The U.S. had once sought as much as $2 billion in damages, Bloomberg Intelligence analyst Holly Froum has estimated. Novartis may have been close to a $1 billion settlement, Stat reported on May 15, citing sources familiar with the matter.

“Novartis confirms that we are engaged in settlement discussions with the Southern District of NY to resolve the ongoing Speaker Program litigation,” spokesman Eric Althoff said in an email. “We cannot comment further at this time.”

A spokesman for Berman declined to comment.

The case is U.S. v. Novartis, 11-cv-71, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Chris Dolmetsch in Federal Court in Manhattan at cdolmetsch@bloomberg.net

To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Peter Jeffrey

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