Government applies “divide and conquer” technique to pressure Novartis to settle multi-defendant FCA case
The government recently applied a time-honored criminal prosecution strategy in a pending False Claims Act (FCA) case against the pharmaceutical giant Novartis. In United States of America, ex rel Kester et al v. Novartis Pharmaceuticals Corporation, the government settled FCA claims with alleged co-conspirators on the condition that they cooperate against Novartis, the lead defendant.
The case made its public debut in April 2013 when the federal district court in Manhattan unsealed relator David Kester’s complaint. The government intervened and eventually included as a co-defendant a pharmacy services provider called BioScrip. The government alleged that Novartis and BioScrip engaged in a kickback scheme to promote Novartis drugs, including Exjade, a drug that removes excess iron that builds up during blood transfusions. The relator amended his complaint to add two additional pharmacy companies, Accredo and US Bioservices.
The outcomes of the claims against the three pharmacy companies have varied greatly. BioScrip settled for $11.7 million on January 8, 2014. The government declined to intervene in the relator’s claims against US Bioservices, and those claims were dismissed. And on April 30, 2015, the government settled with Accredo even though it had not intervened against that company.
The terms of the government’s settlements with BioScrip and Accredo parallel those you would expect in a multi-defendant criminal action. Both agreements contain lengthy admissions of facts concerning the alleged kickback and false claim scheme. The admissions include conduct they engaged in with Novartis. In addition, both BioScrip and Accredo agreed to cooperate in the government’s ongoing case against Novartis. They will provide documents and other evidence, including “recordings,” and will use their best efforts to make directors, officers, and employees available for testimony.
These settlement agreements make clear the government’s plan. It will use the evidence it obtains from Accredo and BioScrip to increase the risk at trial to Novartis, all in an attempt to pressure the Novartis to settle. This is a classic “divide and conquer” technique we normally see in multi-defendant criminal prosecutions. No doubt we will see it more and more in civil False Claims Act suits too.