James E. Miller on the $678 Million Novartis False Claims Settlement

For more than a decade, Novartis spent hundreds of millions of dollars on so-called speaker programs, including speaking fees, exorbitant meals, and top-shelf alcohol that were nothing more than bribes to get doctors across the country to prescribe Novartis’s drugs.  

That’s according to the U.S. Attorney for the Southern District of New York Audrey Strauss who announced earlier this month a $678 settlement of a False Claims Act lawsuit.

The speaker program scandal was brought to the attention of the government by Oswald Bilotta, a Novartis sales representative on Long Island.

In 2009, Bilotta took his concerns about the sham speaker programs to James E. Miller, a partner at Shepherd, Finkelman, Miller and Shah in Chester, Connecticut.

“Novartis was using speaker programs through which physicians were supposed to be educating other physicians about drugs,” Miller told Corporate Crime Reporter in an interview last month. “But the programs were largely of a social nature with little educational value. The purpose of the program was to pay the physician speakers and to reward both the speakers and attendees with expensive meals, alcohol and entertainment all designed to get them to prescribe certain Novartis drugs.”

Did this pay off for Novartis?

“Yes. The government engaged a Nobel Prize winning economist, Dr. Daniel McFadden, to analyze the damages and causation. His analysis established that Novartis reaped handsome rewards in the millions of dollars for making these payments to doctors.”

How did Bilotta end up at your firm?

“He originally approached another lawyer who did not specialize in the field. And that attorney referred him to us.”

When you first met him, was there any doubt in your mind that this was a good case?

“Very little doubt. With all of our whistleblower cases, we engage in a pretty significant due diligence process which involves multiple interviews with the potential relator, and where appropriate significant data analysis.”

“We often and in this case did engage the services of private investigators who look to corroborate that the nature of the allegations were current elsewhere in the country and that it was a significant matter. We did all of that before presenting the case to the United States government.”

It took more than ten years. Is this the usual amount of time it takes for a case to come to fruition – ten years?

“It’s on the longer side. The explanation is two fold – complexity and the size of the case. It was actively litigated for six years from the time the case came out from under seal in 2013 until an agreement of principle was reached to resolve the case. That was in the spring of 2019 on the eve of trial. We prepared the whole case for trial. Both sides were prepared to go to trial in May 2019.” 

“After that agreement of principle was reached between the government and defendants, it did take about twelve months to document the settlement. And that’s largely a process between the government and Novartis. That twelve months can largely be explained by a number of groundbreaking changes in practice that were agreed to by Novartis as part of the settlement.”

Is this one of the larger False Claims Act settlements?

“It is. And we believe it is the largest pure anti-kickback settlement.”

What does the False Claims Act say about how much the whistleblower gets out of the total settlement?

“For intervened claims, which in this case would be the federal and New York State claims, the percentage is generally 15 percent to 25 percent. For non intervened claims, which would be the other states in this case, it would be 25 percent to 30 percent.”

“In this case, an agreement had been submitted to the court for approval. That approval is pending. It has not been finalized. The United States and the relator agreed to 18.5 percent as a reasonable percentage in this case.” 

“The states have separate agreements, and those agreements will be submitted in September or so. Those percentages will range based on differences in state law and the fact that a number of the claims are non intervene as opposed to intervene.”

The $678 million settles just the federal claim?

“It’s mostly the federal claim. But about $40 million is state claims.”

The $678 million settles the global case?


What will be the global bounty provision?

“We expect it to be in excess of $100 million.”

NBC News reported it would be $75 million.

“Yes that’s Gretchen Morgenson’s article. She was asking what Mr. Bilotta would get after attorneys fees.” 

When this case came in the door, did you sense it would be one of these large cases?

“Yes. As we always do, we did an analysis of the drugs at issue and the amount of sales and what appeared to be fairly pervasive conduct. We believed it was likely to be a significant case based on those factors.”

What was the quality of the evidence?

“The evidence was outstanding. With our assistance, the Southern District attorneys interviewed witnesses and took depositions nationwide, engaging top notch experts, not just the Nobel Prize winning economist, but medical education experts and experts regarding cardiovascular drugs, experts regarding pharmaceutical compliance programs. And we did a very significant analysis of in excess of 100,000 speaker programs – whether or not they had been legitimately conducted. Both in terms of fact witnesses and expert witnesses, the case was exceedingly well prepared. The evidence was quite strong.”

What was the nature of the initial evidence that Bilotta brought in the door?

“His evidence involved a number of sales practices that had occurred in the greater New York metropolitan area. But he also presented evidence that these sales practices were occurring elsewhere in the United States. He had information about regional and national sales meetings regarding these practices.” 

Who were the defense attorneys representing Novartis?

“Novartis was represented by Cravath Swaine & Moore and Arnold & Porter Kaye Scholer.”

“At Cravath, the chairman Evan Chesler was one of the lead defense lawyers. He is considered one of the best lawyers in America. He took Mr. Bilotta’s deposition. Another partner was Rachel Skaistis from Cravath. She was very active.” 

(The defense attorneys for Novartis were: Evan R. Chesler, Rachel G Skaistis, Benjamin Gruenstein, Timothy Gray Cameron and Damaris Hernandez at Cravath. And Michael A. Rogoff and Manvin Singh Mayell at Arnold & Porter Kaye Scholer.)

[For the complete q/a format Interview with James E. Miller, see 34 Corporate Crime Reporter 29 (13), Monday July 20, 2020, print edition only.]

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