For Immediate Release - January 29, 2014

Pharmacy Operator to Pay More Than $224,000 to MassHealth Over Kickback Allegations

BioScrip to Pay a Total of $15 Million to Federal and State Authorities

BOSTON — A healthcare company that operated specialty pharmacies nationwide has agreed to pay more than $224,000 to the state’s Medicaid program (MassHealth) to resolve allegations that it received kickbacks in exchange for excessive and misleading promotion of a drug used to treat excess iron, Attorney General Martha Coakley announced today. 

The AG’s Office joined the multi-state and federal civil settlement with BioScrip, headquartered in Minnesota, for a total of $15 million, to resolve allegations that it received kickbacks from Novartis Pharmaceuticals Corporation to promote its “iron chelation” drug Exjade, which can help remove iron after blood transfusions. 

“The payment of illegal kickbacks creates improper incentives that undermine the integrity of our healthcare system,” AG Coakley said. “Our office is committed to preventing fraud in the Medicaid system and ensuring that taxpayer money is spent to improve patient care.”

According to authorities, beginning in 2007, Novartis became concerned that patients were discontinuing use of Exjade because of side effects. BioScrip received kickbacks designed to induce the company to try to keep patients on the drug as long as possible. As part of the scheme, BioScrip employees made thousands of phone calls to Exjade patients and downplayed the potentially life-threatening side effects of the drug, which include kidney failure and gastrointestinal hemorrhage.

The settlement resulted from a whistleblower action, U.S. ex rel. Kester, et al. v. Novartis Pharmaceuticals Corporation, et al., filed in the United States District Court for the Southern District of New York under the federal False Claims Act and various state false claims statutes.

Until 2012, when it sold most of its pharmacy business, BioScrip operated a specialty pharmacy that shipped prescription drugs to Medicaid patients around the country. Novartis allegedly created a closed distribution network in which most Exjade prescriptions in the United States were filled by three pharmacies, in which BioScrip was one of them.

According to the complaint, Novartis encouraged doctors and patients to use the BioScrip pharmacy as a way to foster patient education, and used its control of Exjade prescriptions as well as various rebates and discounts to pay kickbacks to BioScrip. Novartis also allegedly created an “Exjade Scorecard” that measured how long patients took the drug and awarded certain pharmacies that kept patients on the drug the longest. BioScrip often won this competition and received valuable new patient referrals as a result, placing the focus more on order and refills rather than on patient care. 

The joint investigation of this matter was conducted by a team appointed by the National Association of Medicaid Fraud Control Units, the U.S. Attorney’s Office for the Southern District of New York, the U.S. Department of Justice, the Federal Bureau of Investigation, and other federal agencies.

Assistant Attorney General Ian Marinoff of the AG’s Medicaid Fraud Division handled this matter on behalf of the AG’s Office with assistance from data analyst Anthony Megathlin.


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