Novartis Corporate Integrity Agreement Provides Outline for Pharma-Contracting Compliance Programs

Specialty Pharmacy TimesJanuary/February 2016
Volume 7
Issue 1

Industry stakeholders must carefully examine every detail of drug adherence programs to ensure compliance with the Anti-Kickback Statute.

ONE OF THE MOST HEAVILY FOLLOWED CASES in the specialty pharmacy (SP) space during the last couple of years involved Novartis and the alleged offering of improper reimbursements for recommended uses of the drugs Exjade and Myfortic.

The case concluded in November 2015 when Novartis agreed to pay $390 million to resolve the claims. In the aftermath of the settlement, there was much attention given to SP/manufacturer service programs. Industry players scoured the various court documents, searching for practices and facts that might motivate future prosecutions of such drug adherence programs.

Although there is still much debate and ambiguity surrounding the particulars of these adherence programs, one aspect of the Exjade/Myfortic litigation provides straightforward practical guidance, but has received little consideration: the addendum to Novartis’ Corporate Integrity Agreement (CIA).

The CIA recites requirements for SP service programs, specific contract requirements, contract process procedures, and training specifics for Novartis. The CIA should not be disregarded, as it provides workable guidance for SPs structuring a pharma-contracting and services compliance program.

The CIA does not create an exhaustive legal compliance framework, and an individual legal analysis of each arrangement is essential. The CIA does, however, provide a checklist to help ensure compliance with the Anti-Kickback Statute (AKS), which makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive anything of value, in cash or in kind, to induce or reward referrals of items or services reimbursable by federal or state health care programs (eg Medicare, Medicaid, Tricare, etc).


As a reminder, the Exjade/Myfortic litigation involved Novartis’ Exjade Patient Assistance and Support Services (EPASS) program, which included 3 network SPs (among other things). At one point in the business relationship, referrals from the Novartis hub were allocated based on patient adherence.

Among the allegations were:

  • Patient adherence scores resulting in hub referrals did not take into account patients who discontinued Exjade use because their prescriber advised discontinuation over side effects.
  • There were discussions with the SPs about low adherence rates and allocation of referrals, based on scorecard numbers.
  • When a black box warning was added in 2010, SPs were not required to update patient adherence scripts with the information.

Defendants BioScrip and Accredo, settled earlier in the litigation for approximately $15 million and $60 million, respectively.

Service Arrangement Basics

One set of the CIA requirements outlines basic compliance tenets of SP services provided on behalf of manufacturers. Employees responsible for developing, contracting, implementing, and auditing these programs should be aware of these basics.

During the negotiation and development stages, these essential guideposts should be considered:

  • The manufacturer must have an articulable business need for each service.
  • The compensation for the services must be fair market value.
  • The services may not be reasonably expected to undermine, or otherwise interfere, with the clinical judgment of health care professionals (HCPs).
  • The services cannot have the effect of encouraging HCPs to prescribe any specific product over another.
  • Each arrangement must be vetted through a formal review and approval process.

The Contracting Basics

As discussions of service arrangements mature into contracts, there are certain contract terms and elements of review that should be present for each arrangement. The framework below is a basic structure generally applicable to SP/manufacturer service agreements.

Also, the contracting process should be more than just an exercise of passing paper between the parties. The CIA outlines processes to ensure that material stakeholders are appropriately engaged in the development of service programs:

  • Each arrangement must be memorialized, in writing, and signed by both parties.
  • The contract must accurately include the entire business relationship.
  • The contract should contain a manufacturer representation that there is a legitimate business need for the services.
  • The contract should contain a representation, by each party, that it will not violate the AKS.
  • There should be measurable key performance indicators (KPIs) associated with each service provided, and compensation should require meeting certain KPI metrics.
  • Each material stakeholder should certify that the written agreement reflects all the material terms of the arrangement and recertify the same, annually.
  • Each contract should be vetted through the formal contracting review process.

Contracting Compliance Program

The CIA highlights that structuring arrangements in compliance with the AKS and drafting contracts that properly reflect the arrangement are only part of AKS compliance. Arrangements must remain in compliance.

Often, modifications to operations processes occur as service programs morph to fit changing market dynamics or to hone operational efficiencies. These modifications are too frequently informal and not vetted appropriately.

A compliance program is an essential tool to ensure that service programs do not migrate into offerings that are no longer in compliance with applicable law:

  • The SP should create a tracking system to record the services and payments under each arrangement. The tracking system should be used to ensure that the SP is meeting its KPIs and that payment for the services is in accordance with the performance metrics.
  • A compliance committee should be formed to monitor ongoing contract compliance. A senior management employee or executive, such as the chief compliance officer, should conduct an annual review of the compliance tracker and report the findings to the compliance committee.
  • A protocol should be established to respond to suspected compliance issues reported by employees or raised through the contracting or annual review process.
  • If risks are identified, an assessment of the risks should be performed. A plan for monitoring the risk should be created and implemented. If corrective action is warranted, it should be identified and implemented.


All employees should be trained annually on federal program requirements, internal policy requirements, individual responsibilities for complying with applicable regulations, sanctions associated with violations, and examples of improper practices.

The training should include components specific to the individual’s job function. Implementing a structure for vetting manufacturer service programs and revisiting through regular compliance reviews offer an excellent mechanism for mitigating risks associated with manufacturer service programs.

Through a formal process, all material stakeholders become involved and required sign-offs ensure certain basic compliance elements are met. The CIA offers practical guidance on building such compliance programs and should not be overlooked by SPs and industry stakeholders. SPT

About the Author

Michael R. Hess is a member of Bass, Berry & Sims PLC and leads its specialty pharmacy, pharma services and distribution practice, and is based in the firm’s Memphis, Tennessee, office. He is the former chief counsel and vice president of strategic development at Accredo Health Group and assistant general counsel for Accredo’s parent, Medco Health Solutions. Bass, Berry & Sims PLC has more than 220 attorneys representing numerous publicly traded companies and Fortune 500 businesses. The firm has three offices in Tennessee (Nashville, Memphis, Knoxville) and one in Washington, DC.

Shannon L. Wiley is an associate of Bass, Berry & Sims PLC in its specialty pharmacy, pharma services and distribution practice, and is based in the firm’s Memphis, Tennessee, office. Bass, Berry & Sims PLC has more than 220 attorneys representing numerous publicly traded companies and Fortune 500 businesses. The firm has three offices in Tennessee (Nashville, Memphis, Knoxville) and one in Washington, DC.

Related Videos
Practice Pearl #1 Active Surveillance vs Treatment in Patients with NETs
© 2024 MJH Life Sciences

All rights reserved.