news

Three Big Pharma Companies Under Investigation Over PBM Contracts

May 17, 2016
  • FisherBroyles News
  • Health Care
  • White Collar Crime

Last week Johnson & Johnson disclosed in its 10Q filing with the Securities & Exchange Commission that its subsidiary, Janssen Pharmaceuticals, Inc. (JPI) was served with a Civil Investigative Demand (CID) from the U.S. Attorney’s Office for the Southern District of New York.  The March 2016 CID is seeking information related to JPI’s contractual relationships with pharmacy benefit managers (PBM) over the period from January 1, 2006 to the present with regard to unspecified JPI pharmaceutical products.  In the disclosure, JPI acknowledged the CID was issued in connection with an investigation under the False Claims Act.

Merck & Co. Inc., and Endo Pharmaceuticals Inc. made similar disclosures just days before the Johnson & Johnson disclosure.  Both companies received CID’s in March from the DOJ.  Merck’s statement indicated the DOJ wanted to know more about its PBM contracts, services and payments in connection with its Maxalt and Levitra drugs.  EPI’s statement acknowledged their investigation involved PBM contracts for its Frova treatment for migraines.  Both Merck and EPI said in their filings that their companies were cooperating with the investigation.

So far the DOJ is not commenting on the investigation.  It is unknown which PBM’s are involved in the investigation or why these companies have come under scrutiny.  PBM’s negotiate on behalf of the insurers to get the best price for medications from the manufacturers.  Because these investigations are alleged to be occurring in connection with potential violations of the False Claims Act, Medicare, Medicaid, TRICARE and possibly the Department of Labor are the federal payors involved.  It is more probable than not that these investigations could involve incentive programs, discounts and other sales strategies the government may view as violations of the Anti-Kickback Statute.  Novartis Pharmaceuticals agreed to pay $390 million in October 2015 to resolve alleged False Claims Act violations that it provided improper discounts and rebates to specialty pharmacies.

Preet Bharara, the United States Attorney for the Southern District of New York is well known for high-profile investigations and prosecutions.  Although we do not know what the government has in its pocket, the fact that three Big Pharma manufacturers are under investigation signals the potential for a very large penalty should wrong doing be uncovered.

Our Pharmacy Law team will continue to follow this developing news.
Brian E. Dickerson
202.570.0248

Nicole Hughes Waid
202.906.9572

Anthony J. Calamunci
419.376.1776

About FisherBroyles, LLP

Founded in 2002, FisherBroyles, LLP is the first and world’s largest distributed law firm partnership. The Next Generation Law Firm® has grown to hundreds of partners practicing in 23 markets globally. The FisherBroyles’ efficient and cost-effective Law Firm 2.0® model leverages talent and technology instead of unnecessary overhead that does not add value to our clients, all without sacrificing BigLaw quality. Visit our website at www.fisherbroyles.com to learn more about our firm’s unique approach and how we can best meet your legal needs.

These materials have been prepared for informational purposes only, are not legal advice, and under rules applicable to the professional conduct of attorneys in various jurisdictions may be considered advertising materials. This information is not intended to create an attorney-client or similar relationship. Whether you need legal services and which lawyer you select are important decisions that should not be based on these materials alone.

© 2021 FisherBroyles LLP