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Novartis Settles $3.3 Billion Kickback Suit as Profit Dips

Novartis AG settled a $3.3 billion lawsuit in which the U.S. claimed the company paid kickbacks to pharmacies to boost sales of some of its prescription drugs and reported lower-than-expected third-quarter earnings.

Europe’s biggest drugmaker agreed to pay $390 million to settle the kickback claims with the U.S. Department of Justice in a preliminary agreement. A measure of profit dubbed core net income fell 2 percent to $3.06 billion, missing the $3.13 billion average of 10 analyst estimates complied by Bloomberg.

The stock declined as the Alcon eye-care unit acted as a drag on growth for a second consecutive quarter, causing sales to fall short of analysts’ estimates as well. The Basel, Switzerland-based drugmaker had to disclose the legal settlement before it’s final along with earnings because it set aside $400 million to cover its cost in the third quarter, said Chief Executive Officer Joe Jimenez.

"We are not admitting liability, we are also not denying it," Jimenez said in a telephone interview. "We are just settling it and putting it behind us."

The U.S. had sought as much as $3.3 billion from Novartis over two drugs, Exjade and Myfortic, claiming the Swiss company had referred patients to specialty pharmacies and paid kickbacks in the form of rebates to get those pharmacies to recommend the drugs to patients and to...