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Pharmacies and Manufacturers: Patient Assistance Programs and Charities May Be Putting Your Business at Risk as Government Scrutiny Continues

Jazz Pharmaceuticals recently reported in its U.S. Securities and Exchange Commission filing that it has agreed to pay $57 million dollars to the U.S. Department of Justice (DOJ) in order to resolve an investigation by the DOJ that has looked into its financial support of nonprofit patient assistance charities/programs that help Medicare patients cover out-of-pocket drug costs. This investigation was initiated by subpoenas from the U.S. Attorney’s Office for Massachusetts and has not yet been fully settled with the Department of Justice. 

The specific allegations and details of the investigation have not yet been reported, however the DOJ has recently increased its scrutiny of these arrangements between pharmaceutical manufacturers and “independent nonprofit patient assistance charities.” These arrangements are usually characterized by pharmaceutical manufacturers donating large sums of money to independent nonprofit patient assistance charities that are not owned or affiliated with the pharmaceutical manufacturers. These nonprofit patient assistance charities then utilize their funds to offset the cost of patient co-pays on drugs for financially needy patients who cannot otherwise afford their prescription medications or the cost of the drug for the patient would be a substantial burden. 

The Office of the Inspector General (OIG) has issued numerous advisory opinions on these arrangements, particularly in the context of how the independent charities utilize their funds. Notably, the OIG has recently modified and rescinded certain advisory opinions it had issued in the past. The OIG, in 2005 issued a specialty advisory bulletin regarding nonprofit patient assistance charity programs and in 2014 updated their specialty advisory bulletin. In its special advisory bulletins, the OIG has stated that these programs may run afoul of both the Federal Anti-Kickback Statute (AKS) and the Civil Monetary Penalties Law (CMP), potentially then leading to False Claims Act (FCA) liability, if not structured appropriately with certain safeguards. 

This past December, another pharmaceutical manufacturer, United Therapeutics Corporation (United Therapeutics), paid $210 million to resolve FCA lability related to alleged AKS violations from a nonprofit patient assistance charity, Caring Voice Coalition. United Therapeutics is not the first to come under scrutiny, pharmacies have also come under the radar, including specialty pharmacy, Accredo Health Group Inc. (Accredo). Accredo came under AKS and FCA scrutiny via a whistleblower lawsuit that alleged Accredo provided donations to a nonprofit patient assistance charity in exchange for patient referrals from the nonprofit patient assistance charity. 

Pharmacies currently utilizing or contributing to patient assistance programs and pharmaceutical manufacturers currently contributing or who are contemplating contributing to nonprofit patient assistance programs, should be aware of any potential risk. Contact Frier Levitt today to speak to an attorney.