The Federal Government has taken the position in two recent civil False Claims Act (FCA) matters that copayment assistance (in the form of both deductibles and co-pays) resulting from pharmaceutical manufacturers’ funding of charitable foundations, that in turn paid the patient responsibility for prescription medications, constitutes a bribe or kickback to Medicare patients and violates the federal Anti-Kickback Statute (AKS). The AKS prohibits the offering, paying, solicitation or acceptance of any remuneration – direct or in-kind – for the referral of a healthcare service reimbursed by federal programs. Applied to pharmaceutical companies, the AKS prohibition includes money or anything of value, including coverage or subsidization of deductibles and/or co-pays, to induce Medicare patients to purchase or obtain, or their physicians to prescribe, the company’s drugs. A claim submitted in violation of the AKS constitutes a false claim under the FCA.
In a civil lawsuit, the United States Attorney’s Office for the District of Massachusetts filed a FCA complaint against the drug manufacturer Regeneron Pharmaceuticals, Inc., (Regeneron) claiming that its donations to a foundation were in fact a scam that violated the AKS as well as the FCA. The government accused Regeneron of funneling tens of millions of dollars in payments to a third-party foundation, where Regeneron earmarked the money to be used as copayment assistance only for Eylea, a macular degeneration drug manufactured by Regeneron. Additional allegations included that Regeneron paid the foundation only what it needed to cover Medicare expenses for Eylea patients, and that senior management at Regeneron knew the conduct was illegal and took steps to cover up the scheme. The government’s theory is that these payments, which could not be used for competing medications, subsidized the price of Eylea and constituted indirect kickbacks to Medicare patients to avoid paying deductibles and co-pays, thus increasing Regeneron’s market share and resulting in a huge increase in its Return of Investment.
In the second FCA matter, the same U.S. Attorney’s Office announced a settlement with Novartis Pharmaceuticals Corporation (“Novartis”) of East Hanover, New Jersey; Novartis agreed to pay $51.25 million and enter into a five-year corporate integrity agreement (CIA) to resolve the Government’s allegations that it had violated the AKS and FCA by funneling money through three co-pay foundations to subsidize patient co-pays for Novartis drugs. The Government alleged that Novartis used one charity as a conduit to subsidize co-pays for Medicare patients taking Gilenya, a medication intended to treat multiple sclerosis, and two other foundations as conduits to subsidize co-pays for Medicare patients taking Afinitor, a medication intended to treat advanced renal cell carcinoma and progressive neuroendocrine tumors. The Government alleged that although Novartis donated money to the foundations ostensibly to be used for any patients who met eligibility requirements, Novartis took affirmative measures to ensure that its products received a disproportionate amount of donated funds for subsidization of Medicare patient co-pays.
Both matters are based on the government’s theory that deductibles or co-pays in the Medicare program were Congressional requirements to encourage market forces to serve as a check on healthcare costs, and that the drug makers’ specific conduct was a subterfuge that circumvented these safeguard protections of the Medicare fund.
How Frier Levitt Can Help
Pharmaceutical manufacturers, pharmacy HUB services, distributors, pharmacies, and physicians must be aware that assistance with deductibles and/or co-payments is fraught with complications and is the equivalent of a legal minefield. Being a link anywhere in the chain between the patient’s interaction with the prescribing physician and the dispensing of a prescription to the patient, in a scheme that violates the AKS, can render the link complicit in the scheme, subjecting it to FCA and even criminal liability. Frier Levitt’s team approach of attorneys is well-versed in AKS and FCA matters. Its regulatory attorneys can guide you through the complexities of co-pay assistance and its White Collar Criminal Defense and Government Investigations team stands ready to guide, assist and represent clients in Government requests for records and information, as well as investigations and prosecutions. Contact us today for more information.
