United States: Recent Government Actions Against Pharma Manufacturers Highlight Risks With Donations To Patient Assistance Funds

As illustrated by two recent cases, there has been an uptick in Government enforcement action related to pharmaceutical manufacturer donations to patient assistance funds designed to assist patients with copay obligations. Earlier this month, the U.S. District Court for the District of Massachusetts denied Regeneron Pharmaceuticals' motion to dismiss a lawsuit in which the Government claims that donations Regeneron made to a patient-support charity to offset patient copays were unlawful kickbacks meant to persuade physicians to prescribe Regeneron's expensive eye disease drug. On the heels of the Regeneron decision, the United States Department of Justice ("DOJ") announced a $22 million settlement with Biogen, Inc. to resolve claims that Biogen violated the federal False Claims Act ("FCA") by channeling money through two nonprofit foundations to cover patient copays for patients using Biogen's multiple sclerosis drugs. These cases illustrate the Government's emphasis on using the FCA to combat health care fraud in situations involving patient copay assistance programs.

U.S. v. Regeneron Pharmaceuticals, Inc.

Regeneron manufactures Eylea, a prescription drug that treats degenerative eye disease. Eylea costs about $1,850 per dose and is covered under Medicare Part B as a physician-administered drug. Eylea has two primary competitors: one prescription drug which costs $2,000 per dose, and the other which costs $55 per dose but is only FDA approved to treat certain cancers. In 2013 and 2014, Regeneron donated millions of dollars to the Chronic Disease Fund ("CDF"), a nonprofit foundation that uses donations to cover Medicare patient copays for prescription drugs. Through the CDF, Eylea and its more expensive competitor became cheaper out-of-pocket for Medicare patients than the $55 alternative drug.

The relationship between Regeneron and the CDF caught the attention of the Government. If a physician prescribes Eylea to a Medicare patient unable to afford the copay, the prescribing physician can submit a claim to CDF for the patient's applicable Medicare copay, and CDF will pay the copay amount directly to the physician. In U.S. v. Regeneron Pharmaceuticals, Inc., the Government alleged that Regeneron solicited and received drug-specific, nonaggregate data from CDF on patients receiving both Eylea and the CDF grants in order to correlate the amount and frequency of its donations. The Government argued that Regeneron made the donations to CDF to induce physicians to prescribe and submit claims for Eylea, which Medicare then reimbursed. According to the Government's complaint, the promise, or implicit guarantee, of copay assistance from CDF significantly altered the decision-making of patients and physicians.

Regeneron moved to dismiss the lawsuit, alleging that its charitable donations could not induce patients or physicians to purchase Eylea because the CDF grants were structured to make it impossible for donations to influence physicians' prescribing behavior. In a December 4, 2020 decision, the U.S. District Court for the District of Massachusetts held that the Government sufficiently alleged plausible violations of the federal Anti-Kickback Statute —and thus the FCA—and denied Regeneron's motion to dismiss, allowing the Government to proceed with its case. In its decision, the court highlighted allegations that Regeneron made clear to the CDF that Regeneron did not want its donations to be used for the competing drugs and then coordinated with the foundation to provide just enough donation money to fund projected expenditures on Eylea patients, and not patients receiving competing drugs. Specifically, the court was persuaded by the Government's reliance on a 2005 HHS-OIG Special Advisory Bulletin on Patient Assistance Programs ("2005 SAB"), which outlines procedural safeguards for pharmaceutical manufacturers making donations to copay-assistance charities. One such safeguard is that "the pharmaceutical manufacturer does not solicit or receive data from the charity that would facilitate the manufacturer in correlating the amount or frequency of its donations with the number of subsidized prescriptions for its products." Here, the Government alleged that Regeneron solicited and received drug-specific, non-aggregated data from CDF about Eylea patients' utilization of the fund in order to correlate the amount and frequency of its donations. The court found these Government's FCA allegations sufficient to allow the case to proceed.

Recent Related Government Action

On December 17, 2020, the DOJ announced a $22 million settlement with pharmaceutical company Biogen, Inc. to resolve claims that Biogen violated the FCA by channeling money through two nonprofit foundations, one being the CDF, to cover patient copays for patients using Biogen drugs for the treatment of multiple sclerosis. Biogen allegedly worked with a specialty pharmacy vendor, Advanced Care Scripts, to transfer its patients receiving Biogen drugs to the foundations which covered the costs of the Medicare copays for the patients. Advanced Care Scripts also agreed to pay the DOJ a $1.4 million settlement for its role in the alleged conduct. In its announcement, the DOJ noted its commitment to hold companies accountable that pay kickbacks intended to circumvent checks on rising drug prices. In the DOJ's statement, it reiterated that "drug companies that illegally manipulate charitable patient assistance programs to subsidize copays for their own products will be held accountable."

Practical Takeaways

As case law and HHS-OIG guidance have established, companies' practices of waiving patient copays or making donations to offset the cost of copays may violate the AKS if they are made with the intent to induce Medicare-funded referrals or drug purchases. The recent Biogen settlement, along with the Regeneron suit, highlight drug manufacturers' financial support of patient assistance charities as a current enforcement target of the DOJ. As a result, both pharmaceutical manufacturers and health care providers that establish and/or donate to patient copay assistance foundations should carefully structure such arrangements to incorporate procedural safeguards, including those outlined in the 2005 SAB, to reduce risk under the AKS and FCA.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.