Skip to main content

Analysis

3 Drug Makers to Pay $122M to settle Kickback Allegations

By John Commins  
   April 05, 2019

The companies alleged used the foundations as a conduit for copays that induced patients to use their drugs, with the higher prices eventually billed to government-sponsored health plans.

Three pharmaceutical companies will pay a combined $122.6 million to resolve separate allegations that they used third-party foundations as conduits for copays for their own products, the Department of Justice said.

The companies—Jazz Pharmaceuticals plc, Lundbeck LLC, and Alexion Pharmaceuticals Inc.—will pay $57 million, $52.6 million, and $13 million, respectively, to resolve alleged violations of the federal False Claims Act in the kickback schemes that resulted in higher costs for Medicare and the Civilian Health and Medical Program, DOJ said.

The alleged schemes occurred between 2010 and 2016, DOJ said.

The Anti-Kickback Statute bans drug makers from paying any remuneration, including copays, to induce government-sponsored health plan enrollees to purchase the companies' drugs.

"Pharmaceutical companies undercut a key safeguard against rising drug costs when they create assistance funds to serve as conduits for the companies to subsidize the copays of their own drugs," Assistant Attorney General Jody Hunt of DOJ's Civil Division, said in a media release.

"These enforcement actions make clear that the government will hold accountable drug companies that directly or indirectly pay illegal kickbacks," Hunt said.

Jazz and Lundbeck each entered five-year corporate integrity agreements with the Department of Health and Human Services' Office of the Inspector General.

Alexion was exempted from a CIA "because it made sweeping and fundamental organizational changes following the bad conduct," DOJ said.

The changes included firing the C-suite, and ousting half of the members of its board of directors. In addition, 40% of Alexion's employees are new and the company relocated its corporate headquarters to Boston, DOJ said.

Jazz

The allegations against Jazz center on the sale of its narcolepsy drug Xyrem.  Jazz allegedly used the Caring Voice Coalition to established a "Narcolepsy Fund" for which Jazz was the sole donor.

"Although Xyrem accounted for a small share of the overall narcolepsy market, the fund almost exclusively used Jazz's donations to pay copays for Xyrem and required non-Xyrem patients on competing products to obtain a denial letter from another assistance plan before helping them," DOJ said.

Prosecutors also allege that Jazz made Medicare patients ineligible for the drug maker's free drug program and instead referred Xyrem Medicare patients to the foundation, enabling Jazz to generate revenue from Medicare and induce purchases of the drug, rather than continuing to provide these patients with free drugs.

Meanwhile, Jazz raised the price of Xyrem by over 150% over the course of the scheme.

Jazz also sold Prialt, an injectable severe chronic pain medication. The government alleged that Jazz asked the same foundation to create a fund ostensibly to assist patients with the co-pays of any severe chronic pain drugs, but which, in practice, almost exclusively paid Prialt Medicare copays.

Shortly after creating the fund, the foundation allegedly told Jazz that when severe chronic pain patients seeking assistance with other drugs contacted the foundation, it would refer them elsewhere. Prosecutors said Jazz knew that the fund did not appear on the foundation's website, which minimized the number of non-Prialt patients seeking assistance.

Jazz issued a statement noting that the settlement "is not an admission by Jazz of liability or the facts alleged by the DOJ but a settlement of the government’s claims" against the company. The company said it has rigorous compliance guidelines in place for its relationships with independent foundations that provide patient support.

Lundbeck

Lundbeck sells Xenazine, the only drug that was approved to treat chorea associated with Huntington's disease until a generic version became available until 2015.

Prosecutors said Lundbeck was the sole donor to a fund at a foundation that ostensibly provided financial support only for patients with Huntington's Disease. However, Lundbeck allegedly referred Xenazine patients with many other conditions to this foundation, which then paid the Xenazine copays for these unapproved uses.

After the foundation determined in 2014 that its Huntington's Disease fund would no longer pay the copays of patients taking Xenazine for non-Huntington's diseases, Lundbeck repurposed prior donations to the Huntington’s Disease fund to a "general fund" at the foundation to pay patients’ Xenazine copays, DOJ said.

Lundbeck also allegedly made subsequent "unrestricted" payments to the foundation with the understanding that the foundation would use these payments to pay Xenazine copays for these same patients.

When Lundbeck asked the foundation if there was a risk of getting caught, the foundation alleged replied that government regulators "don't know what we use the general fund for," DOJ said.

Lundbeck wouldn’t let Medicare or ChampVA patients participate in its free drug program for Xenazine, which was open to other financially needy patients, even if those Medicare or ChampVA patients could not afford their copays for Xenazine.

Instead, in order to generate revenue from Medicare and ChampVA and to induce purchases of Xenazine, Lundbeck allegedly referred financially needy non-Huntington’s Disease Xenazine patients to the foundation, which resulted in claims to Medicare and ChampVA to cover the cost of the drug, DOJ said.

Lundbeck issued a statement saying that the settlement "allows us to put this matter behind us and continue our focus on providing innovative medications for people living with brain disorders. The agreement does not include any admission that we violated any law."

Alexion

The allegations against Alexion involve the sale of Soliris, a $500,000-a-year drug that is used to treat patients with paroxysmal nocturnal hemoglobinuria and atypical hemolytic uremic syndrome.

Prosecutors allege that Alexion made donations to a "Complement-Mediated Disease" fund at a foundation to pay the Medicare copay obligations of patients taking Soliris and to induce those patients' purchases of Soliris.

Alexion allegedly knew that sky-high price would make the drug unaffordable for many patients, so the company asked a foundation in 2010 to create a financial assistance fund for Soliris patients. The fund paid Medicare copays and other medical expenses.

Alexion—the sole donor to the fund—knew the foundation's financial help for patients was contingent on the patients taking Soliris.

Alexion wouldn’t let Medicare patients to participate in its free drug program, which was open to other financially needy patients, even if those Medicare patients could not afford their copays for Soliris.

Instead, in order to generate revenue from Medicare and induce purchases of Soliris, Alexion allegedly referred Medicare patients prescribed Soliris to the foundation, through the foundation's "referral portal" software.

Allegedly, the "referral portal" reported information back to Alexion confirming those Soliris patients who were approved for copay from the foundation, and detailed the foundation’s payments to them, which resulted in claims to Medicare to cover the cost of Soliris.

Alexion said in a media release that it was "pleased to have reached a constructive resolution with the government that recognizes the significant positive changes achieved over the last two years under the company’s new leadership."

“Pharmaceutical companies undercut a key safeguard against rising drug costs when they create assistance funds to serve as conduits for the companies to subsidize the copays of their own drugs.”

John Commins is a senior editor at HealthLeaders.

Photo credit: Mark Van Scyoc / Shutterstock.com


KEY TAKEAWAYS

The companies—Jazz Pharmaceuticals plc, Lundbeck LLC, and Alexion Pharmaceuticals Inc.—will pay $57 million, $52.6 million, and $13 million, respectively.


Get the latest on healthcare leadership in your inbox.