Three Pharmaceutical Companies Agree to Pay a Total of Over $122 Million to Resolve Allegations that they Paid Kickbacks Through Co-Pay Assistance Foundations
BOSTON – The U.S. Attorney’s Office announced today that three pharmaceutical companies –Jazz Pharmaceuticals plc (Jazz), Lundbeck LLC (Lundbeck), and Alexion Pharmaceuticals, Inc. – have agreed to pay a total of $122.6 million to resolve allegations that they violated the False Claims Act by paying kickbacks to Medicare and Civilian Health and Medical Program (ChampVA) patients through purportedly independent charitable foundations.
When a Medicare beneficiary obtains a prescription drug covered by Medicare Part B or Part D, the beneficiary may be required to make a partial payment, which may take the form of a co-payment, co-insurance, or deductible (collectively, co-pays). Similarly, under ChampVA, patients may be required to pay a co-pay for medications. Congress included co-pay requirements in these programs, in part, to encourage market forces to serve as a check on health care costs, including the prices that pharmaceutical manufacturers can set for their drugs. The Anti-Kickback Statute prohibits pharmaceutical companies from offering or paying, directly or indirectly, any remuneration – which includes money or any other thing of value – to induce Medicare or VA patients to purchase the companies’ drugs.
“We are committed to ensuring that pharmaceutical companies do not use third-party foundations to pay kickbacks masking the high prices those companies charge for their drugs,” said United States Attorney Andrew E. Lelling. “This misconduct is widespread, and enforcement will continue until pharmaceutical companies stop circumventing the anti-kickback laws to artificially bolster high drug prices, all at the expense of American taxpayers.”
“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,” said Assistant Attorney General Jody Hunt of the Department of Justice’s Civil Division. “These enforcement actions make clear that the government will hold accountable drug companies that directly or indirectly pay illegal kickbacks.”
“These settlements demonstrate the FBI’s commitment to safeguarding the Medicare program and ensuring that patients receive treatment solely based on their medical needs,” said Joseph R. Bonavolonta, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division. “Not only did these companies undermine a program that was set up to assist patients in decreasing the cost of their drugs, but they threatened the financial integrity of the Medicare program to which we all contribute and on which we all depend.”
“Kickback schemes undermine the integrity our nation’s healthcare system, including healthcare benefits administered by the U.S. Department of Veterans Affairs,” said Special Agent-in-Charge Sean Smith, VA Office of Inspector General, Northeast Field Office. “The VA Office of Inspector General, along with our law enforcement partners, will continue to aggressively pursue these investigations and exhaust all efforts to uncover these schemes.”
The government’s allegations in the three settlements announced today are as follows:
Jazz. Jazz sells Xyrem, a treatment for narcolepsy, and Prialt, a non-opioid treatment for management of severe chronic pain. The government alleges that, in 2011, Jazz asked a foundation to create a fund that would cover the co-pays of Xyrem patients. The foundation then created a fund that would ostensibly cover the co-pays of patients taking any narcolepsy drug, but that, through May 2014, almost exclusively assisted patients taking Xyrem. During this period, Jazz raised the price of Xyrem at over 24 times the rate of overall inflation in the United States. The government further alleges that Jazz asked the same foundation to create a fund that would purportedly cover the co-pays of patients taking any drug for severe chronic pain, but that, through May 2014, almost exclusively assisted patients taking Prialt. The foundation told Jazz that, when severe chronic pain patients seeking assistance with drugs other than Prialt contacted the foundation, the foundation would refer them elsewhere. Furthermore, as Jazz knew, the foundation did not advertise the severe chronic pain fund on its website, so that Jazz itself was the principal source referrals to the fund. Jazz has agreed to pay $57 million to resolve the government’s allegations.
Lundbeck. Lundbeck sells Xenaxine, a treatment for chorea associated with Huntington’s Disease. The government alleges that, beginning in 2011, Lundbeck donated millions of dollars to a foundation’s fund that, ostensibly, covered the co-pays of patients with Huntington’s Disease, but that, in fact, simply covered the co-pays of patients taking Xenazine, regardless of the condition the drug was being used to treat. After May 2014, when HHS-OIG published a document entitled “Supplemental Special Advisory Bulletin: Independent Charity Assistance Programs,” Lundbeck and the foundation agreed that the foundation would continue to pay the Xenazine co-pays for non-Huntington’s Disease patients out of a “general fund” that the foundation would use for this purpose. When Lundbeck asked the foundation whether there was a “risk” that HHS-OIG would not view this practice as compliant, the foundation replied, “[t]hey don’t know what we use the general fund for.” This conduct continued through 2016. During the period of the alleged misconduct, Lundbeck raised the price of Xenazine at over 22 times the rate of overall inflation in the United States. Lundbeck has agreed to pay $52.6 million to resolve the government’s allegations.
Jazz and Lundbeck each entered five-year corporate integrity agreements (CIAs) with OIG as part of their respective settlements. The CIAs require the companies to implement measures, controls, and monitoring designed to promote independence from any patient assistance programs to which they donate. In addition, the companies agreed to implement risk assessment programs and to obtain compliance-related certifications from company executives and Board members.
“These kickback schemes harm Medicare and the public,” said Gregory E. Demske, Chief Counsel to the Inspector General. “OIG CIAs, such as those with Jazz and Lundbeck, are designed to reduce future risks to patients and taxpayer-funded programs. OIG decided not to require a CIA with Alexion because it made sweeping and fundamental organizational changes following the bad conduct. The changes included hiring a new eight-member executive leadership team and changing half of the members of its Board of Directors. In addition, forty percent of Alexion’s employees are new and the company relocated its corporate headquarters.”
Alexion. Alexion sells Soliris, a drug that is approved to treat patients with paroxysmal nocturnal hemoglobinuria (PNH) and to treat patients with atypical hemolytic uremic syndrome (aHUS). Soliris can cost over $500,000 per year. Alexion allegedly knew that the price it set for Soliris could pose a financial burden to patients. In January 2010, the government alleges, Alexion requested that a foundation create a “Complement-Mediated Disease” (“CMD”) fund. Over the next several months, Alexion and the foundation allegedly discussed the coverage parameters that Alexion desired for the fund, including Alexion’s desire that the fund “not support a patient with any of these [CMD] diagnoses for other reasons tha[n] Soliris therapy.” The government alleges that, after the fund opened, Alexion—the sole donor to the fund—understood that the fund’s provision of financial assistance to a patient was contingent on the patient taking Soliris. Alexion allegedly noted internally that it needed to be diligent in notifying the foundation if a patient had stopped taking Soliris so that Alexion’s donations would not be used on patients who were not starting or maintaining Soliris therapy. Alexion has agreed to pay $13 million to resolve the government’s allegations.
U.S. Attorney Lelling, Assistant Attorney General Hunt, HHS-OIG Chief Counsel Demske, FBI SAC Bonavolonta, and VA OIG SAC Sean Smith made the announcement today. The U.S. Postal Inspection Service also assisted with the investigation. The matter was handled by Assistant U.S. Attorneys Gregg Shapiro and Abraham George, of Lelling’s Affirmative Civil Enforcement Unit, and by Trial Attorneys Augustine Ripa and Sarah Arni of the Justice Department’s Civil Division.